Could Edelweiss Financial Services Limited’s (NSE:EDELWEISS) Investor Composition Influence The Stock Price?

A look at the shareholders of Edelweiss Financial Services Limited (NSE:EDELWEISS) can tell us which group is most powerful. Institutions will often hold stock in bigger companies, and we expect to see insiders owning a noticeable percentage of the smaller ones. Warren Buffett said that he likes ‘a business with enduring competitive advantages that is run by able and owner-oriented people’. So it’s nice to see some insider ownership, because it may suggest that management is owner-oriented.

With a market capitalization of ₹91b, Edelweiss Financial Services is a decent size, so it is probably on the radar of institutional investors. Our analysis of the ownership of the company, below, shows that institutional investors have bought into the company. Let’s take a closer look to see what the different types of shareholder can tell us about Edelweiss Financial Services.

See our latest analysis for Edelweiss Financial Services

NSEI:EDELWEISS Ownership Summary, January 23rd 2020
NSEI:EDELWEISS Ownership Summary, January 23rd 2020

What Does The Institutional Ownership Tell Us About Edelweiss Financial Services?

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 own 29% of Edelweiss Financial Services. 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. 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 Edelweiss Financial Services’s historic earnings and revenue, below, but keep in mind there’s always more to the story.

NSEI:EDELWEISS Income Statement, January 23rd 2020
NSEI:EDELWEISS Income Statement, January 23rd 2020

Edelweiss Financial Services is not owned by hedge funds. The company’s CEO Rashesh Shah is the largest shareholder with 17% of shares outstanding. With 7.9% and 4.8% of the shares outstanding respectively, Arakoni Ramaswamy and Privatbank Ihag Zürich, Asset Management Arm are the second and third largest shareholders. Interestingly, Arakoni Ramaswamy is also a Top Key Executive, again, pointing towards strong insider ownership amongst the company’s top shareholders.

Further, we can found that 52% of the ownership is controlled by the top 11 shareholders, meaning that no one shareholder has a majority interest in the ownership.

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 Edelweiss Financial Services

The definition of company insiders can be subjective, and does vary between jurisdictions. Our data reflects individual insiders, capturing board members at the very least. 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.

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.

It seems insiders own a significant proportion of Edelweiss Financial Services Limited. Insiders own ₹36b worth of shares in the ₹91b company. That’s quite meaningful. It is good to see this level of investment. You can check here to see if those insiders have been buying recently.

General Public Ownership

With a 23% ownership, the general public have some degree of sway over EDELWEISS. 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.

Private Company Ownership

We can see that Private Companies own 9.6%, of the shares on issue. Private companies may be related parties. Sometimes insiders have an interest in a public company through a holding in a private company, rather than in their own capacity as an individual. While it’s hard to draw any broad stroke conclusions, it is worth noting as an area for further research.

Next Steps:

I find it very interesting to look at who exactly owns a company. But to truly gain insight, we need to consider other information, too. Case in point: We’ve spotted 2 warning signs for Edelweiss Financial Services you should be aware of.

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.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.