Is IDFC Limited's (NSE:IDFC) Shareholder Ownership Skewed Towards Insiders?

A look at the shareholders of IDFC Limited (NSE:IDFC) can tell us which group is most powerful. Large companies usually have institutions as shareholders, and we usually see insiders owning shares in smaller companies. I quite like to see at least a little bit of insider ownership. As Charlie Munger said 'Show me the incentive and I will show you the outcome.

IDFC is not a large company by global standards. It has a market capitalization of ₹42b, which means it wouldn't have the attention of many institutional investors. Our analysis of the ownership of the company, below, shows that institutions are noticeable on the share registry. We can zoom in on the different ownership groups, to learn more about IDFC.

See our latest analysis for IDFC

What Does The Institutional Ownership Tell Us About IDFC?

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 IDFC does have institutional investors; and they hold a good portion of the company's stock. 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. If multiple institutions change their view on a stock at the same time, you could see the share price drop fast. It's therefore worth looking at IDFC's earnings history, below. Of course, the future is what really matters.

We note that hedge funds don't have a meaningful investment in IDFC. Our data shows that India is the largest shareholder with 16% of shares outstanding. With 9.5% and 5.0% of the shares outstanding respectively, Khazanah Nasional Berhad and Theleme Partners LLP are the second and third largest shareholders.

A closer look at our ownership figures suggests that the top 12 shareholders have a combined ownership of 52% implying that no one share holder has a majority.

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. We're not picking up on any analyst coverage of the stock at the moment, so the company is unlikely to be widely held.

Insider Ownership Of IDFC

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.

I can report that insiders do own shares in IDFC Limited. It has a market capitalization of just ₹42b, and insiders have ₹2.1b worth of shares, in their own names. It is good to see some investment by insiders, but it might be worth checking if those insiders have been buying.

General Public Ownership

With a 37% ownership, the general public have some degree of sway over IDFC. While this group can't necessarily call the shots, it can certainly have a real influence on how the company is run.

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. For example, we've discovered 3 warning signs for IDFC (1 makes us a bit uncomfortable!) that you should be aware of before investing here.

Of course this may not be the best stock to buy. Therefore, you may wish to see our free collection of interesting prospects boasting favorable financials.

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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