What Percentage Of Sterling Tools Limited (NSE:STERTOOLS) Shares Do Insiders Own?

If you want to know who really controls Sterling Tools Limited (NSE:STERTOOLS), then you'll have to look at the makeup of its share registry. Generally speaking, as a company grows, institutions will increase their ownership. Conversely, insiders often decrease their ownership over time. Warren Buffett said that he likes "a business with enduring competitive advantages that is run by able and owner-oriented people." So it's nice to see some insider ownership, because it may suggest that management is owner-oriented.

With a market capitalization of ₹8.0b, Sterling Tools is a small cap stock, so it might not be well known by many institutional investors. Our analysis of the ownership of the company, below, shows that institutions own shares in the company. Let's take a closer look to see what the different types of shareholders can tell us about 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.

As you can see, institutional investors have a fair amount of stake in Sterling Tools. 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 Sterling Tools' historic earnings and revenue below, but keep in mind there's always more to the story.

Sterling Tools is not owned by hedge funds. Our data suggests that Atul Aggarwal, who is also the company's Chief Financial Officer, 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 23% of common stock, and Manohar Aggarwal holds about 11% of the company stock. Note that two of the top three shareholders are also Chief Executive Officer and Chairman Emeritus, respectively, once again pointing to significant ownership by company insiders.

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 60% 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. Our information suggests that there isn't any analyst coverage of the stock, so it is probably little known.

Insider Ownership Of Sterling Tools

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

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 ₹6.1b stake in this ₹8.0b 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 10% ownership, the general public 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:

It's always worth thinking about the different groups who own shares in a company. But to understand Sterling Tools better, we need to consider many other factors. Be aware that Sterling Tools is showing 2 warning signs in our investment analysis , and 1 of those doesn't sit too well with us...

Of course this may not be the best stock to buy. So take a peek at this free free list of interesting companies.

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. 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.
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