Institutional investors may overlook Equitas Small Finance Bank Limited's (NSE:EQUITASBNK) recent ₹10b market cap drop as long-term gains remain positive

Key Insights

• Institutions' substantial holdings in Equitas Small Finance Bank implies that they have significant influence over the company's share price
• A total of 14 investors have a majority stake in the company with 50% ownership
• Using data from analyst forecasts alongside ownership research, one can better assess the future performance of a company

If you want to know who really controls Equitas Small Finance Bank Limited (NSE:EQUITASBNK), then you'll have to look at the makeup of its share registry. And the group that holds the biggest piece of the pie are institutions with 57% ownership. That is, the group stands to benefit the most if the stock rises (or lose the most if there is a downturn).

Losing money on investments is something no shareholder enjoys, least of all institutional investors who saw their holdings value drop by 8.4% last week. However, the 12% one-year return to shareholders might have softened the blow. But they would probably be wary of future losses.

In the chart below, we zoom in on the different ownership groups of Equitas Small Finance Bank.

See our latest analysis for Equitas Small Finance Bank

What Does The Institutional Ownership Tell Us About Equitas 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.

Equitas 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. It is not uncommon to see a big share price drop if two large institutional investors try to sell out of a stock at the same time. So it is worth checking the past earnings trajectory of Equitas Small Finance Bank, (below). Of course, keep in mind that there are other factors to consider, too.

Since institutional investors own more than half the issued stock, the board will likely have to pay attention to their preferences. Hedge funds don't have many shares in Equitas Small Finance Bank. HDFC Asset Management Company Limited is currently the largest shareholder, with 7.8% of shares outstanding. Meanwhile, the second and third largest shareholders, hold 6.3% and 5.7%, of the shares outstanding, respectively. In addition, we found that Pathangi Vasudevan, the CEO has 1.4% of the shares allocated to their name.

Looking at the shareholder registry, we can see that 50% of the ownership is controlled by the top 14 shareholders, meaning that no single shareholder has a majority interest in the ownership.

While it makes sense to study institutional ownership data for a company, it also makes sense to study analyst sentiments to know which way the wind is blowing. Quite a few analysts cover the stock, so you could look into forecast growth quite easily.

Insider Ownership Of Equitas Small Finance Bank

While the precise definition of an insider can be subjective, almost everyone considers board members to be insiders. 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.

Shareholders would probably be interested to learn that insiders own shares in Equitas Small Finance Bank Limited. It is a pretty big company, so it is generally a positive to see some potentially meaningful alignment. In this case, they own around ₹5.8b worth of shares (at current prices). It is good to see this level of investment by insiders. You can check here to see if those insiders have been buying recently.

General Public Ownership

The general public, who are usually individual investors, hold a 32% stake in Equitas Small Finance Bank. While this group can't necessarily call the shots, it can certainly have a real influence on how the company is run.

Private Company Ownership

Our data indicates that Private Companies hold 4.7%, of the company's shares. 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 Equitas Small Finance Bank better, we need to consider many other factors. For example, we've discovered 2 warning signs for Equitas Small Finance Bank that you should be aware of before investing here.

If you are like me, you may want to think about whether this company will grow or shrink. Luckily, you can check this free report showing analyst forecasts for its future.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com