IDFC First Bank Limited's (NSE:IDFCFIRSTB) largest shareholders are public companies who were rewarded as market cap surged ₹20b last week

Key Insights

• IDFC First Bank's significant public companies ownership suggests that the key decisions are influenced by shareholders from the larger public
• A total of 3 investors have a majority stake in the company with 51% ownership
• Institutions own 17% of IDFC First Bank

A look at the shareholders of IDFC First Bank Limited (NSE:IDFCFIRSTB) can tell us which group is most powerful. With 40% stake, public companies possess the maximum shares in the company. Put another way, the group faces the maximum upside potential (or downside risk).

As a result, public companies collectively scored the highest last week as the company hit ₹483b market cap following a 4.4% gain in the stock.

In the chart below, we zoom in on the different ownership groups of IDFC First Bank.

Check out our latest analysis for IDFC First Bank

What Does The Institutional Ownership Tell Us About IDFC First 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.

IDFC First Bank already has institutions on the share registry. Indeed, they own a respectable stake in the company. This suggests some credibility amongst professional investors. But we can't rely on that fact alone since institutions make bad investments sometimes, just like everyone does. 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 IDFC First Bank's earnings history below. Of course, the future is what really matters.

Hedge funds don't have many shares in IDFC First Bank. Our data shows that IDFC Limited is the largest shareholder with 40% of shares outstanding. In comparison, the second and third largest shareholders hold about 7.1% and 4.1% of the stock.

To make our study more interesting, we found that the top 3 shareholders have a majority ownership in the company, meaning that they are powerful enough to influence the decisions of the company.

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. There are a reasonable number of analysts covering the stock, so it might be useful to find out their aggregate view on the future.

Insider Ownership Of IDFC First 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. Management ultimately answers to the board. However, it is not uncommon for managers to be executive board members, especially if they are a founder or the CEO.

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.

Our data suggests that insiders own under 1% of IDFC First Bank Limited in their own names. However, it's possible that insiders might have an indirect interest through a more complex structure. Keep in mind that it's a big company, and the insiders own ₹2.8b worth of shares. The absolute value might be more important than the proportional share. It is always good to see at least some insider ownership, but it might be worth checking if those insiders have been selling.

General Public Ownership

With a 30% ownership, the general public, mostly comprising of individual investors, have some degree of sway over IDFC First Bank. While this size of ownership may not be enough to sway a policy decision in their favour, they can still make a collective impact on company policies.

Private Equity Ownership

Private equity firms hold a 7.1% stake in IDFC First Bank. This suggests they can be influential in key policy decisions. Some investors might be encouraged by this, since private equity are sometimes able to encourage strategies that help the market see the value in the company. Alternatively, those holders might be exiting the investment after taking it public.

Public Company Ownership

Public companies currently own 40% of IDFC First Bank stock. We can't be certain but it is quite possible this is a strategic stake. The businesses may be similar, or work together.

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 2 warning signs with IDFC First Bank (at least 1 which shouldn't be ignored) , and understanding them should be part of your investment process.

Ultimately the future is most important. You can access this free report on analyst forecasts for the company.

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.