IIFL Capital Services Limited's (NSE:IIFLCAPS) market cap dropped ₹6.6b last week; Public companies bore the brunt

Key Insights

• The considerable ownership by public companies in IIFL Capital Services indicates that they collectively have a greater say in management and business strategy
• The top 4 shareholders own 50% of the company
• 26% of IIFL Capital Services is held by insiders

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If you want to know who really controls IIFL Capital Services Limited (NSE:IIFLCAPS), then you'll have to look at the makeup of its share registry. With 27% stake, public companies possess the maximum shares in the company. Put another way, the group faces the maximum upside potential (or downside risk).

Following a 6.5% decrease in the stock price last week, public companies suffered the most losses, but insiders who own 26% stock also took a hit.

Let's delve deeper into each type of owner of IIFL Capital Services, beginning with the chart below.

See our latest analysis for IIFL Capital Services

What Does The Institutional Ownership Tell Us About IIFL Capital Services?

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 Capital Services 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. 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 IIFL Capital Services' historic earnings and revenue below, but keep in mind there's always more to the story.

We note that hedge funds don't have a meaningful investment in IIFL Capital Services. Fairfax India Holdings Corporation is currently the largest shareholder, with 27% of shares outstanding. With 15% and 4.1% of the shares outstanding respectively, Nirmal Jain and Bank Muscat SAOG, Asset Management Arm are the second and third largest shareholders. In addition, we found that Rajamani Venkatraman, the CEO has 3.7% of the shares allocated to their name.

On looking further, we found that 50% of the shares are owned by the top 4 shareholders. In other words, these shareholders have a meaningful say in the decisions of the company.

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. As far as we can tell there isn't analyst coverage of the company, so it is probably flying under the radar.

Insider Ownership Of IIFL Capital Services

The definition of an insider can differ slightly between different countries, but members of the board of directors always count. 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.

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.

Our most recent data indicates that insiders own a reasonable proportion of IIFL Capital Services Limited. It has a market capitalization of just ₹96b, and insiders have ₹25b 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, who are usually individual investors, hold a 19% stake in IIFL Capital Services. 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 Company Ownership

It seems that Private Companies own 9.3%, of the IIFL Capital Services stock. It's hard to draw any conclusions from this fact alone, so its worth looking into who owns those private companies. Sometimes insiders or other related parties have an interest in shares in a public company through a separate private company.

Public Company Ownership

We can see that public companies hold 27% of the IIFL Capital Services shares on issue. 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:

It's always worth thinking about the different groups who own shares in a company. But to understand IIFL Capital Services better, we need to consider many other factors. For example, we've discovered 2 warning signs for IIFL Capital Services that you should be aware of before investing here.

Of course this may not be the best stock to buy. So take a peek at this free free list of interesting companies.

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.