Is SRF Limited (NSE:SRF) Popular Amongst Institutions?

If you want to know who really controls SRF Limited (NSE:SRF), then you'll have to look at the makeup of its share registry. Insiders often own a large chunk of younger, smaller, companies while huge companies tend to have institutions as shareholders. Companies that have been privatized tend to have low insider ownership.

With a market capitalization of ₹324b, SRF is rather large. We'd expect to see institutional investors on the register. Companies of this size are usually well known to retail investors, too. In the chart below, we can see that institutional investors have bought into the company. Let's take a closer look to see what the different types of shareholders can tell us about SRF.

View our latest analysis for SRF

What Does The Institutional Ownership Tell Us About SRF?

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 SRF. 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 SRF's historic earnings and revenue below, but keep in mind there's always more to the story.

Our data indicates that hedge funds own 6.2% of SRF. That catches my attention because hedge funds sometimes try to influence management, or bring about changes that will create near term value for shareholders. Abr Family Trust is currently the company's largest shareholder with 51% of shares outstanding. This implies that they have majority interest control of the future of the company. Amansa Capital Pte. Ltd. is the second largest shareholder owning 6.2% of common stock, and Kotak Mahindra Asset Management Company Limited holds about 4.8% of the company stock.

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

Insider Ownership Of SRF

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.

Most consider insider ownership a positive because it can indicate the board is well aligned with other shareholders. However, on some occasions too much power is concentrated within this group.

Our most recent data indicates that insiders own less than 1% of SRF Limited. But they may have an indirect interest through a corporate structure that we haven't picked up on. Keep in mind that it's a big company, and the insiders own ₹3.2b worth of shares. The absolute value might be more important than the proportional share. It is always good to see at least some insider ownership, but it might be worth checking if those insiders have been selling.

General Public Ownership

The general public, with a 18% stake in the company, will not 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 Company Ownership

It seems that Private Companies own 51%, of the SRF 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:

It's always worth thinking about the different groups who own shares in a company. But to understand SRF better, we need to consider many other factors. Case in point: We've spotted 3 warning signs for SRF you should be aware of.

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. 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.
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