Lumax Industries Limited's (NSE:LUMAXIND) stock price dropped 10% last week; public companies would not be happy

Key Insights

• Lumax Industries' significant public companies ownership suggests that the key decisions are influenced by shareholders from the larger public
• The top 3 shareholders own 62% of the company
• Insider ownership in Lumax Industries is 27%

To get a sense of who is truly in control of Lumax Industries Limited (NSE:LUMAXIND), it is important to understand the ownership structure of the business. We can see that public companies own the lion's share in the company with 43% ownership. Put another way, the group faces the maximum upside potential (or downside risk).

While insiders who own 27% came under pressure after market cap dropped to ₹22b last week,public companies took the most losses.

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

View our latest analysis for Lumax Industries

What Does The Institutional Ownership Tell Us About Lumax Industries?

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.

We can see that Lumax Industries does have institutional investors; and they hold a good portion of the company's 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. 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.

Hedge funds don't have many shares in Lumax Industries. Our data shows that Stanley Electric Co., Ltd. is the largest shareholder with 36% of shares outstanding. 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.

A more detailed study of the shareholder registry showed us that 3 of the top shareholders have a considerable amount of ownership in the company, via their 62% stake.

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 is a little analyst coverage of the stock, but not much. So there is room for it to gain more coverage.

Insider Ownership Of Lumax Industries

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

It seems insiders own a significant proportion of Lumax Industries Limited. Insiders own ₹5.7b worth of shares in the ₹22b company. We would say this shows alignment with shareholders, but it is worth noting that the company is still quite small; some insiders may have founded the business. You can click here 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. 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

Public companies currently own 43% of Lumax Industries stock. 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:

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. To that end, you should learn about the 2 warning signs we've spotted with Lumax Industries (including 1 which is concerning) .

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.

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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.