Owning 73% in Muthoot Finance Limited (NSE:MUTHOOTFIN) means that insiders are heavily invested in the company's future

By
Simply Wall St
Published
April 17, 2022
NSEI:MUTHOOTFIN
Source: Shutterstock

Every investor in Muthoot Finance Limited (NSE:MUTHOOTFIN) should be aware of the most powerful shareholder groups. With 73% stake, individual insiders possess the maximum shares in the company. That is, the group stands to benefit the most if the stock rises (or lose the most if there is a downturn).

So it follows, every decision made by insiders of Muthoot Finance regarding the company's future would be crucial to them.

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

Check out our latest analysis for Muthoot Finance

ownership-breakdown
NSEI:MUTHOOTFIN Ownership Breakdown April 17th 2022

What Does The Institutional Ownership Tell Us About Muthoot 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.

As you can see, institutional investors have a fair amount of stake in Muthoot Finance. 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 Muthoot Finance's historic earnings and revenue below, but keep in mind there's always more to the story.

earnings-and-revenue-growth
NSEI:MUTHOOTFIN Earnings and Revenue Growth April 17th 2022

Muthoot Finance is not owned by hedge funds. The company's largest shareholder is Thomas Muthoot, with ownership of 18%. Meanwhile, the second and third largest shareholders, hold 15% and 7.2%, of the shares outstanding, respectively.

Our research also brought to light the fact that roughly 52% of the company is controlled by the top 5 shareholders suggesting that these owners wield significant influence on the business.

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. There are plenty of analysts covering the stock, so it might be worth seeing what they are forecasting, too.

Insider Ownership Of Muthoot 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.

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.

It seems that insiders own more than half the Muthoot Finance Limited stock. This gives them a lot of power. Insiders own ₹394b worth of shares in the ₹537b company. That's extraordinary! It is good to see this level of investment. You can check here to see if those insiders have been selling any of their shares.

General Public Ownership

The general public-- including retail investors -- own 10% stake in the company, and hence can't easily be ignored. While this group can't necessarily call the shots, it can certainly have a real influence on how the company is run.

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 Muthoot Finance (including 1 which is potentially serious) .

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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