Capital markets regulator Securities and Exchange Board of India (Sebi) has decided to alter the methodology for calculating the market capitalisation of a publicly-listed company.
According to Sebi's fresh amendments, all listed companies will use the average market-capitalisation of six months.
Market experts suggest that the market capitalization of a listed company fluctuates daily due to market dynamics. Hence, using an average market capitalization over six months provides a more accurate representation of the company's market size and its ranking among peers.
The new rules will come into effect from December 31, 2024. The listed entities' rankings will be determined by the average market capitalization from June 1 to December 31, instead of the market cap as of March 31, the fiscal year-end.
When a new company lists on the bourses, the relevant provisions will apply to a listed entity for the first time, or after any interim period, three months after December 31 (i.e., April 1) or at the start of the next financial year, whichever is later.
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The BSE six month average total market capitisation of Reliance Industries is Rs 16.39 lakh crore during the six months ended December 31, 2023. However, on the last trading day of 2023, i.e. December 29, the market capitalisation of RIL was Rs 17.49 lakh crore.
Additionally, in an effort to ease regulatory challenges for companies eyeing an initial public offer, the Sebi has now allowed non-promoter shareholders to contribute towards meeting the minimum promoters’ contribution without being identified as a promoters.
Prior to this amendment, SEBI's minimum promoter contribution norms required at least 20 percent of promoters' shares to be locked in for a certain period of time post listing after an IPO.
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