IIFL Securities Limited's (NSE:IIFLSEC) market cap dropped ₹4.3b last week; Public companies bore the brunt

Key Insights

• The considerable ownership by public companies in IIFL Securities indicates that they collectively have a greater say in management and business strategy
• 51% of the business is held by the top 4 shareholders
• Insiders own 26% of IIFL Securities

Every investor in IIFL Securities Limited (NSE:IIFLSEC) should be aware of the most powerful shareholder groups. We can see that public companies own the lion's share in the company with 27% ownership. That is, the group stands to benefit the most if the stock rises (or lose the most if there is a downturn).

While insiders, who own 26% shares weren’t spared from last week’s ₹4.3b market cap drop, public companies as a group suffered the maximum losses

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

Check out our latest analysis for IIFL Securities

What Does The Institutional Ownership Tell Us About IIFL Securities?

Institutional investors commonly compare their own returns to the returns of a commonly followed index. So they generally do consider buying larger companies that are included in the relevant benchmark index.

As you can see, institutional investors have a fair amount of stake in IIFL Securities. 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. 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 Securities' earnings history below. Of course, the future is what really matters.

IIFL Securities is not owned by hedge funds. Fairfax India Holdings Corporation is currently the largest shareholder, with 27% of shares outstanding. For context, the second largest shareholder holds about 15% of the shares outstanding, followed by an ownership of 4.1% by the third-largest shareholder.

On looking further, we found that 51% 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.

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. Our information suggests that there isn't any analyst coverage of the stock, so it is probably little known.

Insider Ownership Of IIFL Securities

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.

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 information suggests that insiders maintain a significant holding in IIFL Securities Limited. Insiders have a ₹17b stake in this ₹63b business. This may suggest that the founders still own a lot of shares. You can click here to see if they have been buying or selling.

General Public Ownership

With a 20% ownership, the general public, mostly comprising of individual investors, have some degree of sway over IIFL Securities. 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

It seems that Private Companies own 9.1%, of the IIFL Securities stock. Private companies may be related parties. Sometimes insiders have an interest in a public company through a holding in a private company, rather than in their own capacity as an individual. While it's hard to draw any broad stroke conclusions, it is worth noting as an area for further research.

Public Company Ownership

It appears to us that public companies own 27% of IIFL Securities. This may be a strategic interest and the two companies may have related business interests. It could be that they have de-merged. This holding is probably worth investigating further.

Next Steps:

It's always worth thinking about the different groups who own shares in a company. But to understand IIFL Securities better, we need to consider many other factors. Case in point: We've spotted 2 warning signs for IIFL Securities you should be aware of, and 1 of them is significant.

If you would prefer check out another company -- one with potentially superior financials -- then do not miss this free list of interesting companies, backed by strong financial data.

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.

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