Muthoot Microfin Limited's (NSE:MUTHOOTMF) last week's 12% decline must have disappointed private companies who have a significant stake

Key Insights

• Significant control over Muthoot Microfin by private companies implies that the general public has more power to influence management and governance-related decisions
• Muthoot Fincorp Limited owns 50% of the company
• Using data from company's past performance alongside ownership research, one can better assess the future performance of a company

If you want to know who really controls Muthoot Microfin Limited (NSE:MUTHOOTMF), then you'll have to look at the makeup of its share registry. With 50% stake, private companies 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).

As market cap fell to ₹23b last week, private companies would have faced the highest losses than any other shareholder groups of the company.

Let's take a closer look to see what the different types of shareholders can tell us about Muthoot Microfin.

View our latest analysis for Muthoot Microfin

What Does The Institutional Ownership Tell Us About Muthoot Microfin?

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.

Since institutions own only a small portion of Muthoot Microfin, many may not have spent much time considering the stock. But it's clear that some have; and they liked it enough to buy in. So if the company itself can improve over time, we may well see more institutional buyers in the future. When multiple institutional investors want to buy shares, we often see a rising share price. The past revenue trajectory (shown below) can be an indication of future growth, but there are no guarantees.

We note that hedge funds don't have a meaningful investment in Muthoot Microfin. Looking at our data, we can see that the largest shareholder is Muthoot Fincorp Limited with 50% of shares outstanding. This essentially means that they have extensive influence, if not outright control, over the future of the corporation. With 15% and 7.6% of the shares outstanding respectively, Greater Pacific Capital LLP and Creation Investments India LLC are the second and third largest shareholders.

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. While there is some analyst coverage, the company is probably not widely covered. So it could gain more attention, down the track.

Insider Ownership Of Muthoot Microfin

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

We can see that insiders own shares in Muthoot Microfin Limited. It has a market capitalization of just ₹23b, and insiders have ₹1.9b worth of shares, in their own names. It is good to see some investment by insiders, but it might be worth checking if those insiders have been buying.

General Public Ownership

The general public-- including retail investors -- own 17% stake in the company, and hence can't easily be ignored. 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 Equity Ownership

With an ownership of 23%, private equity firms are in a position to play a role in shaping corporate strategy with a focus on value creation. Some might like this, because private equity are sometimes activists who hold management accountable. But other times, private equity is selling out, having taking the company public.

Private Company Ownership

Our data indicates that Private Companies hold 50%, of the company's shares. 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.

Next Steps:

I find it very interesting to look at who exactly owns a company. But to truly gain insight, we need to consider other information, too. Case in point: We've spotted 2 warning signs for Muthoot Microfin you should be aware of, and 1 of them is a bit unpleasant.

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.