Every investor in Indian Energy Exchange Limited (NSE:IEX) should be aware of the most powerful shareholder groups. Institutions often own shares in more established companies, while it’s not unusual to see insiders own a fair bit of smaller companies. We also tend to see lower insider ownership in companies that were previously publicly owned.
Indian Energy Exchange is not a large company by global standards. It has a market capitalization of ₹52b, which means it wouldn’t have the attention of many institutional investors. Taking a look at our data on the ownership groups (below), it’s seems that institutions own shares in the company. We can zoom in on the different ownership groups, to learn more about Indian Energy Exchange.
What Does The Institutional Ownership Tell Us About Indian Energy Exchange?
Institutional investors commonly compare their own returns to the returns of a commonly followed index. So they generally do consider buying larger companies that are included in the relevant benchmark index.
We can see that Indian Energy Exchange does have institutional investors; and they hold 63% of the stock. This can indicate that the company has a certain degree of credibility in the investment community. However, it is best to be wary of relying on the supposed validation that comes with institutional investors. They too, get it wrong sometimes. 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 Indian Energy Exchange’s historic earnings and revenue, below, but keep in mind there’s always more to the story.
Since institutional investors own more than half the issued stock, the board will likely have to pay attention to their preferences. We note that hedge funds don’t have a meaningful investment in Indian Energy Exchange. The company’s largest shareholder is TVS Capital Funds Limited, with ownership of 13%, The second and third largest shareholders are Dalmia Bharat Sugar and Industries Limited and Mirae Asset Global Investments Co., Ltd, holding 10% and 6.1%, respectively.
We also observed that the top 8 shareholders account for 53% of the register, with a few smaller shareholders to balance the interests of the larger ones to a certain extent.
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. As far I can tell there isn’t analyst coverage of the company, so it is probably flying under the radar.
Insider Ownership Of Indian Energy Exchange
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.
I generally consider insider ownership to be a good thing. However, on some occasions it makes it more difficult for other shareholders to hold the board accountable for decisions.
Our data suggests that insiders own under 1% of Indian Energy Exchange Limited in their own names. But they may have an indirect interest through a corporate structure that we haven’t picked up on. It seems the board members have no more than ₹157m worth of shares in the ₹52b company. Many tend to prefer to see a board with bigger shareholdings. A good next step might be to take a look at this free summary of insider buying and selling.
General Public Ownership
The general public, with a 12% stake in the company, will not easily be ignored. 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
Private equity firms hold a 13% stake in IEX. This suggests they can be influential in key policy decisions. Sometimes we see private equity stick around for the long term, but generally speaking they have a shorter investment horizon and — as the name suggests — don’t invest in public companies much. After some time they may look to sell and redeploy capital elsewhere.
Public Company Ownership
It appears to us that public companies own 10% of IEX. This may be a strategic interest and the two companies may have related business interests. It could be that they have de-merged. This holding is probably worth investigating further.
While it is well worth considering the different groups that own a company, there are other factors that are even more important. Be aware that Indian Energy Exchange is showing 1 warning sign 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.
If you spot an error that warrants correction, please contact the editor at email@example.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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