Free Courses Sale ends Soon, Get It Now
Disclaimer: Copyright infringement not intended.
Context
NSE: https://www.iasgyan.in/daily-current-affairs/national-stock-exchange
About the Index
What is Free-Float Market Capitalisation? Market capitalisation is the measure of a company’s outstanding shares multiplied by the price of each share. For instance, a company with 25000 outstanding shares at Rs. 40 each will have a market cap of Rs. 10 lakh. The size of market capitalisation for a company enables its categorisation into small-cap, mid-cap and large-cap classes. However, free-float market capitalisation is a different concept altogether. In standard market capitalisation, the calculation involves determining the total number of outstanding shares, including both public and privately owned ones. However, in free-float market cap method, the valuation of a company relies only on the outstanding shares held publicly. This share number is then multiplied with the price for each share. In this entire calculation, privately-owned shares are excluded. Therefore, shares owned by trusts, government bodies and promoters are ignored. This also indicates that the value of a free-float market capitalisation would always be lower than the company’s actual market capitalisation value. Free-float market capitalisation is also known as float-adjusted capitalisation. Example: The National Thermal Power Corporation has 120000 outstanding shares, out of which 30000 are publicly owned. The remaining 90000 shares are held by different government entities. The price of each share is Rs. 90. From this information, one can derive the market cap and the free-float market cap of the company. Market capitalisation – 120000 x 90 = Rs. 10800000 Free-float market capitalisation – 30000 x 90 = Rs. 2700000. Advantages of Using Free-Float Market Capitalisation Free-float market cap method of evaluating an index is preferred for the following reasons – Presents a practical picture Total market capitalisation method considers both the shares currently available, as well as those presently locked-in. Nonetheless, the free-float system only considers the number of shares that are currently available in the market for trading. Thus, this process is a more useful metric when it comes to judging the true picture of an enterprise. No distortion of valuation Market capitalisation of large-cap companies can fool investors into thinking that its shares are readily available for trading when the reality is different. Some of the businesses achieve large-cap, but most of their shares remain locked in since they are owned privately. With the free-float market cap, broad-based indexing is possible. This minimises the concentration of such companies with large market cap values. Market-driven methodology This calculation process eliminates companies that only have a minimal amount of shares available for trading in the market. Therefore, investors can locate businesses where they can park their excess funds by buying public shares using this valuation technique easily. |
What is REIT?
Why would somebody invest in REITs?
REITs- the genesis
Evolution of REITs in India
How do REITs work?
The flowchart below shows the basic process of a REIT transaction:
Unitholders |
Investment in REIT ————-> Distributions |
REIT |
Ownership of assets ————> Net property income |
Properties |
Buy/sell property
|
Sponsor |
How Does a Company Qualify as a REIT?
To qualify as a REIT, a company has to meet specific requirements as mentioned below.
Taxation on REITs
Investors must consider the below points about taxation on REITs before investing in them:
Income from sale of REIT units
LTCG: https://www.iasgyan.in/daily-current-affairs/ltcg
Additional points on taxation:
Pros and Cons of Investing in REITs
Performance of REITs in India
Windmill Capital Report
Scope
Decoding Infrastructure Investment Trusts (InvITs)
REITs Vs. InvITs
How do REITs and InvITs operate?
Role of REITs and InvITs in driving the future of Indian infrastructure
Note: Capital-intensive industries include automotive, airline, oil and gas, mining, manufacturing, and real estate. These companies all have to spend money on assets that are expensive. Examples of CapEx include the purchase of land, vehicles, buildings, or heavy machinery.
Note: A self-amortizing loan is one for which the periodic payments, consisting of both principal and interest, are made on a predetermined schedule, ensuring that the loan will be paid off by the end of an agreed-upon term. Payments of this kind are known as fully amortizing payments. This type of mortgage is the default structure of mortgage loans unless otherwise specified. A self-amortizing loan is also known as an amortization loan.
PRACTICE QUESTION Q. REITs and InvITs can play a critical role in driving the future of Indian infrastructure. Discuss. |
© 2024 iasgyan. All right reserved