Thread by @FinsenseG

Which are the most important parameters to look into Shareholding Pattern?

A Thread 🧵👇

1/ A lot is spoken about changing shareholder patterns, people analyze the changes in shareholding trends and try to make sense out of it. Well, shareholding and type of shareholding does play an important role in the growth of a company. So, who are the various shareholders?

2/ Promoter or Promoter Group - They are usually the founders of the business. The promoter can be a single person, a family, a trust, or another company. Promoter holding says a lot about the confidence of those who know ins and outs of the company.

3/ Their such closeness to the company is the precise reason that some market participants try to take a clue from promoter buying and selling their stakes about the future prospects of the company.

4/ Foreign Institutional Investors - These are investors who are investing in Indian stock markets from foreign countries. These too can be a single investor, a company, trust, an asset management company, or a sovereign fund. They are considered ‘quality investors’ by some.

5/ They are perceived as being smarter than other market participants who take informed decisions after conducting proper due diligence. Because their transactions are based on such strong research work, markets like to know what they are buying & selling to get a cue to invest.

6/ Domestic Institutional Investors - These are Indian investors like insurance companies, mutual funds, or corporate houses. Because they are investing and managing big amounts of money, people believe that they would do so backed only by solid research.

7/ The above three types of shareholders create a lot of buzz with their transactions. Even if they initiate a sell transaction just to book profits without any fundamental reason, the stock prices can see a sharp drop due to the huge quantities they hold.

8/ Government - Government holds a stake in a lot of companies. In some companies, it is the promoter holding a majority stake (more than 50%) and in some, it is a minority investor.

9/ The government might have acquired a minority stake in return for providing survival capital to important institutions like banks or it might have sold a majority stake to another company like in the case of Hindustan Zinc.

10/ Retail Investors - These are the smallest investors, who hold a few shares in the company, like us. But these are the ones who lose their hard-earned savings because they are usually taken for a ride by fake people and stories.

11/ They are perceived to be gullible. Increase in retail shareholding is not perceived to be good because & it signifies the selling of stake by FIIs and DIIs onto the retail public. The Internet has somewhat bridged this gap and retail too can now do good research.

12/ Unpopular Fact - One should also look at the pledging of shares which means that the promoters can obtain a loan from giving their shares to banks. If pledge is for personal use, then it is an issue. It is considered as a bad sign because

13/ investors feel that the promoter doesn’t have trust in their company. Sometimes, the share price of a company may fall due to pledging of shares and if falls, the promoter has to face margin calls or else its shares would be sold.

14/ According to us, one should consider all parameters while checking the shareholding pattern.

BY :- @sneh_kagrana

End of Thread. Stay tuned for another thread soon. 🔔