To get a sense of who is truly in control of L&T Finance Holdings Limited (NSE:L&TFH), it is important to understand the ownership structure of the business. With 67% 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).
As a result, public companies were the biggest beneficiaries of last week’s 7.6% gain.
Let’s take a closer look to see what the different types of shareholders can tell us about L&T Finance Holdings.
Check out the opportunities and risks within the IN Diversified Financial industry.
What Does The Institutional Ownership Tell Us About L&T Finance Holdings?
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.
As you can see, institutional investors have a fair amount of stake in L&T Finance Holdings. 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 L&T Finance Holdings, (below). Of course, keep in mind that there are other factors to consider, too.
Hedge funds don’t have many shares in L&T Finance Holdings. Our data shows that Larsen & Toubro Limited is the largest shareholder with 67% of shares outstanding. This implies that they have majority interest control of the future of the company. Meanwhile, the second and third largest shareholders, hold 2.7% and 2.4%, of the shares outstanding, respectively.
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 L&T Finance Holdings
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. The company management answer to the board and the latter should represent the interests of shareholders. Notably, sometimes top-level managers are on the board themselves.
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 information suggests that L&T Finance Holdings Limited insiders own under 1% of the company. We do note, however, it is possible insiders have an indirect interest through a private company or other corporate 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 ₹431m worth of shares (at current prices). Arguably, recent buying and selling is just as important to consider. You can click here to see if insiders have been buying or selling.
General Public Ownership
With a 16% ownership, the general public, mostly comprising of individual investors, have some degree of sway over L&T Finance Holdings. While this size of ownership may not be enough to sway a policy decision in their favour, they can still make a collective impact on company policies.
Public Company Ownership
We can see that public companies hold 67% of the L&T Finance Holdings shares on issue. It’s hard to say for sure but this suggests they have entwined business interests. This might be a strategic stake, so it’s worth watching this space for changes in ownership.
Next Steps:
It’s always worth thinking about the different groups who own shares in a company. But to understand L&T Finance Holdings better, we need to consider many other factors. Like risks, for instance. Every company has them, and we’ve spotted 2 warning signs for L&T Finance Holdings (of which 1 is a bit unpleasant!) you should know about.
If you are like me, you may want to think about whether this company will grow or shrink. Luckily, you can check this free report showing analyst forecasts for its 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.
Valuation is complex, but we’re helping make it simple.
Find out whether L&T Finance Holdings is potentially over or undervalued by checking out our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.
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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.
