Firstsource Solutions Limited's (NSE:FSL) last week's 8.8% decline must have disappointed public companies who have a significant stake

By
Simply Wall St
Published
February 25, 2022
NSEI:FSL
Source: Shutterstock

A look at the shareholders of Firstsource Solutions Limited (NSE:FSL) can tell us which group is most powerful. With 55% stake, public companies possess the maximum shares in the company. That is, the group stands to benefit the most if the stock rises (or lose the most if there is a downturn).

And last week, public companies endured the biggest losses as the stock fell by 8.8%.

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

Check out our latest analysis for Firstsource Solutions

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NSEI:FSL Ownership Breakdown February 25th 2022

What Does The Institutional Ownership Tell Us About Firstsource Solutions?

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 Firstsource Solutions. 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. 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 Firstsource Solutions, (below). Of course, keep in mind that there are other factors to consider, too.

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NSEI:FSL Earnings and Revenue Growth February 25th 2022

Hedge funds don't have many shares in Firstsource Solutions. Our data shows that RPSG Ventures Limited is the largest shareholder with 55% of shares outstanding. This essentially means that they have extensive influence, if not outright control, over the future of the corporation. For context, the second largest shareholder holds about 7.5% of the shares outstanding, followed by an ownership of 2.3% by the third-largest shareholder.

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. Quite a few analysts cover the stock, so you could look into forecast growth quite easily.

Insider Ownership Of Firstsource Solutions

While the precise definition of an insider can be subjective, almost everyone considers board members to be insiders. 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.

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.

We can report that insiders do own shares in Firstsource Solutions Limited. This is a big company, so it is good to see this level of alignment. Insiders own ₹1.6b worth of shares (at current prices). Most would say this shows alignment of interests between shareholders and the board. Still, it might be worth checking if those insiders have been selling.

General Public Ownership

The general public, who are usually individual investors, hold a 22% stake in Firstsource Solutions. 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.

Public Company Ownership

We can see that public companies hold 55% of the Firstsource Solutions shares on issue. We can't be certain but it is quite possible this is a strategic stake. The businesses may be similar, or work together.

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. Consider for instance, the ever-present spectre of investment risk. We've identified 3 warning signs with Firstsource Solutions , and understanding them should be part of your investment process.

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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