Are Institutions Heavily Invested In UltraTech Cement Limited’s (NSE:ULTRACEMCO) Shares?

A look at the shareholders of UltraTech Cement Limited (NSE:ULTRACEMCO) can tell us which group is most powerful. Insiders often own a large chunk of younger, smaller, companies while huge companies tend to have institutions as shareholders. Companies that used to be publicly owned tend to have lower insider ownership.

With a market capitalization of ₹1.2t, UltraTech Cement is rather large. We’d expect to see institutional investors on the register. Companies of this size are usually well known to retail investors, too. Taking a look at our data on the ownership groups (below), it seems that institutions are noticeable on the share registry. Let’s delve deeper into each type of owner, to discover more about UltraTech Cement.

Check out our latest analysis for UltraTech Cement

ownership-breakdown
NSEI:ULTRACEMCO Ownership Breakdown August 21st 2020

What Does The Institutional Ownership Tell Us About UltraTech Cement?

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.

As you can see, institutional investors have a fair amount of stake in UltraTech Cement. This implies the analysts working for those institutions have looked at the stock and they like it. But just like anyone else, they could be wrong. 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 UltraTech Cement’s historic earnings and revenue below, but keep in mind there’s always more to the story.

earnings-and-revenue-growth
NSEI:ULTRACEMCO Earnings and Revenue Growth August 21st 2020

We note that hedge funds don’t have a meaningful investment in UltraTech Cement. Looking at our data, we can see that the largest shareholder is Grasim Industries Limited with 57% of shares outstanding. This essentially means that they have extensive influence, if not outright control, over the future of the corporation. Life Insurance Corporation of India, Asset Management Arm is the second largest shareholder owning 3.3% of common stock, and Standard Life Aberdeen plc holds about 3.1% of the company stock.

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. There are plenty of analysts covering the stock, so it might be worth seeing what they are forecasting, too.

Insider Ownership Of UltraTech Cement

While the precise definition of an insider can be subjective, almost everyone considers board members to be insiders. 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.

Most consider insider ownership a positive because it can indicate the board is well aligned with other shareholders. However, on some occasions too much power is concentrated within this group.

Our most recent data indicates that insiders own less than 1% of UltraTech Cement Limited. It is a very large company, so it would be surprising to see insiders own a large proportion of the company. Though their holding amounts to less than 1%, we can see that board members collectively own ₹702m worth of shares (at current prices). It is good to see board members owning shares, but it might be worth checking if those insiders have been buying.

General Public Ownership

With a 15% ownership, the general public have some degree of sway over UltraTech Cement. While this size of ownership may not be enough to sway a policy decision in their favour, they can still make a collective impact on company policies.

Public Company Ownership

We can see that public companies hold 59% of the UltraTech Cement shares on issue. We can’t be certain but it is quite possible this is a strategic stake. The businesses may be similar, or work together.

Next Steps:

It’s always worth thinking about the different groups who own shares in a company. But to understand UltraTech Cement better, we need to consider many other factors. For example, we’ve discovered 2 warning signs for UltraTech Cement that you should be aware of before investing here.

If you are like me, you may want to think about whether this company will grow or shrink. Luckily, you can check this free report showing analyst forecasts for its future.

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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