Tuesday, March 03, 2015 4:41PM / The Analyst
Free float as far as the equities market is concern refers to the number of shares a quoted firm has as outstanding and available to be traded on the floor of a securities exchange.
The availability of free float gives companies admission to new and large capital through which the general public can invest in the company thus making capital raising easy. A company’s free float also provides a better reflection of the company’s current capitalization.
As stated in the NSE latest X-Compliance Report, companies listed on The Exchange must maintain a minimum free float for the set standards under which they are listed in order to ensure that there is an orderly and liquid market in their securities.
The free float requirement for companies listed on the Main Board is 20% and 15% for ASEM companies. Based on this standard, the Exchange has identified the following companies having free float deficiencies.
DANGCEM which is the most capitalized stock listed on the Exchange is affected and has been given till October 26, 2016 to comply while we are yet to get any confirmation as to whether CHELLARAMS has complied with the directive as the due date December 31, 2014 already lapsed.
Click Here To Download X-Compliance Report: Report date: Feb 06, 2015
In a recent draft rules governing free float requirement published by the Exchange in which it seeks comments from market stakeholders, the NSE in relation to sanctions in the draft rule stated thus:
♦ If the Issuer does not respond to The Exchange’s notification within the prescribed period, the Issuer’s name shall be published on The Exchange’s periodic “X-Compliance Report” as operating “Below Listing Standard”.
♦ The Exchange will commence the process of delisting an Issuer’s shares if:
♦ The Issuer fails to respond to The Exchange within ten (10) business days of receiving its notification; or
♦ The compliance plan submitted by the Issuer is not acceptable to The Exchange and the Issuer fails to produce and submit an acceptable alternative plan within twenty one (21) business days of The Exchange’s rejection of the initial plan; or
♦ The Issuer is unable to return to a state of full compliance with The Exchange’s Listings Standards within two (2) financial years or the time stipulated in the compliance plan approved by The Exchange; or
♦ The Issuer fails to produce and submit an acceptable compliance plan to The Exchange within three (3) months of The Exchange’s publication of its name on The Exchange’s periodic “X-Compliance Report” as operating “Below Listing Standard”.
As the due date for compliance for a company elapse while the date for other affected companies is fast approaching, we expect the market regulators to act and effect the necessary sanctions that will necessitate full compliance.