AU Small Finance Bank Limited (NSE:AUBANK) is a favorite amongst institutional investors who own 51%
- Given the large stake in the stock by institutions, AU Small Finance Bank's stock price might be vulnerable to their trading decisions
- The top 8 shareholders own 51% of the company
- Recent sales by insiders
Every investor in AU Small Finance Bank Limited (NSE:AUBANK) should be aware of the most powerful shareholder groups. The group holding the most number of shares in the company, around 51% to be precise, is institutions. Put another way, the group faces the maximum upside potential (or downside risk).
Since institutional have access to huge amounts of capital, their market moves tend to receive a lot of scrutiny by retail or individual investors. Hence, having a considerable amount of institutional money invested in a company is often regarded as a desirable trait.
In the chart below, we zoom in on the different ownership groups of AU Small Finance Bank.
See our latest analysis for AU Small Finance Bank
What Does The Institutional Ownership Tell Us About AU Small Finance Bank?
Institutions typically measure themselves against a benchmark when reporting to their own investors, so they often become more enthusiastic about a stock once it's included in a major index. We would expect most companies to have some institutions on the register, especially if they are growing.
AU Small Finance Bank already has institutions on the share registry. Indeed, they own a respectable stake in the company. This can indicate that the company has a certain degree of credibility in the investment community. However, it is best to be wary of relying on the supposed validation that comes with institutional investors. They too, get it wrong sometimes. When multiple institutions own a stock, there's always a risk that they are in a 'crowded trade'. When such a trade goes wrong, multiple parties may compete to sell stock fast. This risk is higher in a company without a history of growth. You can see AU Small Finance Bank's historic earnings and revenue below, but keep in mind there's always more to the story.
Institutional investors own over 50% of the company, so together than can probably strongly influence board decisions. Hedge funds don't have many shares in AU Small Finance Bank. The company's CEO Sanjay Agarwal is the largest shareholder with 21% of shares outstanding. Meanwhile, the second and third largest shareholders, hold 9.1% and 4.4%, of the shares outstanding, respectively.
On further inspection, we found that more than half the company's shares are owned by the top 8 shareholders, suggesting that the interests of the larger shareholders are balanced out to an extent by the smaller ones.
Researching institutional ownership is a good way to gauge and filter a stock's expected performance. The same can be achieved by studying analyst sentiments. Our information suggests that there isn't any analyst coverage of the stock, so it is probably little known.
Insider Ownership Of AU Small Finance Bank
The definition of an insider can differ slightly between different countries, but members of the board of directors always count. The company management answer to the board and the latter should represent the interests of shareholders. Notably, sometimes top-level managers are on the board themselves.
Most consider insider ownership a positive because it can indicate the board is well aligned with other shareholders. However, on some occasions too much power is concentrated within this group.
It seems insiders own a significant proportion of AU Small Finance Bank Limited. Insiders own ₹105b worth of shares in the ₹390b company. That's quite meaningful. It is good to see this level of investment. You can check here to see if those insiders have been buying recently.
General Public Ownership
With a 19% ownership, the general public, mostly comprising of individual investors, have some degree of sway over AU Small Finance Bank. This size of ownership, while considerable, may not be enough to change company policy if the decision is not in sync with other large shareholders.
It's always worth thinking about the different groups who own shares in a company. But to understand AU Small Finance Bank better, we need to consider many other factors. Consider risks, for instance. Every company has them, and we've spotted 2 warning signs for AU Small Finance Bank you should know about.
Of course this may not be the best stock to buy. So take a peek at this free free list of interesting companies.
NB: Figures in this article are calculated using data from the last twelve months, which refer to the 12-month period ending on the last date of the month the financial statement is dated. This may not be consistent with full year annual report figures.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
AU Small Finance Bank
AU Small Finance Bank Limited provides various banking and financial services in India.
Excellent balance sheet with reasonable growth potential.