Retail investors invested in Dhanlaxmi Bank Limited (NSE:DHANBANK) up 15% last week, insiders too were rewarded

Key Insights

• Significant control over Dhanlaxmi Bank by retail investors implies that the general public has more power to influence management and governance-related decisions
• The top 22 shareholders own 49% of the company
• Insider ownership in Dhanlaxmi Bank is 37%

A look at the shareholders of Dhanlaxmi Bank Limited (NSE:DHANBANK) can tell us which group is most powerful. The group holding the most number of shares in the company, around 51% to be precise, is retail investors. Put another way, the group faces the maximum upside potential (or downside risk).

Retail investors gained the most after market cap touched ₹11b last week, while insiders who own 37% also benefitted.

Let's take a closer look to see what the different types of shareholders can tell us about Dhanlaxmi Bank.

View our latest analysis for Dhanlaxmi Bank

What Does The Institutional Ownership Tell Us About Dhanlaxmi Bank?

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.

We can see that Dhanlaxmi Bank does have institutional investors; and they hold a good portion of the company's stock. This suggests some credibility amongst professional investors. But we can't rely on that fact alone since institutions make bad investments sometimes, just like everyone does. It is not uncommon to see a big share price drop if two large institutional investors try to sell out of a stock at the same time. So it is worth checking the past earnings trajectory of Dhanlaxmi Bank, (below). Of course, keep in mind that there are other factors to consider, too.

Dhanlaxmi Bank is not owned by hedge funds. Looking at our data, we can see that the largest shareholder is B. Pillai with 10.0% of shares outstanding. With 7.5% and 5.0% of the shares outstanding respectively, Jineesh K. and Yusuffal Kader are the second and third largest shareholders.

Our studies suggest that the top 22 shareholders collectively control less than half of the company's shares, meaning that the company's shares are widely disseminated and there is no dominant shareholder.

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 Dhanlaxmi Bank

The definition of an insider can differ slightly between different countries, but members of the board of directors always count. 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 a reasonable proportion of Dhanlaxmi Bank Limited. Insiders have a ₹4.0b stake in this ₹11b business. We would say this shows alignment with shareholders, but it is worth noting that the company is still quite small; some insiders may have founded the business. You can click here to see if those insiders have been buying or selling.

General Public Ownership

The general public, who are usually individual investors, hold a substantial 51% stake in Dhanlaxmi Bank, suggesting it is a fairly popular stock. With this amount of ownership, retail investors can collectively play a role in decisions that affect shareholder returns, such as dividend policies and the appointment of directors. They can also exercise the power to vote on acquisitions or mergers that may not improve profitability.

Private Company Ownership

It seems that Private Companies own 4.3%, of the Dhanlaxmi Bank 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:

While it is well worth considering the different groups that own a company, there are other factors that are even more important. Be aware that Dhanlaxmi Bank is showing 1 warning sign in our investment analysis , 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.