N※N

SEBI Introduces Special Call Auction for Holding Companies

  //business-finance.news-articles.net/content/202 .. -special-call-auction-for-holding-companies.html
  Published in Business and Finance on Friday, January 2nd 2026 at 21:08 GMT by Zee Business

SEBI Introduces Special Call Auction for Holding Companies: A Bid to Enhance Liquidity & Transparency

The Securities and Exchange Board of India (SEBI) has recently implemented a significant change aimed at improving liquidity and transparency in the trading of holding companies, particularly those with substantial public shareholding. This new initiative involves a special call auction mechanism designed specifically for these entities, marking a potential shift in how investors interact with this often-illiquid segment of the Indian stock market. The move follows concerns about price discovery challenges and limited trading activity surrounding many holding companies.

The Problem: Illiquidity & Price Discovery Challenges

Holding companies, as the name suggests, own controlling stakes in other businesses. They frequently trade at a discount to their underlying asset value – the sum of the values of the companies they hold. This "holding company discount" is often exacerbated by low trading volumes and limited participation from institutional investors. The lack of liquidity makes it difficult for buyers and sellers to find each other, leading to wider bid-ask spreads and potentially skewed price discovery. This can disadvantage minority shareholders and create uncertainty in the market.

As highlighted in the Zeebiz article, many holding companies have seen minimal trading activity, with shares changing hands infrequently. This lack of consistent demand and supply makes it challenging to accurately reflect the true value of these entities. The existing auction mechanism, while present, hasn't been sufficient to address this issue effectively. The current system often sees a few large orders dominating trades, further contributing to price volatility and hindering broader participation.

The Solution: A Dedicated Call Auction Mechanism

To tackle these issues, SEBI has introduced a dedicated call auction process specifically for holding companies. This isn't the first time SEBI has experimented with auctions; they’ve been used previously in specific situations (like the Reliance Industries rights issue), but this is the first time it's being implemented as a regular mechanism for a defined group of companies.

The key features of this special call auction include:

• Pre-Open Session: The auction will take place during a pre-open session, typically 9:15 AM to 9:20 AM, before the market officially opens. This allows participants to submit bids and offers without immediate price pressure from the regular trading session.
• Order Matching: The system matches buy and sell orders submitted during this pre-open period. The auction engine then determines a single price at which trades can be executed.
• Price Discovery: The resulting price reflects the collective demand and supply, theoretically leading to more accurate price discovery than sporadic trading in the regular market session.
• Enhanced Liquidity: The call auction is expected to attract more participants, including institutional investors who may have previously avoided these stocks due to illiquidity concerns. Increased participation should lead to higher trading volumes and tighter bid-ask spreads.

Nine Holding Companies Initially in Focus

SEBI has initially identified nine holding companies that will be subject to this special call auction mechanism. These include:

• Tata Consultancy Services (TCS)
• Reliance Industries Limited (RIL)
• HDFC Life Insurance Company
• ICICI Prudential Life Insurance Company
• Axis Bank
• Bajaj Finance
• Infosys
• State Bank of India (SBI)
• Larsen & Toubro (L&T)

The selection of these companies is based on their significant market capitalization and the prevalence of holding company structures within them. It's important to note that this isn’t an exhaustive list, and SEBI has indicated it may expand the scope in the future. The article references a circular from SEBI (SEBI/HO/DIR-II/POLCY-BASED REGULATION/2024/0013) outlining the specifics of the new mechanism – a document investors should review for complete details.

Potential Benefits and Challenges

The introduction of this special call auction is expected to bring several benefits:

• Reduced Holding Company Discount: More accurate price discovery could help narrow the gap between holding company share prices and the underlying asset values.
• Improved Investor Confidence: Increased liquidity and transparency should boost investor confidence in these stocks.
• Greater Market Efficiency: The mechanism aims to make the market more efficient by facilitating better matching of buyers and sellers.

However, there are also potential challenges:

• Participation Levels: The success of the call auction hinges on sufficient participation from institutional investors and retail traders. If participation remains low, the benefits may be limited.
• Order Manipulation Concerns: As with any auction mechanism, there's a risk of order manipulation or strategic bidding behavior that could distort price discovery. SEBI will need to monitor this closely.
• Learning Curve: It will take time for market participants to adapt to the new process and understand its implications.

Conclusion: A Step Towards Market Improvement

SEBI’s decision to introduce a special call auction mechanism for holding companies represents a proactive step towards improving liquidity, transparency, and price discovery in this often-overlooked segment of the Indian stock market. While challenges remain, the initiative has the potential to benefit minority shareholders, attract institutional investment, and ultimately contribute to a more efficient and robust equity market. The initial focus on nine prominent holding companies provides a starting point for assessing the effectiveness of the mechanism, with the possibility of broader implementation in the future. Investors are encouraged to familiarize themselves with the details of this new process and monitor its impact on the trading dynamics of these key entities.