The Securities and Exchange Board of India (SEBI), which regulates the stock market in India, has introduced a new system to help investors better understand the value of Investment Companies (ICs) and Listed Investment Holding Companies (IHCs). This new system is called a “special call auction mechanism.”
SEBI noticed that some ICs and IHCs were trading on the stock market at prices much lower than their actual value. This can happen for a few reasons. One reason is that these companies may not trade very often. Another reason is that it can be difficult to know exactly how much an IC or IHC is worth because their value depends on the value of the investments they hold.
SEBI will identify specific ICs and IHCs that will be part of this new system. The stock exchanges will then announce a special call auction for these companies at least 14 days in advance. This will give investors time to learn more about the company and decide if they want to participate in the auction.
On the day of the auction, investors will be able to submit bids (offers to buy) and offers (offers to sell) their shares at any price. Once the auction closes, the exchange will determine a single price at which all the shares will be bought and sold. This price will reflect the true supply and demand for the company’s shares at that moment.
Benefits for Investors
This new system should help investors get a fairer price for their shares of ICs and IHCs. It should also make it easier for investors to buy and sell these shares, which could increase liquidity (how easily a share can be bought or sold).
When Will the First Auction Happen?
The first special call auction is expected to take place in October 2024. SEBI will likely announce the specific companies that will be included in the first auction closer to the date.
Important to Note:
This new system is only available once a year for each company. Investors should carefully research any IC or IHC before participating in a call auction.
