In the wake of AU Small Finance Bank Limited's (NSE:AUBANK) latest ₹22b market cap drop, institutional owners may be forced to take severe actions

Key Insights

• Given the large stake in the stock by institutions, AU Small Finance Bank's stock price might be vulnerable to their trading decisions
• 52% of the business is held by the top 10 shareholders
• Insiders own 24% of AU Small Finance Bank

Every investor in AU Small Finance Bank Limited (NSE:AUBANK) should be aware of the most powerful shareholder groups. With 49% stake, institutions possess the maximum shares in the company. In other words, the group stands to gain the most (or lose the most) from their investment into the company.

And institutional investors endured the highest losses after the company's share price fell by 5.0% last week. Needless to say, the recent loss which further adds to the one-year loss to shareholders of 28% might not go down well especially with this category of shareholders. Institutions or "liquidity providers" control large sums of money and therefore, these types of investors usually have a lot of influence over stock price movements. As a result, if the decline continues, institutional investors may be pressured to sell AU Small Finance Bank which might hurt individual investors.

Let's delve deeper into each type of owner of AU Small Finance Bank, beginning with the chart below.

Check out our latest analysis for AU Small Finance Bank

What Does The Institutional Ownership Tell Us About AU Small Finance Bank?

Institutional investors commonly compare their own returns to the returns of a commonly followed index. So they generally do consider buying larger companies that are included in the relevant benchmark index.

As you can see, institutional investors have a fair amount of stake in AU Small Finance Bank. This implies the analysts working for those institutions have looked at the stock and they like it. But just like anyone else, they could be wrong. If multiple institutions change their view on a stock at the same time, you could see the share price drop fast. It's therefore worth looking at AU Small Finance Bank's earnings history below. Of course, the future is what really matters.

AU Small Finance Bank is not owned by hedge funds. With a 19% stake, CEO Sanjay Agarwal is the largest shareholder. With 7.2% and 6.3% of the shares outstanding respectively, Capital Research and Management Company and Fincare Business Services Limited are the second and third largest shareholders.

On further inspection, we found that more than half the company's shares are owned by the top 10 shareholders, suggesting that the interests of the larger shareholders are balanced out to an extent by the smaller ones.

While studying institutional ownership for a company can add value to your research, it is also a good practice to research analyst recommendations to get a deeper understand of a stock's expected performance. Quite a few analysts cover the stock, so you could look into forecast growth quite easily.

Insider Ownership Of AU Small Finance Bank

The definition of company insiders can be subjective and does vary between jurisdictions. Our data reflects individual insiders, capturing board members at the very least. 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.

I generally consider insider ownership to be a good thing. However, on some occasions it makes it more difficult for other shareholders to hold the board accountable for decisions.

It seems insiders own a significant proportion of AU Small Finance Bank Limited. It has a market capitalization of just ₹409b, and insiders have ₹99b worth of shares in their own names. That's quite significant. Most would be pleased to see the board is investing alongside them. You may wish to access this free chart showing recent trading by insiders.

General Public Ownership

The general public, who are usually individual investors, hold a 18% stake in 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.

Private Company Ownership

We can see that Private Companies own 9.1%, of the shares on issue. Private companies may be related parties. Sometimes insiders have an interest in a public company through a holding in a private company, rather than in their own capacity as an individual. While it's hard to draw any broad stroke conclusions, it is worth noting as an area for further research.

Next Steps:

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. To that end, you should be aware of the 1 warning sign we've spotted with AU Small Finance Bank .

If you would prefer discover what analysts are predicting in terms of future growth, do not miss this free report on analyst forecasts.

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.