Institutions own 22% of Bajaj Finance Limited (NSE:BAJFINANCE) shares but public companies control 54% of the company

Key Insights

• Significant control over Bajaj Finance by public companies implies that the general public has more power to influence management and governance-related decisions
• The largest shareholder of the company is Bajaj Finserv Ltd. with a 51% stake
• Insiders have sold recently

To get a sense of who is truly in control of Bajaj Finance Limited (NSE:BAJFINANCE), it is important to understand the ownership structure of the business. And the group that holds the biggest piece of the pie are public companies with 54% ownership. That is, the group stands to benefit the most if the stock rises (or lose the most if there is a downturn).

Meanwhile, institutions make up 22% of the company’s shareholders. Generally speaking, as a company grows, institutions will increase their ownership. Conversely, insiders often decrease their ownership over time.

In the chart below, we zoom in on the different ownership groups of Bajaj Finance.

Check out our latest analysis for Bajaj Finance

What Does The Institutional Ownership Tell Us About Bajaj Finance?

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.

As you can see, institutional investors have a fair amount of stake in Bajaj Finance. 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. 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 Bajaj Finance, (below). Of course, keep in mind that there are other factors to consider, too.

We note that hedge funds don't have a meaningful investment in Bajaj Finance. The company's largest shareholder is Bajaj Finserv Ltd., with ownership of 51%. This implies that they have majority interest control of the future of the company. Bajaj Holdings & Investment Limited is the second largest shareholder owning 3.1% of common stock, and Singapore holds about 3.0% of the company stock.

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 Bajaj Finance

The definition of an insider can differ slightly between different countries, but members of the board of directors always count. 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 Bajaj Finance Limited in their own names. As it is a large company, we'd only expect insiders to own a small percentage of it. But it's worth noting that they own ₹11b worth of shares. It is good to see board members owning shares, 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 20% stake in Bajaj Finance. While this group can't necessarily call the shots, it can certainly have a real influence on how the company is run.

Public Company Ownership

It appears to us that public companies own 54% of Bajaj Finance. It's hard to say for sure but this suggests they have entwined business interests. This might be a strategic stake, so it's worth watching this space for changes in ownership.

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 3 warning signs with Bajaj Finance (at least 1 which is a bit unpleasant) , and understanding them should be part of your investment process.

But ultimately it is the future, not the past, that will determine how well the owners of this business will do. Therefore we think it advisable to take a look at this free report showing whether analysts are predicting a brighter 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.