Tata Consultancy Services Limited (NSE:TCS) is a favorite amongst institutional investors who own 89%

Key Insights

• Significantly high institutional ownership implies Tata Consultancy Services' stock price is sensitive to their trading actions
• The largest shareholder of the company is Tata Sons Private Limited with a 72% stake
• Analyst forecasts along with ownership data serve to give a strong idea about prospects for a business

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To get a sense of who is truly in control of Tata Consultancy Services Limited (NSE:TCS), it is important to understand the ownership structure of the business. With 89% stake, institutions possess the maximum shares in the company. Put another way, the group faces the maximum upside potential (or downside risk).

Since institutional have access to huge amounts of capital, their market moves tend to receive a lot of scrutiny by retail or individual investors. Therefore, a good portion of institutional money invested in the company is usually a huge vote of confidence on its future.

Let's delve deeper into each type of owner of Tata Consultancy Services, beginning with the chart below.

View our latest analysis for Tata Consultancy Services

What Does The Institutional Ownership Tell Us About Tata Consultancy Services?

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.

We can see that Tata Consultancy Services 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. 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 Tata Consultancy Services' earnings history below. Of course, the future is what really matters.

Investors should note that institutions actually own more than half the company, so they can collectively wield significant power. Hedge funds don't have many shares in Tata Consultancy Services. Our data shows that Tata Sons Private Limited is the largest shareholder with 72% of shares outstanding. With such a huge stake in the ownership, we infer that they have significant control of the future of the company. In comparison, the second and third largest shareholders hold about 5.0% and 1.2% of the stock.

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 Tata Consultancy Services

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 information suggests that Tata Consultancy Services Limited insiders own under 1% of the company. It is a very large company, so it would be surprising to see insiders own a large proportion of the company. Though their holding amounts to less than 1%, we can see that board members collectively own ₹1.3b worth of shares (at current prices). In this sort of situation, it can be more interesting to see if those insiders have been buying or selling.

General Public Ownership

The general public-- including retail investors -- own 11% 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.

Next Steps:

It's always worth thinking about the different groups who own shares in a company. But to understand Tata Consultancy Services better, we need to consider many other factors. For instance, we've identified 1 warning sign for Tata Consultancy Services that you should be aware of.

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.

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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.