Venture Capital

Here’s What 3i Infotech Limited’s (NSE:3IINFOTECH) Shareholder Ownership Structure Looks Like

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If you want to know who really controls 3i Infotech Limited (NSE:3IINFOTECH), then you’ll have to look at the makeup of its share registry. Institutions will often hold stock in bigger companies, and we expect to see insiders owning a noticeable percentage of the smaller ones. We also tend to see lower insider ownership in companies that were previously publicly owned.

3i Infotech is not a large company by global standards. It has a market capitalization of ₹12b, which means it wouldn’t have the attention of many institutional investors. In the chart below, we can see that institutions own shares in the company. Let’s take a closer look to see what the different types of shareholders can tell us about 3i Infotech.

View our latest analysis for 3i Infotech

NSEI:3IINFOTECH Ownership Breakdown January 25th 2021

What Does The Institutional Ownership Tell Us About 3i Infotech?

Institutions typically measure themselves against a benchmark when reporting to their own investors, so they often become more enthusiastic about a stock once it’s included in a major index. We would expect most companies to have some institutions on the register, especially if they are growing.

3i Infotech 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. When multiple institutions own a stock, there’s always a risk that they are in a ‘crowded trade’. When such a trade goes wrong, multiple parties may compete to sell stock fast. This risk is higher in a company without a history of growth. You can see 3i Infotech’s historic earnings and revenue below, but keep in mind there’s always more to the story.

earnings-and-revenue-growth

NSEI:3IINFOTECH Earnings and Revenue Growth January 25th 2021

3i Infotech is not owned by hedge funds. Trinity Alternative Investment Managers Ltd. is currently the largest shareholder, with 16% of shares outstanding. With 7.6% and 6.8% of the shares outstanding respectively, ICICI Venture Funds Management Company Limited and Standard Chartered Bank, Asset Management Arm are the second and third largest shareholders.

Looking at the shareholder registry, we can see that 50% of the ownership is controlled by the top 12 shareholders, meaning that no single shareholder has a majority interest in the ownership.

Researching institutional ownership is a good way to gauge and filter a stock’s expected performance. The same can be achieved by studying analyst sentiments. We’re not picking up on any analyst coverage of the stock at the moment, so the company is unlikely to be widely held.

Insider Ownership Of 3i Infotech

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.

Insider ownership is positive when it signals leadership are thinking like the true owners of the company. However, high insider ownership can also give immense power to a small group within the company. This can be negative in some circumstances.

I can report that insiders do own shares in 3i Infotech Limited. In their own names, insiders own ₹252m worth of stock in the ₹12b company. Some would say this shows alignment of interests between shareholders and the board, though I generally prefer to see bigger insider holdings. But it might be worth checking if those insiders have been selling.

General Public Ownership

The general public, with a 49% stake in the company, will not 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 an ownership of 24%, private equity firms are in a position to play a role in shaping corporate strategy with a focus on value creation. Sometimes we see private equity stick around for the long term, but generally speaking they have a shorter investment horizon and — as the name suggests — don’t invest in public companies much. After some time they may look to sell and redeploy capital elsewhere.

Next Steps:

While it is well worth considering the different groups that own a company, there are other factors that are even more important. Be aware that 3i Infotech is showing 2 warning signs in our investment analysis , you should know about…

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of interesting companies.

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. 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.
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