Painful week for private companies invested in Spandana Sphoorty Financial Limited (NSE:SPANDANA) after 18% drop, institutions also suffered losses

Key Insights

• Significant control over Spandana Sphoorty Financial by private companies implies that the general public has more power to influence management and governance-related decisions
• The top 3 shareholders own 57% of the company
• 18% of Spandana Sphoorty Financial is held by Institutions

Every investor in Spandana Sphoorty Financial Limited (NSE:SPANDANA) should be aware of the most powerful shareholder groups. The group holding the most number of shares in the company, around 45% to be precise, is private companies. That is, the group stands to benefit the most if the stock rises (or lose the most if there is a downturn).

While institutions, who own 18% shares weren’t spared from last week’s ₹5.9b market cap drop, private companies as a group suffered the maximum losses

Let's delve deeper into each type of owner of Spandana Sphoorty Financial, beginning with the chart below.

Check out our latest analysis for Spandana Sphoorty Financial

What Does The Institutional Ownership Tell Us About Spandana Sphoorty Financial?

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 Spandana Sphoorty Financial. 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. If multiple institutions change their view on a stock at the same time, you could see the share price drop fast. It's therefore worth looking at Spandana Sphoorty Financial's earnings history below. Of course, the future is what really matters.

We note that hedge funds don't have a meaningful investment in Spandana Sphoorty Financial. Kangchenjunga Ltd. is currently the largest shareholder, with 41% of shares outstanding. In comparison, the second and third largest shareholders hold about 8.6% and 7.8% of the stock.

To make our study more interesting, we found that the top 3 shareholders have a majority ownership in the company, meaning that they are powerful enough to influence the decisions of the company.

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 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 Spandana Sphoorty Financial

While the precise definition of an insider can be subjective, almost everyone considers board members to be insiders. Company management run the business, but the CEO will answer to the board, even if he or she is a member of it.

I generally consider insider ownership to be a good thing. However, on some occasions it makes it more difficult for other shareholders to hold the board accountable for decisions.

Our most recent data indicates that insiders own some shares in Spandana Sphoorty Financial Limited. In their own names, insiders own ₹2.4b worth of stock in the ₹27b company. Some would say this shows alignment of interests between shareholders and the board. But it might be worth checking if those insiders have been selling.

General Public Ownership

The general public-- including retail investors -- own 14% 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

Private equity firms hold a 15% stake in Spandana Sphoorty Financial. This suggests they can be influential in key policy decisions. 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 45%, of the company's shares. It's hard to draw any conclusions from this fact alone, so its worth looking into who owns those private companies. Sometimes insiders or other related parties have an interest in shares in a public company through a separate private company.

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. Be aware that Spandana Sphoorty Financial is showing 2 warning signs in our investment analysis , and 1 of those 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.