FCFE Calculator
FCFE (Free cash flow to equity) – NSE SME Emerge has introduced an additional eligibility criteria recently in addition to other criteria. The companies wishing for SME IPO also have to comply with Free cash flow to equity measure to get listed. However, BSE SME has not introduced it currently.
Free cash flow to Equity calculator is used to calculate cash available with a company that would remain for the shareholders once operating expenses, net fund flow from investing and net fund flow from finance related activities have been accounted for. Hence, this free cash flow is attributable to shareholders, which includes any excess cash and excludes all debt and financial obligations.
Net cash flow from operations
Purchase of fixed assets
Net Borrowings
Net Interest Expenses
Effective Tax Rate
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| Net Interest Expenses | |
| Free Cash Flow to Equity |
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FAQs
NSE SME Emerge has recently introduced additional eligibility criteria for IPO and listing in the existing IPO eligibility criteria. Free Cash Flow to Equity (FCFE) is the amount of cash that a company generates that is available to be distributed to its equity shareholders. It represents the money left after paying all the expenses, taxes, interest, and necessary investment in assets, while also considering any new borrowings and debt obligations. This key financial metric helps assess how effectively a company utilizes its equity capital.
Free cash flow to Equity calculation is done to compute cash available with a company that would remain for the shareholders once operating expenses, net fund flow from investing and net fund flow from finance-related activities have been accounted for. Hence, this free cash flow is attributable to shareholders, which includes any excess cash and excludes all debt and financial obligations.
FCFE = Net Cash flow from operations – Purchase of Fixed assets + Net Borrowings – (Interest*(1-T))
- Net Cash Flow from Operations: It means net cash from operating activities minus income tax paid, as per the audited cash flow statement.
- Net Borrowings: Net Borrowings= (Proceeds from Long Term Borrowings−Repayments) + (Proceeds from Short Term Borrowings−Repayments).
- Effective Tax Rate: 1 – (PAT/PBT).
Free Cash Flow to Equity is used when investors want to know how much cash a company can return to its shareholders after meeting all the expenses, debt repayment, and reinvestment needs.
It is especially used in these cases:
- Valuation of the Company: Analysts use FCFE in discounted cash flow (DCF) models to estimate the fair value of a company’s shares.
- Dividend Analysis: Companies that do not pay regular dividends, FCFE shows the potential cash available for dividends or share buybacks.
- Financial health check – FCFE helps investors see if a company can fund shareholder returns from its own operations instead of relying on borrowing.
- Peer Comparison – It is a useful metric to compare companies in the same sector for understanding which one generates more shareholder-friendly cash flows.
FCFE and FCFF are both cash flow measures, but they are used for different purposes.
- FCFE shows the cash available only for the Equity shareholders after paying all the expenses, taxes, debt repayment and reinvestments. It tells how much money can be given by the company back to shareholders as dividends or buy backs.
- FCFF, on the other hand, shows the cash available to all the providers of capital both debt holders and equity holders before paying debt. It is used to value the overall firm, not just the equity portion.
Positive FCFE signifies have surplus cash after paying its expenses, taxes, debts and investments which can be distributed among shareholders as dividend or reinvested in business.
Negative FCFE means the company is consuming more cash than it generates and does not have enough cash to cover these items (maybe due to losses, high CapEx, or repayments).
NSE SME Emerge has introduced additional eligibility criteria recently in addition to other criteria. Companies wanting to launch SME IPO must show positive FCFE in at least 2 out of 3 financial years immediately before filing the DRHP. The aim of this rule is to ensure that only financially sound companies with ability to generate real cash flow are allowed to raise funds through the Initial Public Offer on NSE SME platform.
By linking eligibility to FCFE, National Stock Exchange ensures greater transparency and protects investors by admitting only those companies that demonstrate sustainable financial growth.
FCFE (Free Cash Flow to Equity) calculator helps to estimate cash available to company’s shareholders after providing for expenses, taxes, debts and investments. This tool helps analysts, investors to assess a company’s financial strength and make informed financial decisions.
This tool makes it easier for investors and analysts to assess a company’s financial strength, especially during IPO evaluations, and supports better-informed investment decisions. FCFE calculator is available at IPOPlatform.com which provides a reliable and accurate calculation that helps users estimate the free cash available to equity shareholders after meeting all expenses, debt obligations, and reinvestments.
The requirement of FCFE (Free cash flow to equity) is mandatory on NSE Emerge. However, it should be noted that it FCFE criteria for Initial Public Offer is not there on BSE (Bombay Stock Exchange) SME.
Free cash flow to Equity calculation measures the cash available with a company that would remain for the shareholders once operating expenses, net fund flow from investing and net fund flow from finance-related activities have been accounted for.
FCFE = Net Cash flow from operations – Purchase of Fixed assets + Net Borrowings – (Interest*(1-T))
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