Is Oriental Aromatics Limited's (NSE:OAL) Shareholder Ownership Skewed Towards Insiders?

A look at the shareholders of Oriental Aromatics Limited (NSE:OAL) can tell us which group is most powerful. Large companies usually have institutions as shareholders, and we usually see insiders owning shares in smaller companies. I quite like to see at least a little bit of insider ownership. As Charlie Munger said 'Show me the incentive and I will show you the outcome.

Oriental Aromatics is a smaller company with a market capitalization of ₹12b, so it may still be flying under the radar of many institutional investors. Taking a look at our data on the ownership groups (below), it seems that institutions don't own shares in the company. Let's take a closer look to see what the different types of shareholders can tell us about Oriental Aromatics.

View our latest analysis for Oriental Aromatics

What Does The Lack Of Institutional Ownership Tell Us About Oriental Aromatics?

Institutional investors often avoid companies that are too small, too illiquid or too risky for their tastes. But it's unusual to see larger companies without any institutional investors.

There are multiple explanations for why institutions don't own a stock. The most common is that the company is too small relative to funds under management, so the institution does not bother to look closely at the company. On the other hand, it's always possible that professional investors are avoiding a company because they don't think it's the best place for their money. Institutional investors may not find the historic growth of the business impressive, or there might be other factors at play. You can see the past revenue performance of Oriental Aromatics, for yourself, below.

We note that hedge funds don't have a meaningful investment in Oriental Aromatics. Because actions speak louder than words, we consider it a good sign when insiders own a significant stake in a company. In Oriental Aromatics' case, its Senior Key Executive, Shyamal Bodani, is the largest shareholder, holding 37% of shares outstanding. In comparison, the second and third largest shareholders hold about 37% and 1.9% of the stock. Interestingly, the second-largest shareholder, Dharmil Bodani is also Senior Key Executive, again, pointing towards strong insider ownership amongst the company's top shareholders.

After doing some more digging, we found that the top 2 shareholders collectively control more than half of the company's shares, implying that they have considerable power to influence the company's decisions.

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. Our information suggests that there isn't any analyst coverage of the stock, so it is probably little known.

Insider Ownership Of Oriental Aromatics

The definition of an insider can differ slightly between different countries, but members of the board of directors always count. Company management run the business, but the CEO will answer to the board, even if he or she is a member of it.

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.

Our most recent data indicates that insiders own the majority of Oriental Aromatics Limited. This means they can collectively make decisions for the company. That means they own ₹9.2b worth of shares in the ₹12b company. That's quite meaningful. Most would be pleased to see the board is investing alongside them. You may wish todiscover (for free) if they have been buying or selling.

General Public Ownership

The general public, with a 22% stake in the company, will not easily be ignored. This size of ownership, while considerable, may not be enough to change company policy if the decision is not in sync with other large shareholders.

Next Steps:

I find it very interesting to look at who exactly owns a company. But to truly gain insight, we need to consider other information, too. Be aware that Oriental Aromatics is showing 2 warning signs in our investment analysis , you should know about...

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.

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