SEBI changed the rules of M-Cap, now the market capitalization of companies will be decided by the average of 6 months

The Securities and Exchange Board of India (SEBI) has issued a notification for companies listed in the stock market. According to this notification, SEBI has changed the rules of Listing Obligations and Disclosure Requirements (LODR).

According to the new rule, now the M-cap of companies will not be calculated daily but over six months. The market fluctuates daily. In such a situation, M-caps of companies change every day.

Averaging the market capitalization figures over a reasonable period of time (six months) will more accurately reflect the market size of the listed entity, according to market experts, who believe that a listed entity's market capitalization fluctuates daily depending on market dynamics.

The modifications were made in response to a committee of experts led by SK Mohanty, a former full-time SEBI member, who made recommendations to improve the ease of doing business. With this SEBI amendment, the average market capitalization calculation will have a defined period of time.

The Securities and Exchange Board of India issued a notification regarding this on May 17. According to this notification, the new rule will come into effect from December 31, 2024. Now the compliance ranking will be based on average market capitalization from July 1 to December 31, with December 31 as the cut-off date.

Regarding amendment in LODR norms, SEBI said, “Every stock exchange will prepare a list by the end of this year i.e. on 31 December 2024. The companies that will be included in this list will be ranked based on average market capitalization from 1 July to 31 December. If the ranking of a company changes every three years, then the new provision will not apply to that company. “This will provide relief to institutions experiencing fluctuations in market capitalization.”

Further, SEBI has given relaxation in respect of filling vacancies of Key Managerial Personnel (KMP) and has extended the time limit from the existing three months to six months in some cases.

In cases where the listed entity is required to obtain approval of the regulatory, government, or statutory authorities to fill such vacancies, these should be filled by the empaneled entity as soon as possible and in any case not earlier than six months from the date of the vacancy.

As per current LODR rules a listed company is required to inform the stock exchanges about financial results, and board meetings for certain resolutions like share buyback, fundraising, etc. within 2-11 working days.