CEAT Limited (NSE:CEATLTD) surges 7.6%; private companies who own 41% shares profited along with institutions

Key Insights

• The considerable ownership by private companies in CEAT indicates that they collectively have a greater say in management and business strategy
• 54% of the business is held by the top 4 shareholders
• Institutional ownership in CEAT is 35%

Every investor in CEAT Limited (NSE:CEATLTD) should be aware of the most powerful shareholder groups. We can see that private companies own the lion's share in the company with 41% ownership. That is, the group stands to benefit the most if the stock rises (or lose the most if there is a downturn).

While private companies were the group that benefitted the most from last week’s ₹8.7b market cap gain, institutions too had a 35% share in those profits.

Let's delve deeper into each type of owner of CEAT, beginning with the chart below.

View our latest analysis for CEAT

What Does The Institutional Ownership Tell Us About CEAT?

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.

As you can see, institutional investors have a fair amount of stake in CEAT. This suggests some credibility amongst professional investors. But we can't rely on that fact alone since institutions make bad investments sometimes, just like everyone does. 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 CEAT's earnings history below. Of course, the future is what really matters.

Hedge funds don't have many shares in CEAT. Instant Holdings Limited is currently the company's largest shareholder with 30% of shares outstanding. In comparison, the second and third largest shareholders hold about 11% and 9.4% of the stock.

Our research also brought to light the fact that roughly 54% of the company is controlled by the top 4 shareholders suggesting that these owners wield significant influence on the business.

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 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 CEAT

The definition of company insiders can be subjective and does vary between jurisdictions. Our data reflects individual insiders, capturing board members at the very least. Management ultimately answers to the board. However, it is not uncommon for managers to be executive board members, especially if they are a founder or the CEO.

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.

Shareholders would probably be interested to learn that insiders own shares in CEAT Limited. The insiders have a meaningful stake worth ₹1.8b. Most would see this as a real positive. It is good to see this level of investment by insiders. You can check here to see if those insiders have been buying recently.

General Public Ownership

The general public, who are usually individual investors, hold a 19% stake in CEAT. 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.

Private Company Ownership

Our data indicates that Private Companies hold 41%, of the company's shares. 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

We can see that public companies hold 3.7% of the CEAT 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:

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 CEAT is showing 3 warning signs in our investment analysis , you should know about...

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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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.