After losing 13% in the past year, Kirloskar Oil Engines Limited (NSE:KIRLOSENG) institutional owners must be relieved by the recent gain

Key Insights

• Given the large stake in the stock by institutions, Kirloskar Oil Engines' stock price might be vulnerable to their trading decisions
• The top 6 shareholders own 52% of the company
• Insider ownership in Kirloskar Oil Engines is 13%

Every investor in Kirloskar Oil Engines Limited (NSE:KIRLOSENG) should be aware of the most powerful shareholder groups. We can see that institutions own the lion's share in the company with 40% ownership. In other words, the group stands to gain the most (or lose the most) from their investment into the company.

After a year of 13% losses, last week’s 14% gain would be welcomed by institutional investors as a possible sign that returns might start trending higher.

In the chart below, we zoom in on the different ownership groups of Kirloskar Oil Engines.

See our latest analysis for Kirloskar Oil Engines

What Does The Institutional Ownership Tell Us About Kirloskar Oil Engines?

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.

Kirloskar Oil Engines 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. 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 Kirloskar Oil Engines' historic earnings and revenue below, but keep in mind there's always more to the story.

We note that hedge funds don't have a meaningful investment in Kirloskar Oil Engines. C S Kirloskar Testamentary trust is currently the company's largest shareholder with 22% of shares outstanding. DSP Asset Managers Pvt. Ltd is the second largest shareholder owning 7.1% of common stock, and DSP BlackRock Investment Managers Pvt. Ltd. holds about 6.3% of the company stock.

We also observed that the top 6 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 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. 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 Kirloskar Oil Engines

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.

Insider ownership is positive when it signals leadership are thinking like the true owners of the company. However, high insider ownership can also give immense power to a small group within the company. This can be negative in some circumstances.

Our most recent data indicates that insiders own a reasonable proportion of Kirloskar Oil Engines Limited. It is very interesting to see that insiders have a meaningful ₹14b stake in this ₹108b 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, who are usually individual investors, hold a 17% stake in Kirloskar Oil Engines. 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 22%, of the shares on issue. 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

It appears to us that public companies own 5.7% of Kirloskar Oil Engines. We can't be certain but it is quite possible this is a strategic stake. The businesses may be similar, or work together.

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. Take risks for example - Kirloskar Oil Engines has 2 warning signs (and 1 which makes us a bit uncomfortable) we think you should know about.

But ultimately it is the future, not the past, that will determine how well the owners of this business will do. Therefore we think it advisable to take a look at this free report showing whether analysts are predicting a brighter 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.