After the recent decline, Sterling Tools Limited (NSE:STERTOOLS) Senior Key Executive Atul Aggarwal's holdings have lost 10% of their value

Key Insights

• Sterling Tools' significant insider ownership suggests inherent interests in company's expansion
• A total of 3 investors have a majority stake in the company with 51% ownership
• Using data from company's past performance alongside ownership research, one can better assess the future performance of a company

A look at the shareholders of Sterling Tools Limited (NSE:STERTOOLS) can tell us which group is most powerful. With 70% stake, individual insiders possess the maximum shares in the company. In other words, the group stands to gain the most (or lose the most) from their investment into the company.

And following last week's 10% decline in share price, insiders suffered the most losses.

In the chart below, we zoom in on the different ownership groups of Sterling Tools.

See our latest analysis for Sterling Tools

What Does The Institutional Ownership Tell Us About Sterling Tools?

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.

Since institutions own only a small portion of Sterling Tools, many may not have spent much time considering the stock. But it's clear that some have; and they liked it enough to buy in. If the business gets stronger from here, we could see a situation where more institutions are keen to buy. 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.

We note that hedge funds don't have a meaningful investment in Sterling Tools. Our data suggests that Atul Aggarwal, who is also the company's Senior Key Executive, holds the most number of shares at 27%. 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. Anil Aggarwal is the second largest shareholder owning 17% of common stock, and Anish Agarwal holds about 7.5% of the company stock. Interestingly, the second and third-largest shareholders also happen to be the Chief Executive Officer and Member of the Board of Directors, respectively. This once again signifies considerable insider ownership amongst the company's top shareholders.

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.

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 Sterling Tools

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.

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.

Our most recent data indicates that insiders own the majority of Sterling Tools Limited. This means they can collectively make decisions for the company. So they have a ₹13b stake in this ₹18b business. Most would argue this is a positive, showing strong alignment with shareholders. You can click here to see if those insiders have been buying or selling.

General Public Ownership

With a 20% ownership, the general public, mostly comprising of individual investors, have some degree of sway over Sterling Tools. 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.

Private Company Ownership

It seems that Private Companies own 5.0%, of the Sterling Tools stock. It might be worth looking deeper into this. If related parties, such as insiders, have an interest in one of these private companies, that should be disclosed in the annual report. Private companies may also have a strategic interest in the company.

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 2 warning signs for Sterling Tools (1 doesn't sit too well with us) 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.