Institutional investors control 56% of The Federal Bank Limited (NSE:FEDERALBNK) and were rewarded last week after stock increased 3.7%

Key Insights

• Institutions' substantial holdings in Federal Bank implies that they have significant influence over the company's share price
• The top 21 shareholders own 51% of the company
• Ownership research along with analyst forecasts data help provide a good understanding of opportunities in a stock

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To get a sense of who is truly in control of The Federal Bank Limited (NSE:FEDERALBNK), it is important to understand the ownership structure of the business. We can see that institutions own the lion's share in the company with 56% ownership. That is, the group stands to benefit the most if the stock rises (or lose the most if there is a downturn).

And as as result, institutional investors reaped the most rewards after the company's stock price gained 3.7% last week. One-year return to shareholders is currently 23% and last week’s gain was the icing on the cake.

Let's take a closer look to see what the different types of shareholders can tell us about Federal Bank.

View our latest analysis for Federal Bank

What Does The Institutional Ownership Tell Us About Federal 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.

We can see that Federal Bank does have institutional investors; and they hold a good portion of the company's stock. 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 Federal Bank's earnings history below. Of course, the future is what really matters.

Investors should note that institutions actually own more than half the company, so they can collectively wield significant power. Federal Bank is not owned by hedge funds. HDFC Asset Management Company Limited is currently the company's largest shareholder with 7.0% of shares outstanding. With 6.0% and 3.6% of the shares outstanding respectively, International Finance Corporation and Life Insurance Corporation of India, Asset Management Arm are the second and third largest shareholders.

A closer look at our ownership figures suggests that the top 21 shareholders have a combined ownership of 51% implying that no single shareholder has a majority.

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. There are plenty of analysts covering the stock, so it might be worth seeing what they are forecasting, too.

Insider Ownership Of Federal Bank

While the precise definition of an insider can be subjective, almost everyone considers board members to be insiders. Company management run the business, but the CEO will answer to the board, even if he or she is a member of it.

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.

We can see that insiders own shares in The Federal Bank Limited. The insiders have a meaningful stake worth ₹23b. Most would see this as a real positive. Most would say this shows alignment of interests between shareholders and the board. Still, it might be worth checking if those insiders have been selling.

General Public Ownership

The general public, who are usually individual investors, hold a 33% stake in Federal Bank. While this group can't necessarily call the shots, it can certainly have a real influence on how the company is run.

Private Equity Ownership

Private equity firms hold a 6.0% stake in Federal Bank. This suggests they can be influential in key policy decisions. Some might like this, because private equity are sometimes activists who hold management accountable. But other times, private equity is selling out, having taking the company public.

Next Steps:

While it is well worth considering the different groups that own a company, there are other factors that are even more important. Consider for instance, the ever-present spectre of investment risk. We've identified 1 warning sign with Federal Bank , and understanding them should be part of your investment process.

But ultimately it is the future, not the past, that will determine how well the owners of this business will do. Therefore we think it advisable to take a look at this free report showing whether analysts are predicting a brighter 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.

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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.