Five-Star Business Finance Limited (NSE:FIVESTAR) most popular amongst private equity firms who own 41%, insiders hold 20%

Key Insights

• Five-Star Business Finance’s significant private equity firms ownership suggests that the key decisions are influenced by shareholders from the larger public
• The top 4 shareholders own 54% of the company
• Insiders own 20% of Five-Star Business Finance

A look at the shareholders of Five-Star Business Finance Limited (NSE:FIVESTAR) can tell us which group is most powerful. The group holding the most number of shares in the company, around 41% to be precise, is private equity firms. Put another way, the group faces the maximum upside potential (or downside risk).

And individual insiders on the other hand have a 20% ownership in the company. Large companies usually have institutions as shareholders, and we usually see insiders owning shares in smaller companies.

In the chart below, we zoom in on the different ownership groups of Five-Star Business Finance.

View our latest analysis for Five-Star Business Finance

What Does The Institutional Ownership Tell Us About Five-Star Business 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 Five-Star Business Finance does have institutional investors; and they hold a good portion of the company’s stock. This implies the analysts working for those institutions have looked at the stock and they like it. But just like anyone else, they could be wrong. 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 Five-Star Business Finance, (below). Of course, keep in mind that there are other factors to consider, too.

Five-Star Business Finance is not owned by hedge funds. Our data suggests that Lakshmipathy Deenadayalan, who is also the company’s Top Key Executive, holds the most number of shares at 19%. When an insider holds a sizeable amount of a company’s stock, investors consider it as a positive sign because it suggests that insiders are willing to have their wealth tied up in the future of the company. In comparison, the second and third largest shareholders hold about 15% and 14% of the stock. Furthermore, CEO Rangarajan Krishnan is the owner of 0.8% of the company’s shares.

On looking further, we found that 54% of the shares are owned by the top 4 shareholders. In other words, these shareholders have a meaningful say in the decisions of 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. Quite a few analysts cover the stock, so you could look into forecast growth quite easily.

Insider Ownership Of Five-Star Business Finance

The definition of an insider can differ slightly between different countries, but members of the board of directors always count. 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 insiders maintain a significant holding in Five-Star Business Finance Limited. It is very interesting to see that insiders have a meaningful ₹41b stake in this ₹207b business. Most would be pleased to see the board is investing alongside them. You may wish to access this free chart showing recent trading by insiders.

General Public Ownership

The general public– including retail investors — own 18% stake in the company, and hence can’t easily be ignored. While this group can’t necessarily call the shots, it can certainly have a real influence on how the company is run.

Private Equity Ownership

With a stake of 41%, private equity firms could influence the Five-Star Business Finance 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 6.3%, 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. Take risks for example – Five-Star Business Finance has 1 warning sign we think you should be aware of.

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.

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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.