LIC Housing Finance Limited's (NSE:LICHSGFIN) market cap dropped ₹11b last week; individual investors who hold 45% were hit as were institutions

Key Insights

• Significant control over LIC Housing Finance by public companies implies that the general public has more power to influence management and governance-related decisions
• 51% of the business is held by the top 3 shareholders
• Institutions own 35% of LIC Housing Finance

If you want to know who really controls LIC Housing Finance Limited (NSE:LICHSGFIN), then you'll have to look at the makeup of its share registry. The group holding the most number of shares in the company, around 45% to be precise, is public companies. In other words, the group stands to gain the most (or lose the most) from their investment into the company.

While institutions, who own 35% shares weren’t spared from last week’s ₹11b market cap drop, public companies as a group suffered the maximum losses

Let's delve deeper into each type of owner of LIC Housing Finance, beginning with the chart below.

See our latest analysis for LIC Housing Finance

What Does The Institutional Ownership Tell Us About LIC Housing Finance?

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.

We can see that LIC Housing Finance does have institutional investors; and they hold a good portion of the company's stock. This can indicate that the company has a certain degree of credibility in the investment community. However, it is best to be wary of relying on the supposed validation that comes with institutional investors. They too, get it wrong sometimes. 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 LIC Housing Finance's 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 LIC Housing Finance. Life Insurance Corporation of India is currently the largest shareholder, with 45% of shares outstanding. Kotak Mahindra Asset Management Company Limited is the second largest shareholder owning 3.2% of common stock, and Mirae Asset Global Investments Co., Ltd. holds about 2.9% of the company stock.

After doing some more digging, we found that the top 3 shareholders collectively control more than half of the company's shares, implying that they have considerable power to influence the company's decisions.

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

Insider Ownership Of LIC Housing Finance

While the precise definition of an insider can be subjective, almost everyone considers board members to be insiders. 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.

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 LIC Housing Finance Limited insiders own under 1% of the company. It is a pretty big company, so it would be possible for board members to own a meaningful interest in the company, without owning much of a proportional interest. In this case, they own around ₹299k worth of shares (at current prices). It is good to see board members owning shares, but it might be worth checking if those insiders have been buying.

General Public Ownership

With a 19% ownership, the general public, mostly comprising of individual investors, have some degree of sway over LIC Housing 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.

Public Company Ownership

We can see that public companies hold 45% of the LIC Housing Finance shares on issue. It's hard to say for sure but this suggests they have entwined business interests. This might be a strategic stake, so it's worth watching this space for changes in ownership.

Next Steps:

While it is well worth considering the different groups that own a company, there are other factors that are even more important. To that end, you should learn about the 2 warning signs we've spotted with LIC Housing Finance (including 1 which is a bit unpleasant) .

If you are like me, you may want to think about whether this company will grow or shrink. Luckily, you can check this free report showing analyst forecasts for its future.

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.