Cummins India Limited (NSE:CUMMINSIND) surges 8.9%; public companies who own 51% shares profited along with institutions

Key Insights

• Cummins India's significant public companies ownership suggests that the key decisions are influenced by shareholders from the larger public
• The largest shareholder of the company is Cummins Inc. with a 51% stake
• Institutional ownership in Cummins India is 28%

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If you want to know who really controls Cummins India Limited (NSE:CUMMINSIND), 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 public companies with 51% ownership. That is, the group stands to benefit the most if the stock rises (or lose the most if there is a downturn).

Public companies gained the most after market cap touched ₹1.2t last week, while institutions who own 28% also benefitted.

In the chart below, we zoom in on the different ownership groups of Cummins India.

See our latest analysis for Cummins India

What Does The Institutional Ownership Tell Us About Cummins India?

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.

Cummins India already has institutions on the share registry. Indeed, they own a respectable stake in the company. 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. 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 Cummins India, (below). Of course, keep in mind that there are other factors to consider, too.

We note that hedge funds don't have a meaningful investment in Cummins India. The company's largest shareholder is Cummins Inc., with ownership of 51%. With such a huge stake in the ownership, we infer that they have significant control of the future of the company. For context, the second largest shareholder holds about 3.0% of the shares outstanding, followed by an ownership of 2.3% by the third-largest shareholder.

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 Cummins India

The definition of company insiders can be subjective and does vary between jurisdictions. Our data reflects individual insiders, capturing board members at the very least. Company management run the business, but the CEO will answer to the board, even if he or she is a member of it.

Most consider insider ownership a positive because it can indicate the board is well aligned with other shareholders. However, on some occasions too much power is concentrated within this group.

Our information suggests that Cummins India Limited insiders own under 1% of the company. As it is a large company, we'd only expect insiders to own a small percentage of it. But it's worth noting that they own ₹60m worth of shares. It is good to see board members owning shares, but it might be worth checking if those insiders have been buying.

General Public Ownership

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

Public Company Ownership

We can see that public companies hold 51% of the Cummins India shares on issue. It's hard to say for sure but this suggests they have entwined business interests. This might be a strategic stake, so it's worth watching this space for changes in ownership.

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. Take risks for example - Cummins India has 1 warning sign we think 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.