Individual investors who have a significant stake must be disappointed along with institutions after Shriram Finance Limited’s (NSE:SHRIRAMFIN) market cap dropped by ₹26b

Key Insights

• Significant control over Shriram Finance by general public implies that this group likely has considerable sway over management and governance-related decisions
• The top 25 shareholders own 50% of the company
• own 33% of Shriram Finance

If you want to know who really controls Shriram Finance Limited (NSE:SHRIRAMFIN), then you’ll have to look at the makeup of its share registry. We can see that individual investors own the lion’s share in the company with 46% ownership. That is, the group stands to benefit the most if the stock rises (or lose the most if there is a downturn).

While the holdings of individual investors took a hit after last week’s 5.0% price drop, institutions with their 33% holdings also suffered.

Let’s delve deeper into each type of owner of Shriram Finance, beginning with the chart below.

See our latest analysis for Shriram Finance

What Does The Institutional Ownership Tell Us About Shriram Finance?

Institutional investors commonly compare their own returns to the returns of a commonly followed index. So they generally do consider buying larger companies that are included in the relevant benchmark index.

We can see that Shriram Finance does have institutional investors; and they hold a good portion of the company’s stock. 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. 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 Shriram Finance’s earnings history below. Of course, the future is what really matters.

Shriram Finance is not owned by hedge funds. Shriram Financial Ventures (Chennai) Private Limited is currently the largest shareholder, with 18% of shares outstanding. In comparison, the second and third largest shareholders hold about 4.4% and 3.2% of the stock.

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.

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 is some analyst coverage of the stock, but it could still become more well known, with time.

Insider Ownership Of Shriram Finance

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. 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 Shriram Finance Limited. However, it’s possible that insiders might have an indirect interest through a more complex structure. It is a pretty big company, so it would be possible for board members to own a meaningful interest in the company, without owning much of a proportional interest. In this case, they own around ₹61m worth of shares (at current prices). 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 46% ownership, the general public, mostly comprising of individual investors, have some degree of sway over Shriram Finance. While this group can’t necessarily call the shots, it can certainly have a real influence on how the company is run.

Private Company Ownership

It seems that Private Companies own 21%, of the Shriram Finance stock. It might be worth looking deeper into this. If related parties, such as insiders, have an interest in one of these private companies, that should be disclosed in the annual report. Private companies may also have a strategic interest in the company.

Next Steps:

While it is well worth considering the different groups that own a company, there are other factors that are even more important. Consider for instance, the ever-present spectre of investment risk. We’ve identified 3 warning signs with Shriram Finance (at least 1 which is a bit concerning) , 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.

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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.