Many people judge the size of a company by simply looking at its share price. They assume that a company with a higher share price is generally a bigger company as compared to a company with a lower share price.
Below are the share price of two companies, one is the leading private sector bank in the country and the other is a giant in the automobile sector.
HDFC Bank – 2245 Rs
MRF – 58,000 Rs

If you are under the impression that because MRF has a way bigger share price as compared to HDFC bank, it might be a bigger company, then you need to read about market capitalisation.

What is market capitalisation?

Market Capitalisation refers to the total market value of a company’s outstanding shares. Outstanding shares refers to the shares owned by the public at large, foreign and domestic investors excluding the shares held by the promoters (owners) of the company. Market capitalisation is calculated by multiplying the outstanding shares with the current market price of the share.
Let us take an example:
A company named XYZ LTD, has
Total number of outstanding shares – 2,00,000
Current price of share -200 Rs
Market capitalization – 2,00,000 * 200 = 40 Crores
The Market capitalisation of XYZ Ltd is 40 crores

Coming back to our original question, is HDFC bank bigger of MRF?
Let’s calculate the market capitalisation of both these companies

Outstanding Shares2,732,812,27142,41,143

Current Market Price2,24558,574
Total Market Capitalization (Crores)6,13,562 Crores24,918 Crores

From the above table you can observe that Market capitalisation of HDFC Bank is 15 times more than MRF, which makes it a bigger company. Although MRF has a bigger share price it is a smaller company as compared to HDFC bank.
You can check the total number of outstanding shares of any company on various websites or simply do a google search.
NOTE: As share price keeps on changing, market capitalisation keeps on changing and is never constant.

How many companies classified according to market capitalisation?

Companies are classified as large-cap, mid cap and small cap (cap is the short form for capitalisation). Earlier every investor had their own definition of a company being a large cap, mid cap or small cap. However, in July 2018, SEBI came out with some rules. SEBI has defined 3 categories based on market capitalization
•Large Cap: Top 100 companies in terms of Market Capitalization.
•Mid Cap: 101st – 250th Company in terms of Market Capitalization.
•Small Cap: 251st Company on wards.

•Large cap: Large caps are stocks of well-established companies with good business models and are considered as safe investments.
Sr.No Company Name Industry Market Capitalization (In crores)
1 Adani ports Transport Infrastructure 75,745
2 Asian paints Paint 1,46,987
3 HDFC BANK Bank – Private 6,14,339
4 HDFC Finance & Housing 3,52,282
5 Britannia Consumer food 64,116
6 ICICI Bank Bank – Private 2,52,716
7 Hindalco Iron & steel 42,312
8 Infosys IT Services & Consulting 3,57,770
9 Dr Reddy’s Lab Pharmaceuticals & Drugs 45,514
10 HUL Household & Personal products 3,93,811
•Mid cap: Mid cap companies are usually in the growing phase and have the potential to become a large cap. They are relatively riskier than large cap companies.
Sr.No Company Name Industry Market Capitalization
1 Ajanta Pharma Pharmaceutical & drugs 9,014
2 Apollo Hospital Hospital & healthcare service 20,871
3 Balkrishna Industries Auto Ancillaries- Rubbers & Tyre products 14,009
4 Bank of India Bank – Public 20,874
5 Exide industries Batteries 15,312
6 Chalomandalam finance term lending 21,047
7 Dish TV cable & d2h 4,188
8 Dewan housing finance – housing 1,462
9 Berger Paints Paints 35,387
10 GMR infra Engineering & Construction 9,385
•Small cap: Small cap companies are usually companies in the early stage of development and have a smaller revenue and client base. As these companies are not well-known, they should be researched properly.
Sr.No Company Name Industry Market Capitalization
1 Allahabad Bank Bank – Public 12,281
2 Bajaj electric Domestic Appliances 3,847
3 Can fin. homes Finance – Housing 5,220
4 BSE limited Finance – Stock Broking 2,734
5 Century Plyboards Wood & Wood products 2,978
6 CEAT Tyres Auto ancillaries – Tyres & Rubber products 3,608
7 Delta Corp. Misc. commercial services 4,776
8 Cochin shipyard Ship building 4,549
9 GNFC Fertilizer 2,859
10 Hind Copper Metals – Non ferrous 3,136