Sundaram Finance Limited's (NSE:SUNDARMFIN) top owners are retail investors with 48% stake, while 26% is held by insiders

Key Insights

• Significant control over Sundaram Finance by retail investors implies that the general public has more power to influence management and governance-related decisions
• A total of 25 investors have a majority stake in the company with 36% ownership
• Insider ownership in Sundaram Finance is 26%

We've found 21 US stocks that are forecast to pay a dividend yield of over 6% next year. See the full list for free.

To get a sense of who is truly in control of Sundaram Finance Limited (NSE:SUNDARMFIN), it is important to understand the ownership structure of the business. The group holding the most number of shares in the company, around 48% to be precise, is retail investors. Put another way, the group faces the maximum upside potential (or downside risk).

Individual insiders, on the other hand, account for 26% of the company's stockholders. Insiders often own a large chunk of younger, smaller, companies while huge companies tend to have institutions as shareholders.

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

Check out our latest analysis for Sundaram Finance

What Does The Institutional Ownership Tell Us About Sundaram 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 Sundaram 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 Sundaram Finance's historic earnings and revenue below, but keep in mind there's always more to the story.

We note that hedge funds don't have a meaningful investment in Sundaram Finance. Axis Asset Management Company Limited is currently the largest shareholder, with 2.7% of shares outstanding. With 2.7% and 2.6% of the shares outstanding respectively, The Vanguard Group, Inc. and India Motor Parts & Accessories Limited are the second and third largest shareholders.

Our studies suggest that the top 25 shareholders collectively control less than half of the company's shares, meaning that the company's shares are widely disseminated and there is no dominant shareholder.

While it makes sense to study institutional ownership data for a company, it also makes sense to study analyst sentiments to know which way the wind is blowing. There are plenty of analysts covering the stock, so it might be worth seeing what they are forecasting, too.

Insider Ownership Of Sundaram Finance

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

Our most recent data indicates that insiders own a reasonable proportion of Sundaram Finance Limited. Insiders own ₹128b worth of shares in the ₹498b company. That's quite meaningful. It is good to see this level of investment. You can check here to see if those insiders have been buying recently.

General Public Ownership

The general public-- including retail investors -- own 48% stake in the company, and hence can't easily be ignored. 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.

Private Company Ownership

Our data indicates that Private Companies hold 10%, 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:

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 Sundaram Finance is showing 2 warning signs in our investment analysis , and 1 of those can't be ignored...

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.