IIFL Finance Limited's (NSE:IIFL) institutional shareholders had a great week as one-year returns increased after a 8.5% gain last week

Key Insights

• Institutions' substantial holdings in IIFL Finance implies that they have significant influence over the company's share price
• 52% of the business is held by the top 8 shareholders
• Insiders own 23% of IIFL Finance

If you want to know who really controls IIFL Finance Limited (NSE:IIFL), 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 30% ownership. In other words, the group stands to gain the most (or lose the most) from their investment into the company.

And things are looking up for institutional investors after the company gained ₹11b in market cap last week. The gains from last week would have further boosted the one-year return to shareholders which currently stand at 4.7%.

In the chart below, we zoom in on the different ownership groups of IIFL Finance.

View our latest analysis for IIFL Finance

What Does The Institutional Ownership Tell Us About IIFL Finance?

Institutions typically measure themselves against a benchmark when reporting to their own investors, so they often become more enthusiastic about a stock once it's included in a major index. We would expect most companies to have some institutions on the register, especially if they are growing.

We can see that IIFL Finance 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 IIFL Finance's earnings history below. Of course, the future is what really matters.

IIFL Finance is not owned by hedge funds. From our data, we infer that the largest shareholder is Nirmal Jain (who also holds the title of Co-Chief Executive Officer) with 16% 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. With 15% and 5.2% of the shares outstanding respectively, Fairfax India Holdings Corporation and Capital Research and Management Company are the second and third largest shareholders. In addition, we found that Rajamani Venkataraman, the CEO has 2.9% of the shares allocated to their name.

We did some more digging and found that 8 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 it makes sense to study institutional ownership data for a company, it also makes sense to study analyst sentiments to know which way the wind is blowing. 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 IIFL 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. Management ultimately answers to the board. However, it is not uncommon for managers to be executive board members, especially if they are a founder or the CEO.

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 information suggests that insiders maintain a significant holding in IIFL Finance Limited. It has a market capitalization of just ₹144b, and insiders have ₹34b worth of shares in their own names. That's quite significant. 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

With a 25% ownership, the general public, mostly comprising of individual investors, have some degree of sway over IIFL Finance. 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

Our data indicates that Private Companies hold 6.2%, of the company's shares. It might be worth looking deeper into this. If related parties, such as insiders, have an interest in one of these private companies, that should be disclosed in the annual report. Private companies may also have a strategic interest in the company.

Public Company Ownership

Public companies currently own 15% of IIFL Finance stock. We can't be certain but it is quite possible this is a strategic stake. The businesses may be similar, or work together.

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. Be aware that IIFL Finance is showing 4 warning signs in our investment analysis , and 1 of those is a bit concerning...

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.