In the wake of Kirloskar Pneumatic Company Limited's (NSE:KIRLPNU) latest ₹4.7b market cap drop, institutional owners may be forced to take severe actions

Key Insights

• Significantly high institutional ownership implies Kirloskar Pneumatic's stock price is sensitive to their trading actions
• The top 5 shareholders own 51% of the company
• Insiders own 30% of Kirloskar Pneumatic

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Every investor in Kirloskar Pneumatic Company Limited (NSE:KIRLPNU) should be aware of the most powerful shareholder groups. And the group that holds the biggest piece of the pie are institutions with 32% ownership. That is, the group stands to benefit the most if the stock rises (or lose the most if there is a downturn).

And institutional investors endured the highest losses after the company's share price fell by 6.7% last week. This set of investors may especially be concerned about the current loss, which adds to a one-year loss of 41% for shareholders. Also referred to as "smart money", institutions have a lot of sway over how a stock's price moves. Hence, if weakness in Kirloskar Pneumatic's share price continues, institutional investors may feel compelled to sell the stock, which might not be ideal for individual investors.

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

View our latest analysis for Kirloskar Pneumatic

What Does The Institutional Ownership Tell Us About Kirloskar Pneumatic?

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.

We can see that Kirloskar Pneumatic does have institutional investors; and they hold a good portion of the company's stock. 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. 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 Kirloskar Pneumatic, (below). Of course, keep in mind that there are other factors to consider, too.

We note that hedge funds don't have a meaningful investment in Kirloskar Pneumatic. Because actions speak louder than words, we consider it a good sign when insiders own a significant stake in a company. In Kirloskar Pneumatic's case, its Top Key Executive, Rahul Kirloskar, is the largest shareholder, holding 15% of shares outstanding. In comparison, the second and third largest shareholders hold about 13% and 9.9% of the stock.

On looking further, we found that 51% of the shares are owned by the top 5 shareholders. In other words, these shareholders have a meaningful say in the decisions of the company.

Researching institutional ownership is a good way to gauge and filter a stock's expected performance. The same can be achieved by studying analyst sentiments. Quite a few analysts cover the stock, so you could look into forecast growth quite easily.

Insider Ownership Of Kirloskar Pneumatic

The definition of an insider can differ slightly between different countries, but members of the board of directors always count. Company management run the business, but the CEO will answer to the board, even if he or she is a member of it.

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.

Our most recent data indicates that insiders own a reasonable proportion of Kirloskar Pneumatic Company Limited. Insiders have a ₹20b stake in this ₹65b business. This may suggest that the founders still own a lot of shares. You can click here to see if they have been buying or selling.

General Public Ownership

The general public-- including retail investors -- own 25% stake in the company, and hence can't easily be ignored. This size of ownership, while considerable, may not be enough to change company policy if the decision is not in sync with other large shareholders.

Public Company Ownership

Public companies currently own 9.9% of Kirloskar Pneumatic stock. 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. Be aware that Kirloskar Pneumatic is showing 1 warning sign in our investment analysis , you should know about...

If you would prefer discover what analysts are predicting in terms of future growth, do not miss this free report on analyst forecasts.

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.