A fantastic week for Five-Star Business Finance Limited's (NSE:FIVESTAR) 41% institutional owners, one-year returns continue to impress

Key Insights

• Institutions' substantial holdings in Five-Star Business Finance implies that they have significant influence over the company's share price
• A total of 11 investors have a majority stake in the company with 51% ownership
• 19% of Five-Star Business Finance is held by insiders

If you want to know who really controls Five-Star Business Finance Limited (NSE:FIVESTAR), then you'll have to look at the makeup of its share registry. We can see that institutions own the lion's share in the company with 41% ownership. In other words, the group stands to gain the most (or lose the most) from their investment into the company.

And as as result, institutional investors reaped the most rewards after the company's stock price gained 15% last week. The one-year return on investment is currently 7.1% and last week's gain would have been more than welcomed.

In the chart below, we zoom in on the different ownership groups of Five-Star Business Finance.

See our latest analysis for Five-Star Business Finance

What Does The Institutional Ownership Tell Us About Five-Star Business Finance?

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.

We can see that Five-Star Business Finance does have institutional investors; and they hold a good portion of the company's stock. This can indicate that the company has a certain degree of credibility in the investment community. However, it is best to be wary of relying on the supposed validation that comes with institutional investors. They too, get it wrong sometimes. 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 Five-Star Business Finance's historic earnings and revenue below, but keep in mind there's always more to the story.

Five-Star Business Finance is not owned by hedge funds. Because actions speak louder than words, we consider it a good sign when insiders own a significant stake in a company. In Five-Star Business Finance's case, its Top Key Executive, Lakshmipathy Deenadayalan, is the largest shareholder, holding 19% of shares outstanding. Fidelity International Ltd is the second largest shareholder owning 6.3% of common stock, and KKR & Co. Inc. holds about 6.0% of the company stock.

Looking at the shareholder registry, we can see that 51% of the ownership is controlled by the top 11 shareholders, meaning that no single 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 Five-Star Business Finance

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.

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.

It seems insiders own a significant proportion of Five-Star Business Finance Limited. It has a market capitalization of just ₹219b, and insiders have ₹41b 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

The general public-- including retail investors -- own 31% stake in the company, and hence can't easily be ignored. 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 Equity Ownership

With a stake of 6.0%, private equity firms could influence the Five-Star Business Finance board. Sometimes we see private equity stick around for the long term, but generally speaking they have a shorter investment horizon and -- as the name suggests -- don't invest in public companies much. After some time they may look to sell and redeploy capital elsewhere.

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 instance, we've identified 2 warning signs for Five-Star Business Finance that 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.

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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.