Institutional investors in Hero MotoCorp Limited (NSE:HEROMOTOCO) see ₹39b decrease in market cap last week, although long-term gains have benefitted them.

Key Insights

• Institutions' substantial holdings in Hero MotoCorp implies that they have significant influence over the company's share price
• The top 6 shareholders own 51% of the company
• Analyst forecasts along with ownership data serve to give a strong idea about prospects for a business

If you want to know who really controls Hero MotoCorp Limited (NSE:HEROMOTOCO), then you'll have to look at the makeup of its share registry. The group holding the most number of shares in the company, around 45% to be precise, is institutions. Put another way, the group faces the maximum upside potential (or downside risk).

Institutional investors endured the highest losses after the company's market cap fell by ₹39b last week. However, the 84% one-year return to shareholders may have helped lessen their pain. We would assume however, that they would be on the lookout for weakness in the future.

Let's take a closer look to see what the different types of shareholders can tell us about Hero MotoCorp.

See our latest analysis for Hero MotoCorp

What Does The Institutional Ownership Tell Us About Hero MotoCorp?

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.

Hero MotoCorp already has institutions on the share registry. Indeed, they own a respectable stake in the company. 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 Hero MotoCorp's historic earnings and revenue below, but keep in mind there's always more to the story.

Hedge funds don't have many shares in Hero MotoCorp. Bahadur Chand Investments Private Limited is currently the largest shareholder, with 20% of shares outstanding. With 14% and 7.3% of the shares outstanding respectively, Brijimohan Lal Om Prakash Partnership Firm and Life Insurance Corporation of India, Asset Management Arm are the second and third largest shareholders.

We also observed that the top 6 shareholders account for more than half of the share register, with a few smaller shareholders to balance the interests of the larger ones to a certain extent.

While it makes sense to study institutional ownership data for a company, it also makes sense to study analyst sentiments to know which way the wind is blowing. There are plenty of analysts covering the stock, so it might be worth seeing what they are forecasting, too.

Insider Ownership Of Hero MotoCorp

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

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 most recent data indicates that insiders own less than 1% of Hero MotoCorp Limited. We do note, however, it is possible insiders have an indirect interest through a private company or other corporate structure. It is a very large company, so it would be surprising to see insiders own a large proportion of the company. Though their holding amounts to less than 1%, we can see that board members collectively own ₹3.7b worth of shares (at current prices). In this sort of situation, it can be more interesting to see if those insiders have been buying or selling.

General Public Ownership

The general public-- including retail investors -- own 18% stake in the company, and hence can't 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 Company Ownership

We can see that Private Companies own 34%, of the shares on issue. 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:

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 Hero MotoCorp is showing 1 warning sign in our investment analysis , you should know about...

If you would prefer discover what analysts are predicting in terms of future growth, do not miss this free report on analyst forecasts.

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.