Jain Irrigation Systems Limited's (NSE:JISLJALEQS) last week's 8.9% decline must have disappointed individual investors who have a significant stake

Key Insights

• Significant control over Jain Irrigation Systems by individual investors implies that the general public has more power to influence management and governance-related decisions
• The top 15 shareholders own 51% of the company
• Institutions own 15% of Jain Irrigation Systems

To get a sense of who is truly in control of Jain Irrigation Systems Limited (NSE:JISLJALEQS), it is important to understand the ownership structure of the business. With 45% stake, individual investors possess the maximum shares in the company. In other words, the group stands to gain the most (or lose the most) from their investment into the company.

And following last week's 8.9% decline in share price, individual investors suffered the most losses.

In the chart below, we zoom in on the different ownership groups of Jain Irrigation Systems.

Check out our latest analysis for Jain Irrigation Systems

What Does The Institutional Ownership Tell Us About Jain Irrigation Systems?

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.

As you can see, institutional investors have a fair amount of stake in Jain Irrigation Systems. 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 Jain Irrigation Systems' historic earnings and revenue below, but keep in mind there's always more to the story.

Jain Irrigation Systems is not owned by hedge funds. Jalgaon Investments Pvt. Ltd. is currently the company's largest shareholder with 18% of shares outstanding. In comparison, the second and third largest shareholders hold about 5.3% and 4.7% of the stock.

After doing some more digging, we found that the top 15 have the combined ownership of 51% in the company, suggesting that no single shareholder has significant control over the company.

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. As far as we can tell there isn't analyst coverage of the company, so it is probably flying under the radar.

Insider Ownership Of Jain Irrigation Systems

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. 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.

We can see that insiders own shares in Jain Irrigation Systems Limited. It has a market capitalization of just ₹49b, and insiders have ₹700m worth of shares, in their own names. Some would say this shows alignment of interests between shareholders and the board. But it might be worth checking if those insiders have been selling.

General Public Ownership

The general public-- including retail investors -- own 45% stake in the company, and hence can't easily be ignored. 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 Equity Ownership

With an ownership of 5.3%, private equity firms are in a position to play a role in shaping corporate strategy with a focus on value creation. Some might like this, because private equity are sometimes activists who hold management accountable. But other times, private equity is selling out, having taking the company public.

Private Company Ownership

Our data indicates that Private Companies hold 30%, 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

We can see that public companies hold 3.6% of the Jain Irrigation Systems shares on issue. It's hard to say for sure but this suggests they have entwined business interests. This might be a strategic stake, so it's worth watching this space for changes in ownership.

Next Steps:

It's always worth thinking about the different groups who own shares in a company. But to understand Jain Irrigation Systems better, we need to consider many other factors. Be aware that Jain Irrigation Systems is showing 2 warning signs in our investment analysis , and 1 of those is concerning...

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of interesting companies.

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.

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

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.