Could The Bajaj Auto Limited (NSE:BAJAJ-AUTO) Ownership Structure Tell Us Something Useful?

If you want to know who really controls Bajaj Auto Limited (NSE:BAJAJ-AUTO), then you’ll have to look at the makeup of its share registry. 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.

Bajaj Auto is a pretty big company. It has a market capitalization of ₹875b. Normally institutions would own a significant portion of a company this size. In the chart below below, we can see that institutional investors have bought into the company. Let’s delve deeper into each type of owner, to discover more about BAJAJ-AUTO.

View our latest analysis for Bajaj Auto

NSEI:BAJAJ-AUTO Ownership Summary, March 18th 2019
NSEI:BAJAJ-AUTO Ownership Summary, March 18th 2019

What Does The Institutional Ownership Tell Us About Bajaj Auto?

Many institutions measure their performance against an index that approximates the local market. So they usually pay more attention to companies that are included in major indices.

Bajaj Auto already has institutions on the share registry. Indeed, they own 15% of the company. 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. If multiple institutions change their view on a stock at the same time, you could see the share price drop fast. It’s therefore worth looking at Bajaj Auto’s earnings history, below. Of course, the future is what really matters.

NSEI:BAJAJ-AUTO Income Statement, March 18th 2019
NSEI:BAJAJ-AUTO Income Statement, March 18th 2019

Hedge funds don’t have many shares in Bajaj Auto. There are a reasonable number of analysts covering the stock, so it might be useful to find out their aggregate view on the future.

Insider Ownership Of Bajaj Auto

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.

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 some shares in Bajaj Auto Limited. Insiders own ₹41b worth of shares (at current prices). Most would say this shows a good alignment of interests between shareholders and the board. Still, it might be worth checking if those insiders have been selling.

General Public Ownership

The general public holds a 24% stake in BAJAJ-AUTO. 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.

Private Company Ownership

We can see that Private Companies own 21%, of the shares on issue. It might be worth looking deeper into this. If related parties, such as insiders, have an interest in one of these private companies, that should be disclosed in the annual report. Private companies may also have a strategic interest in the company.

Public Company Ownership

It appears to us that public companies own 35% of BAJAJ-AUTO. 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.

Next Steps:

While it is well worth considering the different groups that own a company, there are other factors that are even more important.

Many find it useful to take an in depth look at how a company has performed in the past. You can access this detailed graph of past earnings, revenue and cash flow .

But ultimately it is the future, not the past, that will determine how well the owners of this business will do. Therefore we think it advisable to take a look at this free report showing whether analysts are predicting a brighter 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.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

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. Thank you for reading.