SEBI Redefining Free Float? Get All Details of This Story Here!

Free float refers to those shares you can trade publicly in the secondary market or the stock exchange.

These are shares that any directors, founders, promoters, acquirers do not hold, and bodies with controlling interests, strategic stakes, or locked-in shares, do not have.

They are available for retail and other investors trading on the stock market.

SEBI (Securities and Exchange Board of India) looks to redefine what is meant by free-float after a slew of companies without any identifiable promoter has been listed on the 2 bourses.

We have articulated details of this story below.

1. According to some senior officials, SEBI has begun to review the meaning of the term free float.

2. Should this term free float mean minimum public shareholding or shares that investors and promoters do not hold?

3. Representatives of SEBI, a market regulator, have said that they are curious about the definition of free float. For example, does public shareholding give a company the correct sense of free float?

4. SEBI has asked both bourses for their opinion regarding the same. As a result, BSE (Bombay Stock Exchange) and NSE (National Stock Exchange) have responded with a presentation on some top companies trading on these bourses.

5. They have mentioned in these presentations the shareholding patterns and market cap of the top companies of the index. Also, they have said how much the promoters and foreign institutes hold. Therefore, based on these recommendations, SEBI will decide whether the definition of the term free-float needs to change or not.

So far, the Indian definition of free-float means the number of shares that are available for public investment or, in other words, public shareholdings. Globally, the description of free-float implies the number of shares available for trading.

Bottom Line

The reason for this redefinition is that a new set of companies have been listed on the bourse with no promoters. This scenario has led to an understanding that the shares that are not promoter-held may not be the correct reflection of the definition of free float.

Source: Livemint

Frequently Asked Questions

1. What is SEBI’s threshold of minimum public shareholding?

Ans. SEBI’s threshold of minimum public shareholding is 25%.

2. How much of Nifty 50 is held by promoters?

Ans. Promoters hold around 43.7% of the Nifty 50.

3. What is the percentage of Nifty 50 held by foreign investors?

Ans. The percentage of the Nifty 50 held by foreign investors is 27.4%.

Disclaimer: This blog is exclusively for educational purposes and does not provide any advice/tips on investment or recommend buying and selling any stock.