SEBI revises method to calculate market capitalisation of listed companies
New Delhi: The markets regulator SEBI has revised the method for calculating the market capitalisation of listed companies under the Listing Obligations and Disclosure Requirements (LODR) rules.
Instead of relying on the market capitalisation of a single day (currently March 31), listed companies will now use the "average market capitalisation" over a six-month period.
Market experts argue that the market capitalisation of a listed entity fluctuates daily due to market dynamics.
Therefore, using an average market capitalisation over a reasonable period, such as six months, would more accurately represent the market size of the listed entity and its ranking compared to its peers.
The changes were implemented following a recommendation from an expert committee chaired by SEBI's former whole-time member S K Mohanty, aiming to promote ease of doing business.
The amendment specifies a defined period for calculating average market capitalisation.
According to a SEBI notification on May 17, the new rules will take effect on December 31, 2024.
Compliance rankings will be based on the average market capitalisation from July 1 to December 31, using December 31 as the cut-off date.
After determining the market capitalisation on December 31, there will be a three-month transition period, or the start of the immediate next financial year, whichever is later, before the relevant provisions become applicable.
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