HFCL Limited's (NSE:HFCL) 5.1% loss last week hit both individual investors who own 58% as well as institutions

Key Insights

• HFCL's significant individual investors ownership suggests that the key decisions are influenced by shareholders from the larger public
• A total of 25 investors have a majority stake in the company with 41% ownership
• 21% of HFCL is held by Institutions

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Every investor in HFCL Limited (NSE:HFCL) should be aware of the most powerful shareholder groups. We can see that individual investors own the lion's share in the company with 58% ownership. That is, the group stands to benefit the most if the stock rises (or lose the most if there is a downturn).

While institutions, who own 21% shares weren’t spared from last week’s ₹5.7b market cap drop, individual investors as a group suffered the maximum losses

Let's take a closer look to see what the different types of shareholders can tell us about HFCL.

View our latest analysis for HFCL

What Does The Institutional Ownership Tell Us About HFCL?

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.

HFCL already has institutions on the share registry. Indeed, they own a respectable stake in the company. This can indicate that the company has a certain degree of credibility in the investment community. However, it is best to be wary of relying on the supposed validation that comes with institutional investors. They too, get it wrong sometimes. 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 HFCL's historic earnings and revenue below, but keep in mind there's always more to the story.

Hedge funds don't have many shares in HFCL. MN Ventures Private Limited is currently the largest shareholder, with 15% of shares outstanding. With 6.7% and 3.4% of the shares outstanding respectively, quant Money Managers Ltd. and Reliance Industries Limited are the second and third largest shareholders.

On studying our ownership data, we found that 25 of the top shareholders collectively own less than 50% of the share register, implying that no single individual has a majority interest.

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. Our information suggests that there isn't any analyst coverage of the stock, so it is probably little known.

Insider Ownership Of HFCL

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 data suggests that insiders own under 1% of HFCL Limited in their own names. However, it's possible that insiders might have an indirect interest through a more complex structure. Keep in mind that it's a big company, and the insiders own ₹147m worth of shares. The absolute value might be more important than the proportional share. It is good to see board members owning shares, but it might be worth checking if those insiders have been buying.

General Public Ownership

The general public, mostly comprising of individual investors, collectively holds 58% of HFCL shares. This level of ownership gives investors from the wider public some power to sway key policy decisions such as board composition, executive compensation, and the dividend payout ratio.

Private Company Ownership

It seems that Private Companies own 18%, of the HFCL 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.

Public Company Ownership

We can see that public companies hold 3.4% of the HFCL shares on issue. This may be a strategic interest and the two companies may have related business interests. It could be that they have de-merged. This holding is probably worth investigating further.

Next Steps:

It's always worth thinking about the different groups who own shares in a company. But to understand HFCL better, we need to consider many other factors. Be aware that HFCL is showing 2 warning signs in our investment analysis , and 1 of those can't be ignored...

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of interesting companies.

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.