Could The Usha Martin Limited (NSE:USHAMART) Ownership Structure Tell Us Something Useful?

If you want to know who really controls Usha Martin Limited (NSE:USHAMART), 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. Companies that have been privatized tend to have low insider ownership.

Usha Martin is a smaller company with a market capitalization of ₹7.6b, so it may still be flying under the radar of many institutional investors. In the chart below, we can see that institutions are noticeable on the share registry. Let’s delve deeper into each type of owner, to discover more about Usha Martin.

Check out our latest analysis for Usha Martin

NSEI:USHAMART Ownership Summary, February 5th 2020
NSEI:USHAMART Ownership Summary, February 5th 2020

What Does The Institutional Ownership Tell Us About Usha Martin?

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.

We can see that Usha Martin does have institutional investors; and they hold 16% of the stock. 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 Usha Martin’s historic earnings and revenue, below, but keep in mind there’s always more to the story.

NSEI:USHAMART Income Statement, February 5th 2020
NSEI:USHAMART Income Statement, February 5th 2020

Hedge funds don’t have many shares in Usha Martin. The company’s largest shareholder is Peterhouse Investments India Limited, with ownership of 28%, Next, we have Kenwyn Overseas Ltd and UMIL Share & Stock Broking Services(p) Ltd. as the second and third largest shareholders, holding 21% and 13%, of the shares outstanding, respectively.

Additionally, we found that 3 of the top shareholders have a considerable amount of ownership in the company, via their 61% stake.

While studying institutional ownership for a company can add value to your research, it is also a good practice to research analyst recommendations to get a deeper understand of a stock’s expected performance. As far I can tell there isn’t analyst coverage of the company, so it is probably flying under the radar.

Insider Ownership Of Usha Martin

The definition of an insider can differ slightly between different countries, but members of the board of directors always count. 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.

Shareholders would probably be interested to learn that insiders own shares in Usha Martin Limited. In their own names, insiders own ₹239m worth of stock in the ₹7.6b company. It is good to see some investment by insiders, but I usually like to see higher insider holdings. It might be worth checking if those insiders have been buying.

General Public Ownership

The general public holds a 11% stake in USHAMART. 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 6.6%, private equity firms are in a position to play a role in shaping corporate strategy with a focus on value creation. Some investors might be encouraged by this, since private equity are sometimes able to encourage strategies that help the market see the value in the company. Alternatively, those holders might be exiting the investment after taking it public.

Private Company Ownership

It seems that Private Companies own 63%, of the USHAMART stock. It’s hard to draw any conclusions from this fact alone, so its worth looking into who owns those private companies. Sometimes insiders or other related parties have an interest in shares in a public company through a separate private company.

Next Steps:

It’s always worth thinking about the different groups who own shares in a company. But to understand Usha Martin better, we need to consider many other factors. For instance, we’ve identified 2 warning signs for Usha Martin (1 can’t be ignored) that you should be aware of.

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.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. 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. Simply Wall St has no position in the stocks mentioned.

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