Power Finance Corporation Limited's (NSE:PFC) largest shareholders are state or government with 57% ownership, institutions own 30%

Key Insights

• The considerable ownership by state or government in Power Finance indicates that they collectively have a greater say in management and business strategy
• The largest shareholder of the company is India with a 56% stake
• 30% of Power Finance is held by Institutions

If you want to know who really controls Power Finance Corporation Limited (NSE:PFC), then you'll have to look at the makeup of its share registry. With 57% stake, state or government 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).

Meanwhile, institutions make up 30% of the company’s shareholders. Institutions often own shares in more established companies, while it's not unusual to see insiders own a fair bit of smaller companies.

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

Check out our latest analysis for Power Finance

What Does The Institutional Ownership Tell Us About Power 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.

As you can see, institutional investors have a fair amount of stake in Power Finance. 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 Power 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 Power Finance. Our data shows that India is the largest shareholder with 56% of shares outstanding. With such a huge stake in the ownership, we infer that they have significant control of the future of the company. Meanwhile, the second and third largest shareholders, hold 4.0% and 1.9%, of the shares outstanding, respectively.

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

Insider Ownership Of Power Finance

The definition of an insider can differ slightly between different countries, but members of the board of directors always count. 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 information suggests that Power Finance Corporation Limited insiders own under 1% of the company. It is a very large company, so it would be surprising to see insiders own a large proportion of the company. Though their holding amounts to less than 1%, we can see that board members collectively own ₹26m 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

The general public, who are usually individual investors, hold a 13% stake in Power Finance. 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.

Next Steps:

While it is well worth considering the different groups that own a company, there are other factors that are even more important. Be aware that Power Finance is showing 3 warning signs in our investment analysis , and 2 of those are a bit concerning...

Ultimately the future is most important. You can access this free report on analyst forecasts for the company.

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.