Institutional owners may consider drastic measures as Five-Star Business Finance Limited's (NSE:FIVESTAR) recent ₹14b drop adds to long-term losses

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 10 investors have a majority stake in the company with 51% ownership
• Insider ownership in Five-Star Business Finance is 20%

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Every investor in Five-Star Business Finance Limited (NSE:FIVESTAR) should be aware of the most powerful shareholder groups. The group holding the most number of shares in the company, around 41% to be precise, is institutions. That is, the group stands to benefit the most if the stock rises (or lose the most if there is a downturn).

And institutional investors saw their holdings value drop by 6.0% last week. This set of investors may especially be concerned about the current loss, which adds to a one-year loss of 12% for shareholders. Also referred to as "smart money", institutions have a lot of sway over how a stock's price moves. Hence, if weakness in Five-Star Business Finance's share price continues, institutional investors may feel compelled to sell the stock, which might not be ideal for individual investors.

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 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 Five-Star Business Finance's historic earnings and revenue below, but keep in mind there's always more to the story.

Hedge funds don't have many shares in Five-Star Business Finance. From our data, we infer that the largest shareholder is Lakshmipathy Deenadayalan (who also holds the title of Top Key Executive) with 19% of shares outstanding. Its usually considered a good sign when insiders own a significant number of shares in the company, and in this case, we're glad to see a company insider play the role of a key stakeholder. For context, the second largest shareholder holds about 7.2% of the shares outstanding, followed by an ownership of 6.0% by the third-largest shareholder. In addition, we found that Rangarajan Krishnan, the CEO has 1.1% of the shares allocated to their name.

We did some more digging and found that 10 of the top shareholders account for roughly 51% of the register, implying that along with larger shareholders, there are a few smaller shareholders, thereby balancing out each others interests somewhat.

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

Insider Ownership Of Five-Star Business Finance

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. Company management run the business, but the CEO will answer to the board, even if he or she is a member of it.

Insider ownership is positive when it signals leadership are thinking like the true owners of the company. However, high insider ownership can also give immense power to a small group within the company. This can be negative in some circumstances.

Our most recent data indicates that insiders own a reasonable proportion of Five-Star Business Finance Limited. It is very interesting to see that insiders have a meaningful ₹42b stake in this ₹213b business. 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, who are usually individual investors, hold a 29% stake in Five-Star Business Finance. While this group can't necessarily call the shots, it can certainly have a real influence on how the company is run.

Private Equity Ownership

With a stake of 6.0%, private equity firms could influence the Five-Star Business Finance board. Some might like this, because private equity are sometimes activists who hold management accountable. But other times, private equity is selling out, having taking the company public.

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 example, we've discovered 3 warning signs for Five-Star Business Finance (2 can't be ignored!) that you should be aware of before investing here.

Ultimately the future is most important. You can access this free report on analyst forecasts for the company.

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.