Stock Analysis

IDFC First Bank Limited's (NSE:IDFCFIRSTB) largest shareholders are private companies who were rewarded as market cap surged ₹19b last week

NSEI:IDFCFIRSTB
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Key Insights

  • IDFC First Bank's significant private companies ownership suggests that the key decisions are influenced by shareholders from the larger public
  • 51% of the business is held by the top 6 shareholders
  • Institutions own 27% of IDFC First Bank

To get a sense of who is truly in control of IDFC First Bank Limited (NSE:IDFCFIRSTB), it is important to understand the ownership structure of the business. We can see that private companies own the lion's share in the company with 36% ownership. Put another way, the group faces the maximum upside potential (or downside risk).

Clearly, private companies benefitted the most after the company's market cap rose by ₹19b last week.

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

ownership-breakdown
NSEI:IDFCFIRSTB Ownership Breakdown January 4th 2025

What Does The Institutional Ownership Tell Us About IDFC First 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.

IDFC First Bank already has institutions on the share registry. Indeed, they own a respectable stake in the company. 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. 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 IDFC First Bank, (below). Of course, keep in mind that there are other factors to consider, too.

earnings-and-revenue-growth
NSEI:IDFCFIRSTB Earnings and Revenue Growth January 4th 2025

IDFC First Bank is not owned by hedge funds. Idfc Financial Holding Company Limited is currently the largest shareholder, with 36% of shares outstanding. For context, the second largest shareholder holds about 3.7% of the shares outstanding, followed by an ownership of 3.6% by the third-largest shareholder.

We did some more digging and found that 6 of the top shareholders account for roughly 51% of the register, implying that along with larger shareholders, there are a few smaller shareholders, thereby balancing out each others interests somewhat.

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 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. Company management run the business, but the CEO will answer to the board, even if he or she is a member of it.

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.

Our data suggests that insiders own under 1% of IDFC First Bank Limited in their own names. We do note, however, it is possible insiders have an indirect interest through a private company or other corporate structure. Keep in mind that it's a big company, and the insiders own ₹935m 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

The general public, who are usually individual investors, hold a 33% stake in IDFC First 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 36%, of the company's shares. It might be worth looking deeper into this. If related parties, such as insiders, have an interest in one of these private companies, that should be disclosed in the annual report. Private companies may also have a strategic interest in the company.

Next Steps:

I find it very interesting to look at who exactly owns a company. But to truly gain insight, we need to consider other information, too. Be aware that IDFC First Bank is showing 2 warning signs in our investment analysis , you should know about...

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.

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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.