Sebi mulls framework for price discovery of investment cos trading below book value
ICs and IHCs, whose shares are trading at a big discount to their book value, according to the consultation paper.
Some market observers believe that the significant difference between market price and book value of these companies is hurting liquidity, fair price discovery, and investor interest.
The regulator said it received presentation from market participants suggesting unrestricted price discovery in these shares because circuit filters set by Sebi prevent market prices from reflecting the true investment value, resulting in wide variances from book value and very low liquidity.
Currently, shares of some listed ICs or IHCs are traded infrequently at prices significantly lower than their disclosed book value. These companies typically lack day-to-day operations and primarily hold investments, including shares of other listed companies.
Despite holding high-value investments, the market value of the IC or IHC can significantly differ from its book value. This difference may be due to the growth in investments in shares of other listed companies, resulting in potentially high valuations.
In its consultation paper, Sebi proposed that the stock exchanges should co-ordinate amongst themselves and provide the special call-auction mechanism for such companies. Further, such mechanism should be provided for the ICs or IHCs only once in a year.
The Securities and Exchange Board of India (Sebi) has sought comments from public till May 10 on the proposal.
With regards to criteria for identification of ICs or IHCs
