Insiders have been selling Sharda Motor Industries Limited (NSE:SHARDAMOTR) recently yet still hold a significant stake; 8.9% drop last week not ideal

Key Insights

• Sharda Motor Industries' significant insider ownership suggests inherent interests in company's expansion
• Ajay Relan owns 58% of the company
• Insiders have sold recently

Every investor in Sharda Motor Industries Limited (NSE:SHARDAMOTR) should be aware of the most powerful shareholder groups. The group holding the most number of shares in the company, around 65% to be precise, is individual insiders. That is, the group stands to benefit the most if the stock rises (or lose the most if there is a downturn).

And our data suggests that insiders own the top position in the company’s share registry despite recent sales. Following last week's 8.9% decline in share price, the group also suffered the most losses.

In the chart below, we zoom in on the different ownership groups of Sharda Motor Industries.

View our latest analysis for Sharda Motor Industries

What Does The Institutional Ownership Tell Us About Sharda Motor 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.

Less than 5% of Sharda Motor Industries is held by institutional investors. This suggests that some funds have the company in their sights, but many have not yet bought shares in it. If the company is growing earnings, that may indicate that it is just beginning to catch the attention of these deep-pocketed investors. When multiple institutional investors want to buy shares, we often see a rising share price. The past revenue trajectory (shown below) can be an indication of future growth, but there are no guarantees.

Hedge funds don't have many shares in Sharda Motor Industries. Our data suggests that Ajay Relan, who is also the company's Senior Key Executive, holds the most number of shares at 58%. When an insider holds a sizeable amount of a company's stock, investors consider it as a positive sign because it suggests that insiders are willing to have their wealth tied up in the future of the company. In comparison, the second and third largest shareholders hold about 5.1% and 1.5% of the stock. Interestingly, the second-largest shareholder, Aashim Relan is also Chief Executive Officer, again, pointing towards strong insider ownership amongst the company's top shareholders.

While studying institutional ownership for a company can add value to your research, it is also a good practice to research analyst recommendations to get a deeper understand of a stock's expected performance. Our information suggests that there isn't any analyst coverage of the stock, so it is probably little known.

Insider Ownership Of Sharda Motor Industries

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.

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 that insiders own more than half the Sharda Motor Industries Limited stock. This gives them a lot of power. That means they own ₹45b worth of shares in the ₹69b company. That's quite meaningful. It is good to see this level of investment. You can check here to see if those insiders have been buying recently.

General Public Ownership

With a 30% ownership, the general public, mostly comprising of individual investors, have some degree of sway over Sharda Motor 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.

Next Steps:

While it is well worth considering the different groups that own a company, there are other factors that are even more important. For instance, we've identified 2 warning signs for Sharda Motor Industries that you should be aware of.

Of course this may not be the best stock to buy. Therefore, you may wish to see our free collection of interesting prospects boasting favorable financials.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com