Insiders remain on top despite recent sales, own 31% of Edelweiss Financial Services Limited (NSE:EDELWEISS)

Key Insights

• Edelweiss Financial Services' significant insider ownership suggests inherent interests in company's expansion
• 52% of the business is held by the top 9 shareholders
• Insiders have sold recently

If you want to know who really controls Edelweiss Financial Services Limited (NSE:EDELWEISS), then you'll have to look at the makeup of its share registry. And the group that holds the biggest piece of the pie are individual insiders with 31% ownership. That is, the group stands to benefit the most if the stock rises (or lose the most if there is a downturn).

Insiders own the top position in the company’s share registry despite recent sales and as a result, were the biggest beneficiaries of last week’s 4.5% gain.

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

Check out our latest analysis for Edelweiss Financial Services

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

Many institutions measure their performance against an index that approximates the local market. So they usually pay more attention to companies that are included in major indices.

As you can see, institutional investors have a fair amount of stake in 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' historic earnings and revenue below, but keep in mind there's always more to the story.

Hedge funds don't have many shares in Edelweiss Financial Services. With a 16% stake, CEO Rashesh Shah is the largest shareholder. For context, the second largest shareholder holds about 7.5% of the shares outstanding, followed by an ownership of 7.1% by the third-largest shareholder. Interestingly, the second-largest shareholder, Venkatchalam Ramaswamy is also Top Key Executive, again, pointing towards strong insider ownership amongst the company's top shareholders.

We did some more digging and found that 9 of the top shareholders account for roughly 52% of the register, implying that along with larger shareholders, there are a few smaller shareholders, thereby balancing out each others interests somewhat.

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. Our information suggests that there isn't any analyst coverage of the stock, so it is probably little known.

Insider Ownership Of Edelweiss Financial Services

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 most recent data indicates that insiders own a reasonable proportion of Edelweiss Financial Services Limited. It has a market capitalization of just ₹107b, and insiders have ₹34b worth of shares in their own names. That's quite significant. Most would say this shows a good degree of alignment with shareholders, especially in a company of this size. You can click here to see if those insiders have been buying or selling.

General Public Ownership

With a 29% ownership, the general public, mostly comprising of individual investors, have some degree of sway over Edelweiss Financial Services. 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.

Private Company Ownership

It seems that Private Companies own 7.5%, of the Edelweiss Financial Services stock. 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. Consider for instance, the ever-present spectre of investment risk. We've identified 5 warning signs with Edelweiss Financial Services (at least 1 which doesn't sit too well with us) , and understanding them should be part of your investment process.

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of interesting companies.

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.