Institutional owners may take dramatic actions as CMS Info Systems Limited's (NSE:CMSINFO) recent 6.8% drop adds to one-year losses

Key Insights

• Institutions' substantial holdings in CMS Info Systems implies that they have significant influence over the company's share price
• 51% of the business is held by the top 18 shareholders
• Analyst forecasts along with ownership data serve to give a strong idea about prospects for a business

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Every investor in CMS Info Systems Limited (NSE:CMSINFO) should be aware of the most powerful shareholder groups. With 49% stake, institutions possess the maximum shares in the company. Put another way, the group faces the maximum upside potential (or downside risk).

And institutional investors saw their holdings value drop by 6.8% last week. This set of investors may especially be concerned about the current loss, which adds to a one-year loss of 24% for shareholders. Often called “market movers", institutions wield significant power in influencing the price dynamics of any stock. Hence, if weakness in CMS Info Systems' share price continues, institutional investors may feel compelled to sell the stock, which might not be ideal for individual investors.

Let's delve deeper into each type of owner of CMS Info Systems, beginning with the chart below.

Check out our latest analysis for CMS Info Systems

What Does The Institutional Ownership Tell Us About CMS Info Systems?

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.

CMS Info Systems 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. When multiple institutions own a stock, there's always a risk that they are in a 'crowded trade'. When such a trade goes wrong, multiple parties may compete to sell stock fast. This risk is higher in a company without a history of growth. You can see CMS Info Systems' historic earnings and revenue below, but keep in mind there's always more to the story.

CMS Info Systems is not owned by hedge funds. Looking at our data, we can see that the largest shareholder is SBI Funds Management Limited with 9.1% of shares outstanding. For context, the second largest shareholder holds about 6.4% of the shares outstanding, followed by an ownership of 5.6% by the third-largest shareholder. Rajiv Kaul, who is the second-largest shareholder, also happens to hold the title of Chief Executive Officer.

After doing some more digging, we found that the top 18 have the combined ownership of 51% in the company, suggesting that no single shareholder has significant control over the company.

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 CMS Info Systems

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.

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 most recent data indicates that insiders own some shares in CMS Info Systems Limited. As individuals, the insiders collectively own ₹4.3b worth of the ₹67b company. It is good to see some investment by insiders, but it might be worth checking if those insiders have been buying.

General Public Ownership

The general public, who are usually individual investors, hold a 44% stake in CMS Info Systems. While this group can't necessarily call the shots, it can certainly have a real influence on how the company is run.

Next Steps:

While it is well worth considering the different groups that own a company, there are other factors that are even more important.

I like to dive deeper into how a company has performed in the past. You can access this interactive graph of past earnings, revenue and cash flow, for free.

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.