Firstsource Solutions Limited (NSE:FSL) surges 5.1%; public companies who own 54% shares profited along with institutions

Key Insights

• Significant control over Firstsource Solutions by public companies implies that the general public has more power to influence management and governance-related decisions
• 54% of the company is held by a single shareholder (RPSG Ventures Limited)
• Insiders have sold recently

Every investor in Firstsource Solutions Limited (NSE:FSL) should be aware of the most powerful shareholder groups. The group holding the most number of shares in the company, around 54% to be precise, is public companies. Put another way, the group faces the maximum upside potential (or downside risk).

Following a 5.1% increase in the stock price last week, public companies profited the most, but institutions who own 25% stock also stood to gain from the increase.

In the chart below, we zoom in on the different ownership groups of Firstsource Solutions.

See our latest analysis for Firstsource Solutions

What Does The Institutional Ownership Tell Us About Firstsource Solutions?

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.

We can see that Firstsource Solutions 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. 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 Firstsource Solutions' historic earnings and revenue below, but keep in mind there's always more to the story.

We note that hedge funds don't have a meaningful investment in Firstsource Solutions. RPSG Ventures Limited is currently the largest shareholder, with 54% of shares outstanding. This implies that they have majority interest control of the future of the company. With 8.1% and 2.1% of the shares outstanding respectively, HDFC Asset Management Company Limited and ICICI Prudential Asset Management Company Limited are the second and third largest shareholders.

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. Quite a few analysts cover the stock, so you could look into forecast growth quite easily.

Insider Ownership Of Firstsource Solutions

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.

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 Firstsource Solutions Limited in their own names. Keep in mind that it's a big company, and the insiders own ₹702m worth of shares. The absolute value might be more important than the proportional share. It is good to see board members owning shares, but it might be worth checking if those insiders have been buying.

General Public Ownership

With a 19% ownership, the general public, mostly comprising of individual investors, have some degree of sway over Firstsource Solutions. 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.

Public Company Ownership

We can see that public companies hold 54% of the Firstsource Solutions shares on issue. This may be a strategic interest and the two companies may have related business interests. It could be that they have de-merged. This holding is probably worth investigating further.

Next Steps:

While it is well worth considering the different groups that own a company, there are other factors that are even more important. For example, we've discovered 2 warning signs for Firstsource Solutions that you should be aware of before investing here.

If you would prefer discover what analysts are predicting in terms of future growth, do not miss this free report on analyst forecasts.

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.