Individual investors who have a significant stake must be disappointed along with institutions after Elgi Equipments Limited's (NSE:ELGIEQUIP) market cap dropped by ₹13b

Key Insights

• Elgi Equipments' significant individual investors ownership suggests that the key decisions are influenced by shareholders from the larger public
• A total of 7 investors have a majority stake in the company with 51% ownership
• Insiders own 13% of Elgi Equipments

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. Put another way, the group faces the maximum upside potential (or downside risk).

Following a 5.5% decrease in the stock price last week, individual investors suffered the most losses, but institutions who own 22% stock also took a hit.

In the chart below, we zoom in on the different ownership groups of Elgi Equipments.

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

It would appear that 8.8% 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. Our data shows that Dark Horse Portfolio Investments Ltd. is the largest shareholder with 20% of shares outstanding. The second and third largest shareholders are Jairam Varadaraj and Pari Washington Company Pvt. Ltd, with an equal amount of shares to their name at 8.9%. Jairam Varadaraj, who is the second-largest shareholder, also happens to hold the title of Chief Executive Officer.

We also observed that the top 7 shareholders account for more than half of the share register, with a few smaller shareholders to balance the interests of the larger ones to a certain extent.

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 a reasonable number of analysts covering the stock, so it might be useful to find out their aggregate view on the future.

Insider Ownership Of Elgi Equipments

While the precise definition of an insider can be subjective, almost everyone considers board members to be insiders. 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.

I generally consider insider ownership to be a good thing. However, on some occasions it makes it more difficult for other shareholders to hold the board accountable for decisions.

Our most recent data indicates that insiders own a reasonable proportion of Elgi Equipments Limited. It is very interesting to see that insiders have a meaningful ₹28b stake in this ₹219b business. 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-- including retail investors -- own 35% stake in the company, and hence can't easily be ignored. While this group can't necessarily call the shots, it can certainly have a real influence on how the company is run.

Private Company Ownership

Our data indicates that Private Companies hold 20%, of the company's shares. It's hard to draw any conclusions from this fact alone, so its worth looking into who owns those private companies. Sometimes insiders or other related parties have an interest in shares in a public company through a separate private company.

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.

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 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.