Lumax Industries Limited's (NSE:LUMAXIND) 10% gain last week benefited both public companies who own 43% as well as insiders

Key Insights

• Lumax Industries' significant public companies ownership suggests that the key decisions are influenced by shareholders from the larger public
• A total of 3 investors have a majority stake in the company with 62% ownership
• 27% of Lumax Industries is held by insiders

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A look at the shareholders of Lumax Industries Limited (NSE:LUMAXIND) can tell us which group is most powerful. The group holding the most number of shares in the company, around 43% to be precise, is public companies. Put another way, the group faces the maximum upside potential (or downside risk).

Public companies gained the most after market cap touched ₹34b last week, while insiders who own 27% also benefitted.

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

See our latest analysis for Lumax Industries

What Does The Institutional Ownership Tell Us About Lumax Industries?

Institutions typically measure themselves against a benchmark when reporting to their own investors, so they often become more enthusiastic about a stock once it's included in a major index. We would expect most companies to have some institutions on the register, especially if they are growing.

Lumax Industries 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. It is not uncommon to see a big share price drop if two large institutional investors try to sell out of a stock at the same time. So it is worth checking the past earnings trajectory of Lumax Industries, (below). Of course, keep in mind that there are other factors to consider, too.

We note that hedge funds don't have a meaningful investment in Lumax Industries. The company's largest shareholder is Stanley Electric Co., Ltd., with ownership of 36%. The second and third largest shareholders are Anmol Jain and Deepak Jain, with an equal amount of shares to their name at 13%. Note that the second and third-largest shareholders are also Senior Key Executive and Chairman of the Board, respectively, meaning that the company's top shareholders are insiders.

To make our study more interesting, we found that the top 3 shareholders have a majority ownership in the company, meaning that they are powerful enough to influence the decisions of the company.

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 Lumax Industries

While the precise definition of an insider can be subjective, almost everyone considers board members to be insiders. 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 most recent data indicates that insiders own a reasonable proportion of Lumax Industries Limited. Insiders have a ₹9.1b stake in this ₹34b business. This may suggest that the founders still own a lot of shares. You can click here to see if they have been buying or selling.

General Public Ownership

With a 17% ownership, the general public, mostly comprising of individual investors, have some degree of sway over Lumax Industries. 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.

Public Company Ownership

It appears to us that public companies own 43% of Lumax Industries. 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:

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 Lumax Industries is showing 2 warning signs in our investment analysis , and 1 of those is a bit unpleasant...

Ultimately the future is most important. You can access this free report on analyst forecasts for the company.

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.