While institutions own 21% of L&T Finance Limited (NSE:LTF), public companies are its largest shareholders with 67% ownership

Key Insights

• The considerable ownership by public companies in L&T Finance indicates that they collectively have a greater say in management and business strategy
• Larsen & Toubro Limited owns 67% of the company
• Institutions own 21% of L&T Finance

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Every investor in L&T Finance Limited (NSE:LTF) should be aware of the most powerful shareholder groups. With 67% stake, public companies possess the maximum shares in the company. In other words, the group stands to gain the most (or lose the most) from their investment into the company.

Institutions, on the other hand, account for 21% of the company's stockholders. Large companies usually have institutions as shareholders, and we usually see insiders owning shares in smaller companies.

Let's delve deeper into each type of owner of L&T Finance, beginning with the chart below.

View our latest analysis for L&T Finance

What Does The Institutional Ownership Tell Us About L&T Finance?

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 L&T Finance does have institutional investors; and they hold a good portion of the company's stock. 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. 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 L&T Finance's historic earnings and revenue below, but keep in mind there's always more to the story.

Hedge funds don't have many shares in L&T Finance. Larsen & Toubro Limited is currently the largest shareholder, with 67% of shares outstanding. This essentially means that they have extensive influence, if not outright control, over the future of the corporation. With 2.9% and 2.4% of the shares outstanding respectively, Mirae Asset Global Investments Co., Ltd. and BNP Paribas Arbitrage Sa, Asset Management Arm are the second and third largest shareholders.

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 L&T Finance

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.

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 most recent data indicates that insiders own less than 1% of L&T Finance Limited. 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 ₹90m worth of shares (at current prices). It is always good to see at least some insider ownership, but it might be worth checking if those insiders have been selling.

General Public Ownership

The general public, who are usually individual investors, hold a 11% stake in L&T 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 67% of the L&T Finance shares on issue. 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:

While it is well worth considering the different groups that own a company, there are other factors that are even more important. Consider for instance, the ever-present spectre of investment risk. We've identified 2 warning signs with L&T Finance (at least 1 which makes us a bit uncomfortable) , and understanding them should be part of your investment process.

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.

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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.