Institutions profited after CMS Info Systems Limited's (NSE:CMSINFO) market cap rose ₹4.5b last week but retail investors profited the most

Key Insights

• Significant control over CMS Info Systems by retail investors implies that the general public has more power to influence management and governance-related decisions
• A total of 22 investors have a majority stake in the company with 50% ownership
• Institutional ownership in CMS Info Systems is 46%

To get a sense of who is truly in control of CMS Info Systems Limited (NSE:CMSINFO), it is important to understand the ownership structure of the business. With 48% stake, retail investors possess the maximum shares in the company. That is, the group stands to benefit the most if the stock rises (or lose the most if there is a downturn).

While retail investors were the group that benefitted the most from last week’s ₹4.5b market cap gain, institutions too had a 46% share in those profits.

In the chart below, we zoom in on the different ownership groups of CMS Info Systems.

View our latest analysis for CMS Info Systems

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

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.

CMS Info Systems 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. 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. SBI Funds Management Limited is currently the company's largest shareholder with 9.1% of shares outstanding. For context, the second largest shareholder holds about 5.8% of the shares outstanding, followed by an ownership of 4.6% by the third-largest shareholder. Rajiv Kaul, who is the second-largest shareholder, also happens to hold the title of Chief Executive Officer.

A closer look at our ownership figures suggests that the top 22 shareholders have a combined ownership of 50% implying that no single shareholder has a majority.

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

Insider Ownership Of CMS Info Systems

The definition of an insider can differ slightly between different countries, but members of the board of directors always count. 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.

Shareholders would probably be interested to learn that insiders own shares in CMS Info Systems 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 ₹4.9b 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-- including retail investors -- own 48% stake in the company, and hence can't easily be ignored. This size of ownership, while considerable, may not be enough to change company policy if the decision is not in sync with other large shareholders.

Next Steps:

It's always worth thinking about the different groups who own shares in a company. But to understand CMS Info Systems better, we need to consider many other factors. Consider risks, for instance. Every company has them, and we've spotted 1 warning sign for CMS Info Systems you should know about.

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.

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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.