Both individual investors who control a good portion of Elgi Equipments Limited (NSE:ELGIEQUIP) along with institutions must be dismayed after last week's 6.1% decrease

Key Insights

• Significant control over Elgi Equipments by individual investors implies that the general public has more power to influence management and governance-related decisions
• The top 7 shareholders own 52% of the company
• 13% of Elgi Equipments is held by insiders

We check all companies for important risks. See what we found for Elgi Equipments in our free report.

A look at the shareholders of Elgi Equipments Limited (NSE:ELGIEQUIP) can tell us which group is most powerful. The group holding the most number of shares in the company, around 35% to be precise, is individual investors. That is, the group stands to benefit the most if the stock rises (or lose the most if there is a downturn).

While institutions who own 23% came under pressure after market cap dropped to ₹141b last week,individual investors took the most losses.

Let's delve deeper into each type of owner of Elgi Equipments, beginning with the chart below.

See our latest analysis for Elgi Equipments

What Does The Institutional Ownership Tell Us About Elgi Equipments?

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.

Elgi Equipments already has institutions on the share registry. Indeed, they own a respectable stake in the company. 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 Elgi Equipments' historic earnings and revenue below, but keep in mind there's always more to the story.

Our data indicates that hedge funds own 8.5% of Elgi Equipments. That worth noting, since hedge funds are often quite active investors, who may try to influence management. Many want to see value creation (and a higher share price) in the short term or medium term. Dark Horse Portfolio Investments Ltd. is currently the company's largest shareholder with 20% of shares outstanding. Meanwhile, the second and third largest shareholders, hold 8.9% and 8.5%, of the shares outstanding, respectively. Jairam Varadaraj, who is the second-largest shareholder, also happens to hold the title of Chief Executive Officer.

On further inspection, we found that more than half the company's shares are owned by the top 7 shareholders, suggesting that the interests of the larger shareholders are balanced out to an extent by the smaller ones.

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. There are plenty of analysts covering the stock, so it might be worth seeing what they are forecasting, too.

Insider Ownership Of Elgi Equipments

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 most recent data indicates that insiders own a reasonable proportion of Elgi Equipments Limited. Insiders own ₹18b worth of shares in the ₹141b company. That's quite meaningful. Most would say this shows a good degree of alignment with shareholders, especially in a company of this size. 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 35% stake in Elgi Equipments. 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

We can see that Private Companies own 20%, of the shares on issue. 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:

While it is well worth considering the different groups that own a company, there are other factors that are even more important.

I always like to check for a history of revenue growth. You can too, by accessing this free chart of historic revenue and earnings in this detailed graph.

Ultimately the future is most important. You can access this free report on analyst forecasts for the company.

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.