Promoter holding
Shareholding Pattern
Promoter holding is the percentage of a company's shares owned by its founders or controlling group. Read with institutional holdings, its trend is an early warning of trouble long before it shows in the accounts.
Formula
Promoter holding
Promoter Holding (%) = Shares Held by Promoters ÷ Total Shares Outstanding × 100
Institutional holding
DII or FII Holding (%) = Shares Held by the Institution Type ÷ Total Shares Outstanding × 100
Benchmark: Above 40 to 50% is a good sign; for very large companies, read the trend instead of the level
Reading the number
Promoters know the business better than anyone. When they buy more of it, they are telling you they have confidence in it. When they sell, they are telling you the opposite, whatever the press release says. Rising promoter holding is very positive. Falling promoter holding is very negative.
The level rule has an exception. Very large companies, worth ₹20,000 to ₹50,000 crore or more, often cannot sustain a high promoter stake, and banks and some large companies are not permitted one. In those cases the trend replaces the level.
Domestic institutional investors (mutual funds, insurers) and foreign institutional investors are the market's professionals. Track whether they are adding or reducing. The combined rule from the notes: promoter rising is positive, FII rising is positive, DII rising is positive. All three falling at once is the negative signal, and one of the best methods for finding companies in which both the owners and the professionals are losing faith. Add the stock to a watchlist so that changes in the shareholding pattern reach you as alerts.
Indian example
Related ratios
Glossary terms
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