Is L.G. Balakrishnan & Bros Limited (NSE:LGBBROSLTD) Popular Amongst Insiders?

By
Simply Wall St
Published
March 19, 2021
NSEI:LGBBROSLTD
Source: Shutterstock

The big shareholder groups in L.G. Balakrishnan & Bros Limited (NSE:LGBBROSLTD) have power over the company. Institutions often own shares in more established companies, while it's not unusual to see insiders own a fair bit of smaller companies. I generally like to see some degree of insider ownership, even if only a little. As Nassim Nicholas Taleb said, 'Don’t tell me what you think, tell me what you have in your portfolio.

L.G. Balakrishnan & Bros is a smaller company with a market capitalization of ₹9.8b, so it may still be flying under the radar of many institutional investors. Our analysis of the ownership of the company, below, shows that institutions own shares in the company. Let's delve deeper into each type of owner, to discover more about L.G. Balakrishnan & Bros.

Check out our latest analysis for L.G. Balakrishnan & Bros

ownership-breakdown
NSEI:LGBBROSLTD Ownership Breakdown March 20th 2021

What Does The Institutional Ownership Tell Us About L.G. Balakrishnan & Bros?

Many institutions measure their performance against an index that approximates the local market. So they usually pay more attention to companies that are included in major indices.

As you can see, institutional investors have a fair amount of stake in L.G. Balakrishnan & Bros. 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 L.G. Balakrishnan & Bros' historic earnings and revenue below, but keep in mind there's always more to the story.

earnings-and-revenue-growth
NSEI:LGBBROSLTD Earnings and Revenue Growth March 20th 2021

L.G. Balakrishnan & Bros is not owned by hedge funds. With a 11% stake, CEO Balakrishnan Vijayakumar is the largest shareholder. For context, the second largest shareholder holds about 8.7% of the shares outstanding, followed by an ownership of 6.9% by the third-largest shareholder. Interestingly, the third-largest shareholder, Rajsri Vijayakumar is also a Member of the Board of Directors, again, indicating strong insider ownership amongst the company's top shareholders.

On further inspection, we found that more than half the company's shares are owned by the top 7 shareholders, suggesting that the interests of the larger shareholders are balanced out to an extent by the smaller ones.

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. While there is some analyst coverage, the company is probably not widely covered. So it could gain more attention, down the track.

Insider Ownership Of L.G. Balakrishnan & Bros

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.

It seems insiders own a significant proportion of L.G. Balakrishnan & Bros Limited. Insiders own ₹2.9b worth of shares in the ₹9.8b company. It is great to see insiders so invested in the business. It might be worth checking if those insiders have been buying recently.

General Public Ownership

The general public holds a 35% stake in L.G. Balakrishnan & Bros. 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 15%, of the shares on issue. It's hard to draw any conclusions from this fact alone, so its worth looking into who owns those private companies. Sometimes insiders or other related parties have an interest in shares in a public company through a separate private company.

Next Steps:

It's always worth thinking about the different groups who own shares in a company. But to understand L.G. Balakrishnan & Bros better, we need to consider many other factors. For example, we've discovered 1 warning sign for L.G. Balakrishnan & Bros that you should be aware of before investing here.

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. 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.
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