What does a shareholding pattern of a company reveal?

By Research Desk
about 4 years ago

Shareholding pattern shows how the total number of shares equity outstanding in the company is divided between various owners (individuals and institutions). It shoes how the ownership id split among the entities that make up its owners.

Shareholding pattern of listed companies is required to be disclosed to the stock exchanges every quarter.

It also shows a list of promoter entities, public owning more than 1% and another list of public owning more than 5% of the company’s shares. It also includes detailed list of locked-in shares and encumbered / pledged shares.

It consists of the following broad divisions, which are further divided into various categories:

1.Promoter Shareholding (responsible for floating the company)

A. Domestic Promoters

  1. Individuals
  2. Government
  3. Corporate Bodies
  4. Financial Institutions/Banks

B. Foreign Promoters

  1. Individuals (NRI/ Foreigners)
  2. Corporate Bodies
  3. Institutions
  4. Qualified Foreign Investors

 

2. Public Shareholding

A. Institutions

  1. Mutual Funds
  2. Financial Institutions/Banks
  3. Government
  4. Venture Capital Funds
  5. Insurance Companies
  6. Foreign Institutional Investors (FIIs)
  7. Foreign Venture Capital Investors
  8. Qualified Foreign Investors

B. Non Institutions

  1. Corporate Bodies
  2. Individuals
  3. Others such as Trusts, Clearing Members, NRIs, etc.
  4. Custodians (in case of foreign depository receipts)

 

Holdings in various categories provide insight into control in the company, favour the stock holds with the market players, and entities that hold high stakes in the stock, changes in whose holdings will affect stock prices.

  • A higher promoter stake usually means that the promoters have belief that the company has potential for growth in the future. If a promoter raises his stake, it is comprehended that he has high confidence in the business and may get positive results.
  • A more diversified holding and a good presence of institutional investors indicates that promoters have little room to carry out random decisions that benefit them without gauging how it would affect earnings and other shareholders. It is good to compare holding patterns with those of the previous quarters to check how holdings have changed.
  • Holding by FIIs or mutual funds and insurance companies is an indicator on how favoured a stock is among institutional investors. A sizeable amount of FII holdings indicate higher confidence in the company. However, it can be disadvantageous when FIIs sell their stake in a chunk resulting in share fall in share price.
  • Domestic mutual fund and insurance company holding in a company is a good sign as it asks for more clarity and transparency in the company operations.

Let’s take an example of Wipro’s Shareholding Pattern. The following table shows a breakup of shareholding pattern, in percentage terms, as of 30th September 2014.

Promoter & Promoter Group

73.43%

Indian

73.43%

Foreign

-

Public

24.63%

Institutions

13.64%

FII

  9.09%

DII

  4.55%

Non Institutions

10.99%

Bodies Corporate

  3.91%

Custodians

  1.94%

 

 

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