Using Market capitalization to show the size of a company is important because company size is a basic determinant of various characteristics in which investors are interested, including risk. It is also easy to calculate. A company with 10 million shares(1Crore) selling at 100rs a share would have a market cap of 1 billion (100 crores).
Free-float market capitalization:
Suppose company A has 1,000 shares in total, of which 200 are held by the promoters, so that only 800 shares are available for trading to the general public. These 800 shares are called ‘free-floating’ shares. If the price of each share is 120 rupees, then the ‘total’ market capitalization of the company is 120,000 rupees (1,000 x 120), but its free-float market capitalization is 96,000 rupees (800 x 120).
In stockmarket companies will be divided into different groups by its capitalization.
Those are Large Cap, Medium Cap, Small Cap & Micro Cap.
A company which market capitalization is more than 20,000 cr its is in Large Cap .
A company which market capitalization is more than 5000 cr but not greater than 20,000 cr it is in Mid Cap
A company which market capitalization is less than 5000 cr it is in Small Cap.
A company which market capitalization is 500cr to 1000 cr then it is in Micro.