• Definition of 'Market Capitalization:-

• The total dollar market value of all of a company's outstanding shares. Market capitalization is
calculated by multiplying a company's shares outstanding by the current market price of one
share. The investment community uses this figure to determine a company's size, as opposed to
sales or total asset figures.

• The total capitalization of stock markets or economic regions may be compared to other
economic indicators. The total market capitalization of all publicly traded companies in the
world was US$51.2 trillion in January 2007 and rose as high as US$57.5 trillion in May 2008
before dropping below US$50 trillion in August 2008 and slightly above US$40 trillion in
September 2008
CONTENT
1. VALUATION
2. CATEGORIZETION OF COMPNIES BY CAPITALISATION
3. RELATED MEASURES
1.VALUATION
• Market capitalization represents the public consensus on the value of a company's equity. In a
public corporation, ownership interest is freely bought and sold through purchases and sales of
stock, providing a market mechanism (price discovery), which determines the price of the
company's shares. Market capitalization is defined as the share price multiplied by the number
of shares in issue, providing a total value for the company's shares outstanding.

• Formula of Market Capitalization:-

Market Capitalization=Current Stock Price x Shares Outstanding
• e.g.:- Let's assume Company XYZ has 10,000,000 shares outstanding and the current
share price is $9. Based on this information and the formula above, we can calculate
that Company XYZ's market capitalization is 10,000,000 x $9 = $90 million

2.CATEGORIZETION OF COMPNIES BY CAPITALISATION

• Traditionally, companies were divided into large-cap, mid-cap, and small-cap. The terms mega-
cap and micro-cap have also since come into common use, and nano-cap is sometimes heard.
Different numbers are used by different indexes; there is no official definition of, or full
consensus agreement about, the exact cutoff values. The cutoffs may be defined as percentiles
rather than in nominal dollars. The definitions expressed in nominal dollars need to be adjusted
over the decades due to inflation, population change, and overall market valuation (for example,
$1 billion was a large market cap in 1950, but it is not very large now), and they may be different
for different countries. A rule of thumb may look like:

• Mega-cap: Over $200 billion

• Large-cap: Over $10 billion

 • Mid-cap: $2 billion–$10 billion

• Small-cap: $250 million–$2 billion

• Micro-cap: Below $250 million

• Nano-cap: Below $50 million

3.Related measures:-
Market cap reflects only the equity value of a company. It is important to note that a firm's
choice of Capital Structure has a significant impact on how the total value of a company is allocated
between equity and debt. A more comprehensive measure is enterprise value (EV), which includes debt,
preferred stock, and other factors.

definition of ipo:-
An initial public offer, as the name indicates, is the first (initial) instance of a company (called
the issuer) offering its commons stock (or shares) to the general public for subscription.

I.P.O PROCESS
The issuance of an IPO is a process with distinctive stages. the life cycle of an IPO can be
understood to be spread over these steps or stages. The various stages in the life cycle of an
Initial Public Offering are as follows:-

1.Initialization – In this stage, the company appoints various entities that are crucial in
the management of the IPO. these entities include the issue managers or book runners
(mostly investment banks) and registrars to the issue.
• 2.Pre Issue Activities – In this stage, the draft offer prospectus is prepared and
submitted to SEBI. The lead manager may conduct road shows- which are basically
marketing activities- to generate awareness about the issue.

• 3.Prospectus Review – SEBI reviews the prospectus submitted to it, and any changes
and revisions suggested by SEBI are incorporated at this stage. Once the draft is
approved by SEBI, it is termed as the Offer Prospectus

• 4.Submit Prospectus to Stock Exchange – The offer prospectus is now submitted to

relevant stock exchange for approval. When the date of issue and the price band (and
not the exact price) is decided and incorporated into the offer prospectus, it becomes
the ‘Red Herring Prospectus’.
• 5.Distribution of Red Herring Prospectus and IPO Forms – The prospectus and the
forms are distributed to retail investors through the syndicate members.
• 6.Public Issue – In this stage, the issue is thrown open to the public and the bids are
collected. The public issue closes at a predetermined date. This stage can be considered
to be the “public face” of the IPO.
• 7.Price Fixing – Once all the bids are collected, the lead managers decide the final issue
price, and inform the stock exchange and SEBI.
• 8.Processing of IPO Applicationsby Registrar – This is the ‘clerical’ stage, wherein the
forms are collected, checks are processed, share allotment is completed, shares are
transferred to the demat accounts and any excess money is refunded.
• 9.Listing in the Stock Exchange – Once the date of listing is decided, the shares of the
issuer company are listed on the stock exchange.

Book building
• Book building is actually a price discovery method. In this method, the company doesn't
fix up a particular price for the shares, but instead gives a price range, e.g. Rs 80-100.
• When bidding for the shares, investors have to decide at which price they would like
to bid for the shares, for e.g. Rs 80, Rs 90 orRs 100. They can bid for the shares at any
price within this range.
• Based on the demand and supply of the shares, the final price is fixed. The lowest
price (Rs 80) is known as the floor price and the highest price (Rs 100) is known as cap
price.
• The price at which the shares are allotted is known as cut off price. The entire process
begins with the selection of the lead manager, an investment banker whose job is to
bring the issue to the public.

Types Of Investors:-
• The retail individual investor (RII)
• The non-institutional investor (NII)
• The Qualified Institutional Buyers (QIBs)
• 1.Retail Individual Investor:-

• RII is an investor who applies for stocks for a value of not more than
Rs 100,000. Any bid exceeding this amount is considered in the NII category.

• 2.Non-Institutional Investor:-

• NIIs are commonly referred to as high net-worth individuals. Each of

these categories is allocated a certain percentage of the total issue. The total allotment to the
 RII category has to be at least 35% of the total issue. RIIs also have an option of applying at the
cut-off price. This option is not available to other classes of investors. NIIs are to be given at
least 15% of the total issue.

3.Qualified Institutional Buyers:-

QIBs are to be issued not more than 50% of the total
issue. Allotment to RIIs and NIIs is made through a proportionate allotment system. The
allotment to the QIBs is at the discretion of the BRLM.
Reverse Book Building:-
• It is a price discovery mechanism for the companies who
want to delist their shares or buy back shares from the shareholders.
Green Shoe Option; It is also referred to as an over allotment
option. It is a mechanism to provide post listing price stability to an initial public offering

Book Building Process

• The Issuer who is planning an offer nominates lead merchant banker(s) as 'book
runners'.
• The Issuer specifies the number of securities to be issued and the price band for the
bids.
• The Issuer also appoints syndicate members with whom orders are to be placed by the
investors.
• The syndicate members input the orders into an 'electronic book'. This process is called
'bidding' and is similar to open auction.
• The book normally remains open for a period of 5 days.
• Bids have to be entered within the specified price band.
• Bids can be revised by the bidders before the book closes.
• On the close of the book building period, the book runners evaluate the bids on the
basis of the demand at various price levels.
• The book runners and the Issuer decide the final price at which the securities shall be
issued.
• Generally, the number of shares are fixed, the issue size gets frozen based on the final
price per share.
• Allocation of securities is made to the successful bidders. The rest get refund orders.
ADR(American Depository Receipt)
• An American depositary receipt (ADR) is a negotiable security that represents securities
of a non-US company that trade in the US financial markets. Securities of a foreign
company that are represented by an ADR are called American depositary shares (ADSs).
What Are The ADR?
American Depository Receipts popularly known as ADRs were introduced in the American
market in 1927.  ADR is a security issued by a company outside the U.S. which physically
remains in the country of issue, usually in the custody of a bank, but is traded on U.S. stock
exchanges.  In other words, ADR is a stock that trades in the United States but represents a
specified number of shares in a foreign corporation.  
Thus, we can say ADRs are one or more units of a foreign security traded in American
market.   They are traded just like  regular stocks of other corporate but are issued / sponsored
in the U.S. by a bank or brokerage.
Advantage Of ADR:-
There Are Many Advantage For An Individual.
1. ADRs are an easy and cost effective way to buy shares of a foreign company.
2. The individuals are able to  save considerable money and energy by trading in ADRs, as it
reduces administrative costs and avoids foreign taxes on each transaction.  
3. Foreign entities prefer ADRs, because they get more U.S. exposure and it allows them to
tap  the  American equity markets.  
The shares represented by ADRs are  without voting rights. 

Some Major ADRs issued by Indian Companies  :

For Example:-Among the Indian ADRs listed on the US markets, are Infy (the Infosys
Technologies ADR),  WIT (the Wipro ADR),  Rdy(the Dr Reddy’s Lab ADR), and Say (the Satyam
Computer ADS)

Global depository receipt:-(GDR)

Depository Receipts are  a type of negotiable (transferable) financial security, representing a
security, usually in the form of equity, issued by a foreign publicly-listed company.  However,
DRs are   traded on a local stock exchange though the foreign public listed company is not
traded on the local exchange. 
 Later on these have become popular in other parts of the world also in the form of
Global Depository Receipts (GDRs). Some other common type of DRs are European DRs and
International DRs.
GDR are commonly listed on European stock exchanges such as the London Stock Exchange.
Both ADRs and GDRs are usually denominated in US dollars, but  these can also be
denominated in Euros.
How do Depository Receipts Created?  
When a foreign company wants to list its securities on another country’s stock
exchange, it can do so through  Depository Receipts (DR) mode.  . To allow creation of  DRs, the
shares of the foreign company, which the DRs represent, are first of all delivered and deposited
with the custodian bank of the depository through which they intend to create the DR.   On
receipt of the delivery of shares,  the custodial bank creates DRs and  issues the  same to
investors in the country where the DRs are intended to be listed. These DRs are then listed and
traded in the local stock exchanges of that country.
• The 14 foreign incorporated companies included in the NASDAQ 100 are:
• Bermuda - Marvell Technology Group (MRVL)
• Canada - Research In Motion (RIMM)
• Cayman Islands - Garmin Ltd. (GRMN) and Seagate Technology (STX)
• China - Baidu (BIDU)
• India - Infosys (INFY)
• Ireland - Ryanair (RYAAY) and Warner Chilcott (WCRX)
• Israel - Check Point (CHKP) and Teva Pharmaceutical Industries, Ltd. (TEVA)
• Luxembourg - Millicom International Cellular (MICC)
• Singapore - Flextronics (FLEX)
• Switzerland - Foster Wheeler (FWLT) and Logitech (LOGI)
• 1 euro= 72.63 rs

• 1 euro= 1.32 US $

• 1euro= 10.23 hong kong $

• 1euro= 40.32 Russian Rubel

• 1euro= 111.93 Japanees Yen

• 1 US $= 55.01 Rs
 • 1 Russian Rubel= 1.80 Rs

• 1 Hongkong $= 7.10 Rs

• 1 japanees Yen= 0.65 Rs

• Today, the euro is one of the world's most powerful currencies, used by more than 320 million
Europeans in twenty-three countries. The countries currently using the euro are:

(1) Andorra(2) Austria(3) Belgium(4) Cyprus(5) Estonia(6) Finland(7) France(8) Germany(9)

Greece(10)Ireland(11) Italy(12) Kosovo(13) Luxembourg(14) Malta(15) Monaco(16)
Montenegro(17) Netherlands(18) Portugal(19) San Marino(20) Slovakia(21) Slovenia(22)
Spain(23) Vatican City