Lumax Auto Technologies Limited's (NSE:LUMAXTECH) market cap increased by ₹6.9b, insiders receive a 39% cut

Key Insights

• Significant insider control over Lumax Auto Technologies implies vested interests in company growth
• 56% of the business is held by the top 3 shareholders
• Institutional ownership in Lumax Auto Technologies is 28%

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Every investor in Lumax Auto Technologies Limited (NSE:LUMAXTECH) should be aware of the most powerful shareholder groups. With 39% stake, individual insiders possess the maximum shares in the company. Put another way, the group faces the maximum upside potential (or downside risk).

Clearly, insiders benefitted the most after the company's market cap rose by ₹6.9b last week.

In the chart below, we zoom in on the different ownership groups of Lumax Auto Technologies.

Check out our latest analysis for Lumax Auto Technologies

What Does The Institutional Ownership Tell Us About Lumax Auto Technologies?

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.

We can see that Lumax Auto Technologies 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. 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 Lumax Auto Technologies' historic earnings and revenue below, but keep in mind there's always more to the story.

Lumax Auto Technologies is not owned by hedge funds. Deepak Jain is currently the largest shareholder, with 19% of shares outstanding. In comparison, the second and third largest shareholders hold about 19% and 18% of the stock. Anmol Jain, who is the second-largest shareholder, also happens to hold the title of Senior Key Executive.

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 56% 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 are plenty of analysts covering the stock, so it might be worth seeing what they are forecasting, too.

Insider Ownership Of Lumax Auto Technologies

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. Company management run the business, but the CEO will answer to the board, even if he or she is a member of it.

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.

Our information suggests that insiders maintain a significant holding in Lumax Auto Technologies Limited. Insiders own ₹33b worth of shares in the ₹85b 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 14% stake in the company, and hence can't easily be ignored. 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

It seems that Private Companies own 18%, of the Lumax Auto Technologies stock. Private companies may be related parties. Sometimes insiders have an interest in a public company through a holding in a private company, rather than in their own capacity as an individual. While it's hard to draw any broad stroke conclusions, it is worth noting as an area for further research.

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. For instance, we've identified 3 warning signs for Lumax Auto Technologies that you should be aware of.

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.