The free float is a measure of actual availability of stocks of a company in the market for public investment. Free float factor is used for calculating free float market capitalization of a company. Free-float market capitalization takes into consideration only those equity shares issued by the company that are readily available for trading in the market. The goal to calculate Free Float is to distinguish between strategic (control) shareholders, whose holdings depend on concerns such as maintaining control rather than the economic fortunes of the company, and those holders whose investments depend on the stock's price and their evaluation of a company's future prospects. Free float market capitalization is used for the computation of indices.

While calculating free-float market capitalization the following categories of shareholdings will be excluded where it can be identified separately:

• Shareholding reported under promoter category
• Depository Receipts (DRs) held by promoters and promoter groups
• Associate/group companies/ cross-holdings
• Family members of promoter
• Trusts managed by promoter/ promoter group companies
• Employee Benefit Trusts/ Employee Welfare Trusts
• Directors
• Public shareholder representing (nominating) member on Board
• Public shareholder entitled to represent (nominate) member on Board
• Key Management Personnel (KMP)
• First right of refusal in favor of company/promoters in case shareholder intends to sell the stake
• Strategic investment by corporate bodies
• Direct/ indirect shareholding by Central/ State Government/ Government backed corporations, Governor in case of central/ state owned company (excluding insurance companies)
• Direct/ indirect shareholding by Central/ State Government/ Government backed corporations, Governor in company where government is not a promoter (excluding insurance companies)
• Foreign Direct Investment
• Private Equity Investor
• Private Equity Fund
• Foreign Venture Capital Investors
• Sovereign Wealth Funds
• Locked-in shares which would not be sold in the open market in normal course
• Investor Education and Protection Fund (IEPF)
• Persons acting in concert with promoters

Holding of equity shares by the remaining shareholders fall under the free float category.

Free-float factor is a multiple with which the total market capitalization of a company is adjusted to arrive at the Free-float market capitalization. A Free-float factor of say 0.55 means that only 55% of the market capitalization of the company will be considered for calculation.

Following are the entities considered as non-free float and hence clubbed together and reduced from the 100% (total shareholding)

• Promoter and Promoter Group
• Public Locked-in Shares holding (as per the Share Holding Pattern (SHP)) filed by the Company under Clause 35 of the Listing Agreement
• GDR – Promoter holding only
• Strategic & Others appearing under Public Categories of SHP

BSE is calculating the free float factor to two decimal places for computation of BSE Indices as illustrated below:

E.g: For ABC Ltd

Free Float Factor in the above case is (100-48.44)/100 = 0.51