Share Holding Pattern – Definition, Meaning and Analysis

The shareholding pattern gives one an idea of how the shares of a company are distributed across different entities. Shareholding patterns are significant for trading because they give traders an insight into a company’s financial health. The shareholding pattern refers to the division of shares which haven’t been put on the stock market.

Shareholding patterns represent the share ownership pattern of companies. For example, it shows how different investors have invested in the firm’s shares. It also shows the shareholding percentage across different classes of investors. 

Listed companies must publish a statement of their shareholding pattern for every quarter. Current and potential investors may access the published reports to assess the firm’s capital structure and make vital investment decisions. 

What are the components of the shareholding pattern?

A company’s shareholding pattern is divided into two primary components: 

Promoter shareholding is the percentage of shares owned by the company’s promoters. The promoters are the company’s founders, who hold a majority stake in the company’s capital. They occupy many seats on the company’s management committee. Moreover, the owners’ relatives who own company shares fall under the promoters group. 

Public Shareholding: 

The proportion of shares not held by the promoters but issued to institutional and retail investors falls under public shareholding. 

Public shareholding constitutes institutional shareholding by financial bodies. It could be financial institutions, mutual funds, banks, insurance companies, Foreign Institutional Investors (FIIs), Foreign Direct Investors (FDIs) and the common public. 

If retail investors subscribe to the company’s shares, they fall under the public shareholding category. Moreover, the company must disclose if any individual entity holds more than 1% of the public shareholdings. 

Shareholding Snapshot:

Promoters	58.47%
Non-Institution	41.34%
Mutual Funds	0.01%
FIIs	0.18%

SEBI rules for shareholding pattern

• If individuals/entities hold more than a 1% stake in the firm, the company must disclose the details of these investors. The disclosure must be completed within the last 21 days of each quarter. 
• Other than promoter and public shareholders, companies must also have non-promoter shareholdings.
• The shareholding pattern disclosure must be made to the stock exchanges such as NSE and BSE, wherever the company is listed. 
• If the company promoters pledge shares to raise money/funds, the shareholding pattern must disclose all details of this pledging and the share proportions pledged as collateral by the promoters. 

How can you check a company’s shareholding pattern?

You can easily find a company’s shareholding pattern from the company’s website, the stock exchanges such as NSE/BSE, and financial websites like Business Standard and Moneycontrol. 

• You must visit the BSE website. 
• You then enter the firm’s name whose shareholding pattern you seek in the BSE search bar. 
• You scroll down and then click on the tab called the shareholding pattern. 
• You then select the quarter whose shareholding pattern you intend to find and study the shareholding pattern.

What does the shareholding pattern signify?

If promoters hold a sizeable portion of a company’s stock, consider this a favourable sign. It means promoters assume significant risks by investing in their company as they believe in the firm’s profitability. 

Look for the shareholder’s pattern, which reveals investments by Foreign Institutional Investors (FIIs). If FIIs believe in the company, it is a good sign as such firms may generate attractive returns. 

It would help if you looked out for companies with very high promoter stakes. Concentrated stakes mean promoters have the right to make vital decisions that might hurt investors’ interests. Look for a diversified shareholding pattern instead of a concentrated promoter’s stake in the firm. 

It would help if you compared the shareholding pattern across multiple quarters to spot significant changes. If the promoter’s shareholding pattern keeps changing, you must find out why. If promoters are exiting their stake regularly, it may signify a lack of faith in the company’s business. 

The company’s shareholders’ pattern is a public record you can assess. You get an idea of how the company has raised money for its operations. It also helps one gauge the company’s profitability to make proper investment decisions before investing. 

Conclusion:

1. One must check the promoter’s shareholders’ pattern before investing in the company. 
2. Ensure promoters don’t have too high a stake in the company. Otherwise, there are chances that promoters would make most of the major decisions unilaterally, which is detrimental to the cause of investors. 
3. Check if mutual funds and insurance companies have a significant stake in the firm. It is a good sign as these are big investors.