With 35% institutional ownership, Shriram Finance Limited (NSE:SHRIRAMFIN) is a favorite amongst the big guns

Key Insights

• Given the large stake in the stock by institutions, Shriram Finance's stock price might be vulnerable to their trading decisions
• 51% of the business is held by the top 18 shareholders
• Analyst forecasts along with ownership data serve to give a strong idea about prospects for a business

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If you want to know who really controls Shriram Finance Limited (NSE:SHRIRAMFIN), then you'll have to look at the makeup of its share registry. And the group that holds the biggest piece of the pie are institutions with 35% ownership. That is, the group stands to benefit the most if the stock rises (or lose the most if there is a downturn).

Since institutional have access to huge amounts of capital, their market moves tend to receive a lot of scrutiny by retail or individual investors. Hence, having a considerable amount of institutional money invested in a company is often regarded as a desirable trait.

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

View our latest analysis for Shriram Finance

What Does The Institutional Ownership Tell Us About Shriram 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 Shriram Finance. This suggests some credibility amongst professional investors. But we can't rely on that fact alone since institutions make bad investments sometimes, just like everyone does. 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 Shriram 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 Shriram Finance. Looking at our data, we can see that the largest shareholder is Shriram Capital Private Limited with 18% of shares outstanding. Shriram Value Services Limited is the second largest shareholder owning 7.1% of common stock, and Singapore holds about 5.4% of the company stock.

Looking at the shareholder registry, we can see that 51% of the ownership is controlled by the top 18 shareholders, meaning that no single shareholder has a majority interest in the ownership.

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 a reasonable number of analysts covering the stock, so it might be useful to find out their aggregate view on the future.

Insider Ownership Of Shriram 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 Shriram Finance Limited insiders own under 1% of the company. However, it's possible that insiders might have an indirect interest through a more complex structure. 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 ₹158m worth of shares (at current prices). In this sort of situation, it can be more interesting to see if those insiders have been buying or selling.

General Public Ownership

With a 33% ownership, the general public, mostly comprising of individual investors, have some degree of sway over Shriram Finance. While this group can't necessarily call the shots, it can certainly have a real influence on how the company is run.

Private Company Ownership

It seems that Private Companies own 25%, of the Shriram Finance stock. 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. For instance, we've identified 2 warning signs for Shriram Finance (1 shouldn't be ignored) that you should be aware of.

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.

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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.