Despite recent sales, Sterling Tools Limited (NSE:STERTOOLS) insiders own 74% shares but recent downturn may have set them back

Key Insights

• Significant insider control over Sterling Tools implies vested interests in company growth
• The top 3 shareholders own 51% of the company
• Insiders have been selling lately

Every investor in Sterling Tools Limited (NSE:STERTOOLS) should be aware of the most powerful shareholder groups. The group holding the most number of shares in the company, around 74% to be precise, is individual insiders. In other words, the group stands to gain the most (or lose the most) from their investment into the company.

Even though insiders have sold shares recently, the group owns the most numbers of shares in the company. As a result, the group bore the brunt of last week’s ₹1.9b market cap loss.

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?

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.

Less than 5% of Sterling Tools 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. So if the company itself can improve over time, we may well see more institutional buyers in the future. It is not uncommon to see a big share price rise if multiple institutional investors are trying to buy into a stock at the same time. So check out the historic earnings trajectory, below, but keep in mind it's the future that counts most.

Sterling Tools is not owned by hedge funds. Our data suggests that Atul Aggarwal, who is also the company's Senior Key Executive, holds the most number of shares at 26%. 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. For context, the second largest shareholder holds about 17% of the shares outstanding, followed by an ownership of 7.5% by the third-largest shareholder. 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.

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 51% stake.

Researching institutional ownership is a good way to gauge and filter a stock's expected performance. The same can be achieved by studying analyst sentiments. We're not picking up on any analyst coverage of the stock at the moment, so the company is unlikely to be widely held.

Insider Ownership Of Sterling Tools

While the precise definition of an insider can be subjective, almost everyone considers board members to be insiders. Management ultimately answers to the board. However, it is not uncommon for managers to be executive board members, especially if they are a founder or the CEO.

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 information suggests that insiders own more than half of Sterling Tools Limited. This gives them effective control of the company. So they have a ₹8.8b stake in this ₹12b business. 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 16% ownership, the general public, mostly comprising of individual investors, have some degree of sway over Sterling Tools. While this group can't necessarily call the shots, it can certainly have a real influence on how the company is run.

Private Company Ownership

It seems that Private Companies own 5.0%, of the Sterling Tools 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. Consider risks, for instance. Every company has them, and we've spotted 2 warning signs for Sterling Tools you should know about.

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.