On May 17, 2024, the Securities and Exchange Board of India (SEBI) amended its Listing Obligations and Disclosure Requirements (LODR) Regulations, 2015 with SEBI (LODR) (Amendment) 2024 for revising the method for calculating the market capitalization of listed companies under the LODR Regulations.
- Instead of using a single day’s market cap (previously calculated on March 31), SEBI now employs an ‘Average Market Capitalization’ over a defined period.
- This change affects the following provisions in the LODR Regulations viz. 3, 15, 17, 21, 25, 26A, 29, 30, 34, 43A, 44. For Sub Regulations Click Here
Notes:
i.The change follows recommendations from a SEBI-appointed expert committee chaired by former whole-time member Santosh Kumar (SK) Mohanty, aimed at facilitating ease of business.
ii.The changes will impact the Top 100/top 250 companies based on market capitalisation. For the rest of the companies, the framework is still voluntary.
Key Points:
i.Amendments to Regulations 3, 17, 21(5), 25, 30 (omission of the Explanation under sub-regulation 11), 34, 43A, and 44 will take effect from December 31, 2024.
ii.The ranking for compliance will now be based on the average market capitalization from July 1 to December 31, with December 31 as the cut-off date.
ii.After the ranking is determined on December 31, there is a three-month transition period (or until the start of the next financial year, whichever is later) before the relevant LODR provisions apply.
iii.These provisions, determined by a company’s market capitalisation ranking, include requirements for:
- Appointing an independent woman director
- Having at least six directors on the board
- Board meeting quorum
- Risk management committee
- Rumour verification
- Directors and officers insurance for independent directors
- Dividend distribution policy
- Business Responsibility and Sustainability Report
- Holding the AGM within five months of the financial year’s end
- Live webcasting AGM proceedings
iv.This adjustment aims to provide a more accurate reflection of a company’s market size by averaging its market capitalisation over six months, addressing daily fluctuations in market dynamics.
Recent Related News:
i.SEBI introduces framework for administration and supervision of Research Analysts and Investment Advisers as stock exchange will be recognized as RAASB (Research Analyst Administration and Supervisory Body) and IAASB (Investment Adviser Administration and Supervisory Body) for administration and supervision of Research Analysts (RAs) and Investment Advisers (IAs) respectively.
ii.SEBI introduces T+0 settlement cycle for stock trades, allowing for same-day settlement of stock trades, instead of one-day settlement period (T+1) i.e. waiting for a day for the trade to settle and funds/stocks to be delivered. The provisions of T+0 came into effect from March 28, 2024.
About Securities and Exchange Board of India (SEBI):
Chairperson– Madhabi Puri Buch
Headquarters– Mumbai, Maharashtra
Establishment–1992
