Could The Elgi Equipments Limited (NSE:ELGIEQUIP) Ownership Structure Tell Us Something Useful?

By
Simply Wall St
Published
November 23, 2021
NSEI:ELGIEQUIP
Source: Shutterstock

If you want to know who really controls Elgi Equipments Limited (NSE:ELGIEQUIP), then you'll have to look at the makeup of its share registry. Institutions often own shares in more established companies, while it's not unusual to see insiders own a fair bit of smaller companies. I generally like to see some degree of insider ownership, even if only a little. As Nassim Nicholas Taleb said, 'Don’t tell me what you think, tell me what you have in your portfolio.

Elgi Equipments isn't enormous, but it's not particularly small either. It has a market capitalization of ₹73b, which means it would generally expect to see some institutions on the share registry. In the chart below, we can see that institutions are noticeable on the share registry. Let's delve deeper into each type of owner, to discover more about Elgi Equipments.

Check out our latest analysis for Elgi Equipments

ownership-breakdown
NSEI:ELGIEQUIP Ownership Breakdown November 24th 2021

What Does The Institutional Ownership Tell Us About Elgi Equipments?

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.

We can see that Elgi Equipments does have institutional investors; and they hold a good portion of the company's stock. 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. If multiple institutions change their view on a stock at the same time, you could see the share price drop fast. It's therefore worth looking at Elgi Equipments' earnings history below. Of course, the future is what really matters.

earnings-and-revenue-growth
NSEI:ELGIEQUIP Earnings and Revenue Growth November 24th 2021

It would appear that 9.6% of Elgi Equipments shares are controlled by hedge funds. 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 16% of shares outstanding. Pari Washington Company Pvt Ltd is the second largest shareholder owning 9.6% of common stock, and Jairam Varadaraj holds about 9.3% of the company stock. Jairam Varadaraj, who is the third-largest shareholder, also happens to hold the title of Member of the Board of Directors.

We did some more digging and found that 7 of the top shareholders account for roughly 54% of the register, implying that along with larger shareholders, there are a few smaller shareholders, thereby balancing out each others interests somewhat.

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. Quite a few analysts cover the stock, so you could look into forecast growth quite easily.

Insider Ownership Of Elgi Equipments

The definition of an insider can differ slightly between different countries, but members of the board of directors always count. 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.

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 most recent data indicates that insiders own a reasonable proportion of Elgi Equipments Limited. Insiders have a ₹9.6b stake in this ₹73b business. This may suggest that the founders still own a lot of shares. You can click here to see if they have been buying or selling.

General Public Ownership

The general public-- including retail investors -- own 31% stake in the company, and hence can't easily be ignored. 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

Our data indicates that Private Companies hold 18%, of the company's shares. 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.

Public Company Ownership

It appears to us that public companies own 4.1% of Elgi Equipments. This may be a strategic interest and the two companies may have related business interests. It could be that they have de-merged. This holding is probably worth investigating further.

Next Steps:

While it is well worth considering the different groups that own a company, there are other factors that are even more important. To that end, you should be aware of the 2 warning signs we've spotted with Elgi Equipments .

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.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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