Could The Kirloskar Electric Company Limited (NSE:KECL) Ownership Structure Tell Us Something Useful?

By
Simply Wall St
Published
February 27, 2020
NSEI:KECL

A look at the shareholders of Kirloskar Electric Company Limited (NSE:KECL) can tell us which group is most powerful. Institutions will often hold stock in bigger companies, and we expect to see insiders owning a noticeable percentage of the smaller ones. I quite like to see at least a little bit of insider ownership. As Charlie Munger said 'Show me the incentive and I will show you the outcome.

Kirloskar Electric is not a large company by global standards. It has a market capitalization of ₹877m, which means it wouldn't have the attention of many institutional investors. In the chart below, we can see that institutional investors have bought into the company. Let's delve deeper into each type of owner, to discover more about Kirloskar Electric.

View our latest analysis for Kirloskar Electric

NSEI:KECL Ownership Summary, February 28th 2020
NSEI:KECL Ownership Summary, February 28th 2020

What Does The Institutional Ownership Tell Us About Kirloskar Electric?

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 own 5.8% of Kirloskar Electric. 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 Kirloskar Electric's earnings history, below. Of course, the future is what really matters.

NSEI:KECL Income Statement, February 28th 2020
NSEI:KECL Income Statement, February 28th 2020

Kirloskar Electric is not owned by hedge funds. Our data suggests that Vijay Kirloskar, who is also the company's Top Key Executive, holds the most number of shares at 18%. When an insider holds a sizeable amount of a company's stock, investors consider it as a positive sign because it suggests that insiders are willing to have their wealth tied up in the future of the company. Abhiman Trading Company Pvt Ltd is the second largest shareholder with 7.9% of common stock, followed by Vijayjyothi Investment & Agencies Pvt Ltd, holding 6.4% of the stock.

On studying the facts and figures more closely, we found that 8 of the top shareholders account for 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. As far I can tell there isn't analyst coverage of the company, so it is probably flying under the radar.

Insider Ownership Of Kirloskar Electric

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.

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.

It seems insiders own a significant proportion of Kirloskar Electric Company Limited. Insiders have a ₹166m stake in this ₹877m business. I would say this shows alignment with shareholders, but it is worth noting that the company is still quite small; some insiders may have founded the business. You can click here to see if those insiders have been buying or selling.

General Public Ownership

The general public, with a 38% stake in the company, will not 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 34%, 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.

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. Be aware that Kirloskar Electric is showing 4 warning signs in our investment analysis , and 2 of those shouldn't be ignored...

Of course this may not be the best stock to buy. So take a peek at this free 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.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.

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