Private equity firms in Sona BLW Precision Forgings Limited (NSE:SONACOMS) are its biggest bettors, and their bets paid off as stock gained 12% last week

By
Simply Wall St
Published
March 21, 2022
NSEI:SONACOMS
Source: Shutterstock

If you want to know who really controls Sona BLW Precision Forgings Limited (NSE:SONACOMS), then you'll have to look at the makeup of its share registry. And the group that holds the biggest piece of the pie are private equity firms with 34% ownership. Put another way, the group faces the maximum upside potential (or downside risk).

Clearly, private equity firms benefitted the most after the company's market cap rose by ₹42b last week.

Let's take a closer look to see what the different types of shareholders can tell us about Sona BLW Precision Forgings.

See our latest analysis for Sona BLW Precision Forgings

ownership-breakdown
NSEI:SONACOMS Ownership Breakdown March 21st 2022

What Does The Institutional Ownership Tell Us About Sona BLW Precision Forgings?

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.

We can see that Sona BLW Precision Forgings does have institutional investors; and they hold a good portion of the company's stock. This implies the analysts working for those institutions have looked at the stock and they like it. But just like anyone else, they could be wrong. 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 Sona BLW Precision Forgings' historic earnings and revenue below, but keep in mind there's always more to the story.

earnings-and-revenue-growth
NSEI:SONACOMS Earnings and Revenue Growth March 21st 2022

Sona BLW Precision Forgings is not owned by hedge funds. Blackstone Inc. is currently the largest shareholder, with 34% of shares outstanding. Meanwhile, the second and third largest shareholders, hold 33% and 4.0%, of the shares outstanding, respectively.

A more detailed study of the shareholder registry showed us that 2 of the top shareholders have a considerable amount of ownership in the company, via their 67% 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 Sona BLW Precision Forgings

While the precise definition of an insider can be subjective, almost everyone considers board members to be insiders. 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.

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 Sona BLW Precision Forgings Limited. We do note, however, it is possible insiders have an indirect interest through a private company or other corporate structure. Keep in mind that it's a big company, and the insiders own ₹66k worth of shares. The absolute value might be more important than the proportional share. Arguably, recent buying and selling is just as important to consider. You can click here to see if insiders have been buying or selling.

General Public Ownership

The general public-- including retail investors -- own 10% 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 Equity Ownership

With an ownership of 34%, private equity firms are in a position to play a role in shaping corporate strategy with a focus on value creation. Some investors might be encouraged by this, since private equity are sometimes able to encourage strategies that help the market see the value in the company. Alternatively, those holders might be exiting the investment after taking it public.

Private Company Ownership

It seems that Private Companies own 33%, of the Sona BLW Precision Forgings stock. 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:

It's always worth thinking about the different groups who own shares in a company. But to understand Sona BLW Precision Forgings better, we need to consider many other factors.

I like to dive deeper into how a company has performed in the past. You can find historic revenue and earnings in this detailed graph.

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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