Institutions profited after Bajaj Finance Limited's (NSE:BAJFINANCE) market cap rose ₹212b last week but public companies profited the most

Key Insights

• The considerable ownership by public companies in Bajaj Finance indicates that they collectively have a greater say in management and business strategy
• Bajaj Finserv Ltd. owns 51% of the company
• 22% of Bajaj Finance is held by Institutions

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A look at the shareholders of Bajaj Finance Limited (NSE:BAJFINANCE) can tell us which group is most powerful. We can see that public companies own the lion's share in the company with 55% ownership. In other words, the group stands to gain the most (or lose the most) from their investment into the company.

While public companies were the group that benefitted the most from last week’s ₹212b market cap gain, institutions too had a 22% share in those profits.

Let's take a closer look to see what the different types of shareholders can tell us about Bajaj Finance.

View 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.

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

Bajaj Finance is not owned by hedge funds. Our data shows that Bajaj Finserv Ltd. is the largest shareholder with 51% of shares outstanding. This essentially means that they have extensive influence, if not outright control, over the future of the corporation. For context, the second largest shareholder holds about 3.1% of the shares outstanding, followed by an ownership of 2.6% by the third-largest shareholder.

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

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. Management ultimately answers to the board. However, it is not uncommon for managers to be executive board members, especially if they are a founder or the CEO.

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 less than 1% of Bajaj Finance Limited. It is a very large company, so it would be surprising to see insiders own a large proportion of the company. Though their holding amounts to less than 1%, we can see that board members collectively own ₹10b worth of shares (at current prices). 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 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

It appears to us that public companies own 55% of Bajaj Finance. 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:

It's always worth thinking about the different groups who own shares in a company. But to understand Bajaj Finance better, we need to consider many other factors. To that end, you should learn about the 2 warning signs we've spotted with Bajaj Finance (including 1 which is a bit concerning) .

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.