Positive week for Five-Star Business Finance Limited (NSE:FIVESTAR) institutional investors who lost 33% over the past year

Key Insights

• Institutions' substantial holdings in Five-Star Business Finance implies that they have significant influence over the company's share price
• 52% of the business is held by the top 9 shareholders
• Insiders own 20% of Five-Star Business Finance

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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. And the group that holds the biggest piece of the pie are institutions with 45% ownership. Put another way, the group faces the maximum upside potential (or downside risk).

Institutional investors would probably welcome last week's 4.6% increase in the share price after a year of 33% losses as a sign that returns may to begin trending higher.

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

Check out 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.

Five-Star Business Finance already has institutions on the share registry. Indeed, they own a respectable stake in the company. 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. It is not uncommon to see a big share price drop if two large institutional investors try to sell out of a stock at the same time. So it is worth checking the past earnings trajectory of Five-Star Business Finance, (below). Of course, keep in mind that there are other factors to consider, too.

Hedge funds don't have many shares in Five-Star Business Finance. With a 19% stake, CEO Lakshmipathy Deenadayalan is the largest shareholder. For context, the second largest shareholder holds about 9.2% of the shares outstanding, followed by an ownership of 6.0% by the third-largest shareholder.

We also observed that the top 9 shareholders account for more than half of the share register, with a few smaller shareholders to balance the interests of the larger ones to a certain extent.

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

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

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 a reasonable proportion of Five-Star Business Finance Limited. It is very interesting to see that insiders have a meaningful ₹32b stake in this ₹157b business. Most would be pleased to see the board is investing alongside them. You may wish to access this free chart showing recent trading by insiders.

General Public Ownership

The general public, who are usually individual investors, hold a 25% stake in Five-Star Business 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.

Private Equity Ownership

Private equity firms hold a 6.0% stake in Five-Star Business Finance. This suggests they can be influential in key policy decisions. 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:

It's always worth thinking about the different groups who own shares in a company. But to understand Five-Star Business Finance better, we need to consider many other factors. Take risks for example - Five-Star Business Finance has 2 warning signs (and 1 which is a bit concerning) we think you should know about.

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.