Shriram Finance Limited (NSE:SHRIRAMFIN) is a favorite amongst institutional investors who own 42%

Simply Wall St · 10/16 09:49

Key Insights

  • Institutions' substantial holdings in Shriram Finance implies that they have significant influence over the company's share price
  • A total of 13 investors have a majority stake in the company with 51% ownership
  • Using data from analyst forecasts alongside ownership research, one can better assess the future performance of a company

Every investor in Shriram Finance Limited (NSE:SHRIRAMFIN) should be aware of the most powerful shareholder groups. With 42% stake, institutions 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).

Because institutional owners have a huge pool of resources and liquidity, their investing decisions tend to carry a great deal of weight, especially with 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 Shriram Finance, beginning with the chart below.

View our latest analysis for Shriram Finance

ownership-breakdown
NSEI:SHRIRAMFIN Ownership Breakdown October 16th 2024

What Does The Institutional Ownership Tell Us About Shriram Finance?

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.

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

earnings-and-revenue-growth
NSEI:SHRIRAMFIN Earnings and Revenue Growth October 16th 2024

We note that hedge funds don't have a meaningful investment in Shriram Finance. Our data shows that Shriram Capital Private Limited is the largest shareholder with 18% of shares outstanding. With 7.1% and 6.7% of the shares outstanding respectively, Shriram Investment Holdings Limited and Singapore are the second and third largest shareholders.

After doing some more digging, we found that the top 13 have the combined ownership of 51% in the company, suggesting that no single shareholder has significant control over the company.

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. 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 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. 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.

I generally consider insider ownership to be a good thing. However, on some occasions it makes it more difficult for other shareholders to hold the board accountable for decisions.

Our most recent data indicates that insiders own less than 1% of Shriram Finance Limited. We do note, however, it is possible insiders have an indirect interest through a private company or other corporate structure. 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 ₹159m 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

With a 25% 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 25%, of the Shriram Finance stock. It's hard to draw any conclusions from this fact alone, so its worth looking into who owns those private companies. Sometimes insiders or other related parties have an interest in shares in a public company through a separate private 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. For instance, we've identified 2 warning signs for Shriram Finance (1 shouldn't be ignored) 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.