Elgi Equipments Limited's (NSE:ELGIEQUIP) market cap dropped ₹14b last week; individual investors who hold 35% were hit as were institutions

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
• A total of 7 investors have a majority stake in the company with 52% ownership
• 13% of Elgi Equipments is held by insiders

A look at the shareholders of Elgi Equipments Limited (NSE:ELGIEQUIP) can tell us which group is most powerful. And the group that holds the biggest piece of the pie are individual investors with 35% ownership. Put another way, the group faces the maximum upside potential (or downside risk).

Following a 7.9% decrease in the stock price last week, individual investors suffered the most losses, but institutions who own 23% stock also took a hit.

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

Check out our latest analysis for Elgi Equipments

What Does The Institutional Ownership Tell Us About Elgi Equipments?

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.

Elgi Equipments 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 Elgi Equipments, (below). Of course, keep in mind that there are other factors to consider, too.

Our data indicates that hedge funds own 8.5% of Elgi Equipments. That catches my attention because hedge funds sometimes try to influence management, or bring about changes that will create near term value for shareholders. The company's largest shareholder is Dark Horse Portfolio Investments Ltd., with ownership of 20%. For context, the second largest shareholder holds about 8.9% of the shares outstanding, followed by an ownership of 8.5% by the third-largest shareholder. Jairam Varadaraj, who is the second-largest shareholder, also happens to hold the title of Chief Executive Officer.

We did some more digging and found that 7 of the top shareholders account for roughly 52% of the register, implying that along with larger shareholders, there are a few smaller shareholders, thereby balancing out each others interests somewhat.

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

Insider Ownership Of Elgi Equipments

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. 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. It has a market capitalization of just ₹167b, and insiders have ₹21b worth of shares in their own names. That's quite significant. Most would be pleased to see the board is investing alongside them. You may wish to access this free chart showing recent trading by insiders.

General Public Ownership

With a 35% ownership, the general public, mostly comprising of individual investors, have some degree of sway over Elgi Equipments. While this size of ownership may not be enough to sway a policy decision in their favour, they can still make a collective impact on company policies.

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 like to dive deeper into how a company has performed in the past. You can access this interactive graph of past earnings, revenue and cash flow, for free.

If you would prefer discover what analysts are predicting in terms of future growth, do not miss this free report on analyst forecasts.

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.