Definition of Free-float:

Share holdings held by investors that would not, in the normal course come into the open market for trading are treated as 'Controlling/ Strategic Holdings' and hence not included in free-float. In specific, the following categories of holding are generally excluded from the definition of Free-float:

• Holdings by founders/directors/ acquirers which has control element

• Holdings by persons/ bodies with "Controlling Interest"

• Government holding as promoter/acquirer

• Holdings through the FDI Route

• Strategic stakes by private corporate bodies/ individuals

• Equity held by associate/group companies (cross-holdings)

• Equity held by Employee Welfare Trusts

• Locked-in shares and shares which would not be sold in the open market in normal course.

The remaining shareholders would fall under the Free-float category.


Determining Free-float factors of companies:

BSE has designed a Free-float format, which is filled and submitted by all index companies on a quarterly basis with the Exchange. (Format available on www.bseindia.com) The Exchange determines the Free-float factor for each company based on the detailed information submitted by the companies in the prescribed format. Free-float factor is a multiple with which the total market capitalization of a company is adjusted to arrive at the Free-float market capitalization. Once the Free-float of a company is determined, it is rounded-off to the higher multiple of 5 and each company is categorized into one of the 20 bands given below. A Free-float factor of say 0.55 means that only 55% of the market capitalization of the company will be considered for index calculation.

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