To get a sense of who is truly in control of HDFC Life Insurance Company Limited (NSE:HDFCLIFE), it is important to understand the ownership structure of the business. And the group that holds the biggest piece of the pie are public companies with 52% ownership. In other words, the group stands to gain the most (or lose the most) from their investment into the company.
And institutions on the other hand have a 30% ownership in the company. Institutions will often hold stock in bigger companies, and we expect to see insiders owning a noticeable percentage of the smaller ones.
Let's delve deeper into each type of owner of HDFC Life Insurance, beginning with the chart below.
What Does The Institutional Ownership Tell Us About HDFC Life Insurance?
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.
We can see that HDFC Life Insurance does have institutional investors; and they hold a good portion of the company's stock. 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. It is not uncommon to see a big share price drop if two large institutional investors try to sell out of a stock at the same time. So it is worth checking the past earnings trajectory of HDFC Life Insurance, (below). Of course, keep in mind that there are other factors to consider, too.
Hedge funds don't have many shares in HDFC Life Insurance. Housing Development Finance Corporation Limited is currently the largest shareholder, with 48% of shares outstanding. For context, the second largest shareholder holds about 4.1% of the shares outstanding, followed by an ownership of 3.8% by the third-largest shareholder.
To make our study more interesting, we found that the top 2 shareholders have a majority ownership in the company, meaning that they are powerful enough to influence the decisions of the company.
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 HDFC Life Insurance
The definition of company insiders can be subjective and does vary between jurisdictions. Our data reflects individual insiders, capturing board members at the very least. 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 data suggests that insiders own under 1% of HDFC Life Insurance Company Limited in their own names. As it is a large company, we'd only expect insiders to own a small percentage of it. But it's worth noting that they own ₹4.7b worth of shares. It is good to see board members owning shares, but it might be worth checking if those insiders have been buying.
General Public Ownership
With a 17% ownership, the general public, mostly comprising of individual investors, have some degree of sway over HDFC Life Insurance. 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.
Public Company Ownership
It appears to us that public companies own 52% of HDFC Life Insurance. It's hard to say for sure but this suggests they have entwined business interests. This might be a strategic stake, so it's worth watching this space for changes in ownership.
It's always worth thinking about the different groups who own shares in a company. But to understand HDFC Life Insurance better, we need to consider many other factors. Consider for instance, the ever-present spectre of investment risk. We've identified 2 warning signs with HDFC Life Insurance , and understanding them should be part of your investment process.
But ultimately it is the future, not the past, that will determine how well the owners of this business will do. Therefore we think it advisable to take a look at this free report showing whether analysts are predicting a brighter 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.
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.