Summary
Outstanding shares are those currently owned by shareholders, whereas floating shares are those available for trading by the public. Both of these measures help analyse the company’s shareholding pattern, market value, and stock liquidity.
It is advisable to consider changes in their values over time. Share issuances might result in dilution, whereas share buybacks might reduce outstanding shares and affect earnings per share.
Investors must exercise caution when analysing low-float stocks, as they tend to exhibit high price volatility due to the limited number of shares available for trading.
Outstanding shares represent the equity shares of a company currently held by its shareholders. Floating shares refer to the portion of those shares generally available for public trading.
A company can therefore have a large number of outstanding shares but a much smaller free float when a significant portion is held by promoters or other strategic shareholders.
What Are Outstanding Shares?
Outstanding shares are the equity shares of a company currently held by its shareholders, including promoters, institutional investors, retail investors and other eligible shareholders.
The no. of outstanding shares is commonly used to calculate a company’s market capitalisation. Outstanding shares are also relevant to earnings per share, although basic EPS uses the weighted average number of equity shares outstanding during the reporting period.
The outstanding share count can change when a company issues new shares, completes a buyback or undertakes certain other corporate actions.
Calculation Formula for Outstanding Shares
For Indian companies, the outstanding share count generally refers to the equity shares currently in issue and held by shareholders. It can be obtained from the company’s latest share capital and shareholding disclosures.
In India, shares bought back by a company are cancelled rather than kept as treasury shares. So, once the buyback is completed, the number of outstanding shares comes down.
The outstanding share count can also change after fresh equity issuance, conversion of eligible securities or other corporate actions affecting the company’s equity capital.
How to Calculate Outstanding Shares?
The latest outstanding share count can generally be obtained from a company’s financial statements, shareholding disclosures and stock exchange filings.
When reviewing the figure, check whether the company has completed any corporate action that changed its equity capital, such as a fresh share issue or buyback. A buyback reduces the outstanding share count after the bought-back shares are extinguished.
The latest share count disclosed by the company can be used to check its current outstanding shares.
Example for Basic Outstanding Shares Calculation
Suppose ABC Ltd. has 10 crore outstanding equity shares. It later buys back 50 lakh shares, which are then extinguished.
Outstanding shares before buyback = 10 cr
Shares bought back = 50 lakh
Outstanding shares after buyback = 9.5 cr
If ABC Ltd.’s market price is ₹200 per share after the buyback, its market capitalisation based on the current share price would be:
₹200 x 9.5 cr = ₹1900 cr
What Are Floating Shares (Free Float)?
Floating shares, or free-float shares, represent the portion of a company’s outstanding shares generally available for public trading.
Free float excludes holdings classified as non-free-float under the applicable methodology, such as promoter and certain strategic holdings. As a result, a company can have a large number of outstanding shares but a much smaller number of floating shares.
A larger free float provides a greater pool of shares available for trading, while a smaller free float can make the stock more sensitive to large buy or sell orders when liquidity is limited.
Calculation Formula for Floating Shares
A simplified way to estimate floating shares is:
Floating Shares = Outstanding Shares (-) Non-Free-Float Holdings
For example, if a company has 10 cr outstanding shares and 6 cr shares are classified as non-free-float holdings:
Floating Shares = 10 − 6 crore = 4 cr
Free float can also be expressed as a percentage:
Free Float Percentage = Floating Shares / Outstanding Shares x 100
Official free-float calculations should follow the methodology used by the relevant exchange or index provider.
How to Calculate Floating Shares?
To estimate a company’s floating shares, start with its latest outstanding share count and review its shareholding pattern.
The calculation can then be approached in three steps:
- Identify the total outstanding shares.
- Identify holdings classified as non-free-float under the applicable methodology.
- Deduct those holdings from the outstanding shares.
For example, suppose a company has 20 crore outstanding shares and 12 crore shares are classified as non-free-float holdings.
Floating Shares = 20 − 12 crore = 8 cr
Free Float Percentage = 8 cr / 20 cr x 100 = 40%
Example for Basic Floating Shares Calculation
Assume XYZ Ltd. has 15 crore outstanding shares. Of these, 10 crore shares are classified as non-free-float holdings.
Outstanding Shares = 15 cr
Non-Free-Float Holdings = 10 cr
Floating Shares = 15 cr − 10 cr = 5 cr
The free-float percentage would be:
Free Float Percentage = 5 / 15 × 100 = 33.33%
Outstanding Shares vs Floating Shares: Key Differences Explained
Outstanding shares show the total shares held by the shareholders; floating shares focus on the portion available for public trading
| Basis | Outstanding Shares | Floating Shares |
| Meaning | Shares currently outstanding and held by shareholders | Portion of outstanding shares generally available for public trading |
| Includes | Promoters, institutional investors, retail investors and other shareholders | Shares qualifying as free float under the applicable methodology |
| Promoter holding | Included | Generally excluded |
| Main use | Used in market capitalisation and per-share calculations | Helps assess tradable supply and liquidity |
| Number of shares | Equal to or higher than floating shares | Equal to or lower than outstanding shares |
| Changes due to | Fresh issuance, buybacks and other corporate actions | Changes in outstanding shares or classification of shareholdings |
Why Outstanding & Floating Shares Matter in Investing Decisions
Outstanding shares are useful when looking at a company’s equity base. They are used in calculations such as market capitalisation and earnings per share, and the number can change after a fresh issue or buyback.
Free float tells a different story. It shows how many shares are actually available for public trading. If that number is small, even a large buy or sell order can have a noticeable effect on the share price, especially when trading volumes are low.
Free float should therefore be read along with trading volume and the company’s shareholding pattern rather than on its own.
How Traders & Investors Use This Data in Real Markets
Changes in outstanding shares can show whether a fresh issue, buyback or other corporate action has altered the company’s equity base. They are also useful when comparing per-share figures across different periods.
Free float matters more from a trading perspective. If only a small portion of shares is available in the market, a large buy or sell order can move the price more sharply, especially when volumes are thin.
This becomes important for institutional investors dealing in large quantities. They often look at free float and trading volume before taking a sizeable position, as limited liquidity can make entry and exit more difficult.
Final Thoughts
Outstanding shares and floating shares are important concepts that help analyse a company’s ownership pattern and stock behaviour. Outstanding shares are the total shares of a company held by its stakeholders, whereas floating shares are the number of shares available for trading in the market.
It is better to analyse outstanding and floating shares alongside the company’s fundamentals and financials, the performance of the company’s promoters, the company’s valuation, the volume of shares traded, and market conditions.
FAQs
Not necessarily. Outstanding shares refer to equity shares currently in issue and held by shareholders. The number can change following fresh issues, buybacks and other corporate actions affecting the company’s equity capital.
No. Floating stocks typically exclude shares owned by promoters, founders, and other strategic investors. Free-floating stocks primarily denote those available for trading on the stock exchange.
Yes, the market capitalisation is calculated with the use of the outstanding stocks. The simplest formula for calculating market capitalisation is to multiply a stock’s price by the number of outstanding shares.
Yes, floating shares could vary depending on changes in the structure of the company’s ownership, as a result of the sale of shares by the promoter, expiration of the lock-in period, issuing of new shares, and other actions of the corporation that would increase or reduce the total number of shares available for public float.
Low-float stocks can sometimes become more volatile due to the limited number of available shares, which can affect prices in response to high demand or supply constraints. But many other factors could contribute to the price volatility, including trading volume and overall market conditions.
No. Floating shares are usually lower than outstanding shares because promoter, strategic or other non-free-float holdings may be excluded. However, both figures can be equal if all outstanding shares qualify as free float.
