In this analysis, my focus will be on developing a perspective on Havells India Limited’s (NSE:HAVELLS) latest ownership structure, a less discussed, but important factor. When it comes to ownership structure of a company, the impact has been observed in both the long-and short-term performance of shares. If an activist institution invests the same amount of capital in a stock as a passive long-term pension fund, the implications are potentially different for key corporate financing decisions such as the use of excess cash or the source of financing. While these are more of a long-term investor’s concern, short-term investors may find the impact of institutional trading overwhelming enough to lose out on what could be a potential opportunity. Therefore, it is beneficial for us to examine HAVELLS’s ownership structure in more detail.
Institutional OwnershipHAVELLS’s 16.71% institutional ownership seems enough to cause large share price movements in the case of significant share sell-off or acquisitions by institutions, particularly when there is a low level of public shares available on the market to trade. However, as not all institutions are alike, such high volatility events, especially in the short-term, have been more frequently linked to active market participants like hedge funds. For HAVELLS shareholders, the potential of this type of share price volatility shouldn’t be as concerning as hedge fund ownership is is not significant,indicating few chances of such sudden price moves. While that hardly seems concerning, I will explore further into HAVELLS’s ownership type to find out how it can affect the company’s investment profile.
Insider OwnershipAn important group of shareholders are company insiders. Insider ownership has to do more with how the company is managed and less to do with the direct impact of the magnitude of shares trading on the market. 18.41% ownership of HAVELLS insiders is large enough to make an impact on shareholder returns. In general, this level of insider ownership has negatively affected underperforming (consistently low PE ratio) companies and positively affected the companies that outperform (consistently high PE ratio). It’s also interesting to learn what HAVELLS insiders have been doing with their shareholdings lately. While insider buying is possibly a sign of a positive outlook for the company, selling doesn’t necessarily indicate a negative outlook as they may be selling to meet personal financial needs.
General Public OwnershipThe general public holds a substantial 18.19% stake in HAVELLS, making it a highly popular stock among retail investors. This size of ownership gives retail investors collective power in deciding on major policy decisions such as executive compensation, appointment of directors and acquisitions of businesses.
Private Equity OwnershipWith an ownership of 5.28%, private equity firms are a major stakeholder in HAVELLS and are in a position to play an important role in shaping up corporate strategy with a focus on value creation. This is an encouraging sign for investors as these investors tend to be active strategist in companies, focusing on increasing operational and capital efficiency for the firm.
Private Company OwnershipPotential investors in HAVELLS should also look at another important group of investors: private companies, with a stake of 41.35%, who are primarily invested because of strategic and capital gain interests. An ownership of this size indicates a strong financial backing and has the potential to influence HAVELLS’s business strategy. Thus, investors should dig deeper into HAVELLS’s business relations with these companies and how it can affect shareholder returns in the long-term.
The company’s high institutional ownership makes margin of safety a very important consideration to existing investors since long bull and bear trends often emerge when these big-ticket investors see a change in long-term potential of the company. This will enable shareholders to comfortably invest in the company while avoid getting trapped in a sustained sell-off that is often observed in stocks with this level of institutional participation. However, ownership structure should not be the only determining factor when you’re building an investment thesis for HAVELLS. Rather, you should be examining fundamental factors such as the intrinsic valuation, which is a key driver of Havells India’s share price. I highly recommend you to complete your research by taking a look at the following:
- Future Outlook: What are well-informed industry analysts predicting for HAVELLS’s future growth? Take a look at our free research report of analyst consensus for HAVELLS’s outlook.
- Past Track Record: Has HAVELLS been consistently performing well irrespective of the ups and downs in the market? Go into more detail in the past performance analysis and take a look at the free visual representations of HAVELLS’s historicals for more clarity.
- Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at firstname.lastname@example.org.