Sebi tweaks methodology for calculating market cap-based rankings

The Securities and Exchange Board of India (Sebi) has changed the methodology for calculating market capitalisation-based rankings of listed companies.

Instead of a single-day market cap, the rankings will now be based on the average market cap for six months.

The regulator has directed stock exchanges to do the computation at the end of the calendar year and prepare the rankings based on the average market cap from July 1 to December 31.

Till now, the computation was done on the basis of the market cap on March 31.

The rankings are important for compliance with several mandates and regulations. For instance, the top 100 listed companies have to comply with rumour verification norms from June 1, while the compliance deadline for the top 250 is from December 1. Similarly, for compliance with ESG-related norms and corporate governance matters, Sebi has a glide path for the top 100, top 500, and top 1,000 listed companies based on the market cap-wise ranking.

“Sebi received representations from market stakeholders that calculating the market capitalisation as of a single day and the consequent application of relevant Sebi Listing Obligations and Disclosure Requirements (LODR) Regulations led to an increase in compliance burden for listed companies,” said Abhimanyu Bhattacharya, partner, Khaitan & Co.

Following the new rankings, any company that becomes applicable to comply with any such mandate by the regulator for the first time will be provided a three-month window to comply.

“For such listed entities which remain outside the applicable threshold for a period of three consecutive years in terms of this regulation, the provisions that apply on the basis of criteria of market capitalisation shall cease to apply at the end of the financial year following December 31 of the third consecutive year,” said Sebi in the notification.