Ownership

Mutual Fund Holding

This data item is calculated as the sum of shares held by the entire universe of equity mutual funds divided by the total shares outstanding of the company. Examples of equity mutual funds are Reliance Small Cap fund which is from the Reliance AMC; HDFC Equity fund, which is from the HDFC AMC, etc.

Mutual funds have superior research capabilities and perform extensive analysis about the company before investing in it. A high mutual fund stake in a company is considered to be an endorsement about the company’s prospect.

Mutual Fund Holding Change – 3M

This data item is calculated as the difference between the current mutual fund ownership percentage and the percentage 3 months ago. Suppose, mutual funds held 40% stake in the company 3 months ago and currently they hold only 34%, the ownership change percentage is (34 – 40) = -6%.

Mutual funds have superior research capabilities and perform extensive analysis about the company before investing in it. A high MF stake in a company is considered to be an endorsement about the company’s prospect. A drastic increase or decrease in MF ownership percentage is a signal of potential change in fortunes of the company.

Mutual Fund Holding Change – 6M

This data item is calculated as the difference between the current mutual fund ownership percentage and the percentage 6 months ago. Suppose, mutual funds held 42% stake in the company 6 months ago and currently they hold only 34%, the ownership change percentage is (34 – 42) = -8%.

Extreme spike or fall in MF ownership level is an indicator of potential change in performance of the company. If MFs anticipate that the company might register improved performance in the future they are likely to increase their stake in the company and vice versa.

Promoter Holding

This data item is calculated as shares held by promoters divided by total shares outstanding of the company. Promoters are individuals or corporations who invest for the purpose of gaining and holding onto stake in the company for very long periods of time. They are interested in running the company and may even hold board positions.

A very high or very low promoter ownership percentage is not desirable. A very high promoter stake will automatically lead to lesser holdings by institutional and retail investors. In such a situation, promoters might take decisions that is adversarial to retail shareholders interest. A very low promoter stake means promoters are not sufficiently invested in the company and might not be interested in running the company.

Promoter Holding Change – 3M

This data item is calculated as the difference between the current promoter ownership percentage and the percentage 3 months ago. Analysing promoter ownership change is tricky as a lot of factors have to be considered before deciding on whether the change is positive or negative for the company.

  • If the promoter is selling off stake when the company is reporting poor fundamentals, it means that the entity has lost hope in the future of the company
  • A promoter entity increasing stake in the company when share prices are falling either due to weak market conditions or poor fundamentals usually signifies that the long-term potential of the company is strong and that share price fall is a temporary phenomenon
  • A marginal stake dilution to bring in other promoter partners is usually seen as positive endorsement of the company. For example, real estate company DLF recently sold 40% stake in a subsidiary company to GIC of Singapore. Markets reacted positively to the news
  • A marginal stake dilution when promoter entity has very high holding is considered positive, as the number of shares freely available to buy and sell increases
  • If the promoter entity increases stake in the company via market purchase route or preferential allotment at market price or above market price, it is considered positive for the stock

Promoter Holding Change – 6M

This data item is calculated as the difference between the current promoter ownership percentage and the percentage 6 months ago.

Pledged Promoter Holding

Pledging refers to the act of taking loans against the shares one holds. Sometimes, promoters of companies will raise funds, either for personal or professional use, by taking loans using shares of the company that they own as collateral.

Typically, the bank or NBFC lending money will lend an amount that is less than market value of the shares. For example, suppose X is the promoter of Aarti Industries. The total shares outstanding of the company is 10,000 and X holds 60% stake in the company i.e 6,000 shares. If the current market price of each share of Aarti Industries is Rs 20, then X’s total holding is worth Rs.1,20,000 (6000 * 20). X needs Rs.50,000 for his personal use and is planning to pledge some of the shares of Aarti Industries in order to raise the money. Suppose the bank lends Rs.80 for every Rs.100 collateral pledged, X will have to then pledge Rs.62,500 worth of shares to raise Rs.50,000. This translates to 3125 shares (62,500 / 20). So, out of the total shares outstanding 31.25% is pledged (3,125 / 10,000). The difference between the amount of collateral and the amount of money received as loan is the margin amount.

Now, if the share price of the company starts falling, the margin starts getting eroded and the lender can then ask X to either return some part of the loan or pledge more shares in order to make up for the margin shortfall. If X is not able to do so, the lender will then sell the shares in the stock market to raise the required amount and maintain the margin.

In case of volatile markets, holding shares of companies with high pledged percentage is very risky. This is because, if the stock price falls sharply, lenders will sell the shares and this sudden increase in supply of the shares will further push down the price of the stock and investors might incur significant loss.

Domestic Institutional Investor (DII) Holding

This data item is calculated as shares held by institutional investors based in India divided by the total shares outstanding of the company. DII refers to large financial institutions like mutual funds, pension funds, insurance companies, endowment funds etc, which are based in India. Examples of DIIs are Life Insurance Corporation of India and HDFC Mutual Fund.

DIIs conduct extensive research about the prospects of the company & related sector, perform due diligence about capabilities of the management & corporate governance as well as other related factors before investing in a company. Generally, once DIIs decide to invest in a company, they hold onto the shares of the company for a long period of time. A high DII stake in a company is considered to be an endorsement about the company’s prospects.

DII Holding Change – 3M

This data item is calculated as the difference between the current DII ownership percentage and the percentage 3 months ago. Suppose, DIIs held 14% stake in the company 3 months ago and currently they hold 18.5%, the ownership change percentage is (18.5 – 14) = 4.5%.

A drastic increase or decrease in DII ownership percentage is a signal of a potential change in the fortunes of the company.

DII Holding Change – 6M

This data item is calculated as the difference between the current DII ownership percentage and the percentage 6 months ago. Suppose, DIIs held 20% stake in the company 6 months ago and currently they hold 18.5%, the ownership change percentage is (18.5 – 20) = -1.5%.

An extravagant change in DII ownership percentage is a signal of potential change in the fortunes of the company. A drastic increase indicates possible improvement in performance of the company and vice versa.

Foreign Institutional Investor (FII) Holding

This data item is calculated as shares held by institutional investors based outside of India divided by the total shares outstanding of the company.

Foreign institutional investments are investments by foreigners in Indian securities including shares, government bonds, corporate bonds, convertible securities, infrastructure securities etc. The class of investors who make investment in these securities are known as Foreign Institutional Investors (FII). According to SEBI regulations, any equity investment by foreigners that is less than or equal to 10% of the capital of a company is called portfolio investment.

Investments by Non-resident Indians is not considered as FII investment.

A high FII stake in a company, especially by sovereign wealth funds, endowment funds etc, is considered to be an endorsement about the company’s prospects. These entities conduct extensive research about the prospects of the company and related sector before investing in the company for the long-term.

FII Holding Change – 3M

This data item is calculated as the difference between the current FII ownership percentage and the percentage 3 months ago. Suppose, FIIs held 10% stake in the company 3 months ago and currently they hold 12.5%, the ownership change percentage is (12.5 – 10) = 2.5%.

If FIIs anticipate that a company will perform well over the long-term and can be relied upon to create shareholder value, they will increase their stake in the company. Else, if the company is expected to underperform, FIIs might sell out, thereby reducing their stake.

FII Holding Change – 6M

This data item is calculated as the difference between the current FII ownership percentage and the percentage 6 months ago. Suppose, FIIs held 7% stake in the company 6 months ago and currently they hold 12.5%, the ownership change percentage is (12.5 – 7) = 5.5%.

A drastic increase or decrease in FII ownership percentage is a signal of potential change in the fortunes of the company.