Private equity firms who hold 39% of KFin Technologies Limited (NSE:KFINTECH) gained 6.6%, institutions profited as well

Key Insights

• Significant control over KFin Technologies by private equity firms implies that the general public has more power to influence management and governance-related decisions
• 57% of the business is held by the top 3 shareholders
• Institutional ownership in KFin Technologies is 28%

To get a sense of who is truly in control of KFin Technologies Limited (NSE:KFINTECH), it is important to understand the ownership structure of the business. And the group that holds the biggest piece of the pie are private equity firms with 39% ownership. That is, the group stands to benefit the most if the stock rises (or lose the most if there is a downturn).

While private equity firms were the group that benefitted the most from last week’s ₹6.7b market cap gain, institutions too had a 28% share in those profits.

Let’s take a closer look to see what the different types of shareholders can tell us about KFin Technologies.

View our latest analysis for KFin Technologies

What Does The Institutional Ownership Tell Us About KFin Technologies?

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.

KFin Technologies already has institutions on the share registry. Indeed, they own a respectable stake in the company. 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. 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 KFin Technologies, (below). Of course, keep in mind that there are other factors to consider, too.

Hedge funds don’t have many shares in KFin Technologies. Looking at our data, we can see that the largest shareholder is General Atlantic Service Company, L.P. with 39% of shares outstanding. In comparison, the second and third largest shareholders hold about 11% and 7.8% of the stock.

To make our study more interesting, we found that the top 3 shareholders have a majority ownership in the company, meaning that they are powerful enough to influence the decisions of the company.

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 KFin Technologies

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 most recent data indicates that insiders own some shares in KFin Technologies Limited. It is a pretty big company, so it is generally a positive to see some potentially meaningful alignment. In this case, they own around ₹1.7b worth of shares (at current prices). If you would like to explore the question of insider alignment, you can click here to see if insiders have been buying or selling.

General Public Ownership

With a 21% ownership, the general public, mostly comprising of individual investors, have some degree of sway over KFin Technologies. 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.

Private Equity Ownership

With a stake of 39%, private equity firms could influence the KFin Technologies board. Some investors might be encouraged by this, since private equity are sometimes able to encourage strategies that help the market see the value in the company. Alternatively, those holders might be exiting the investment after taking it public.

Private Company Ownership

Our data indicates that Private Companies hold 11%, of the company’s shares. 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.

Many find it useful to take an in depth look at how a company has performed in the past. You can access this detailed graph of past earnings, revenue and cash flow.

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.