MSTC Limited's (NSE:MSTCLTD) market cap surged ₹3.2b last week, state or government who have a lot riding on the company were rewarded

Key Insights

• Significant control over MSTC by state or government implies that the general public has more power to influence management and governance-related decisions
• The largest shareholder of the company is India with a 65% stake
• Using data from company's past performance alongside ownership research, one can better assess the future performance of a company

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To get a sense of who is truly in control of MSTC Limited (NSE:MSTCLTD), it is important to understand the ownership structure of the business. And the group that holds the biggest piece of the pie are state or government with 65% ownership. That is, the group stands to benefit the most if the stock rises (or lose the most if there is a downturn).

As a result, state or government were the biggest beneficiaries of last week’s 10% gain.

Let's take a closer look to see what the different types of shareholders can tell us about MSTC.

Check out our latest analysis for MSTC

What Does The Institutional Ownership Tell Us About MSTC?

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.

MSTC already has institutions on the share registry. Indeed, they own a respectable stake in the company. This implies the analysts working for those institutions have looked at the stock and they like it. But just like anyone else, they could be wrong. 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 MSTC, (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 MSTC. The company's largest shareholder is India, with ownership of 65%. This essentially means that they have extensive influence, if not outright control, over the future of the corporation. In comparison, the second and third largest shareholders hold about 1.8% and 1.1% of the stock.

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. Our information suggests that there isn't any analyst coverage of the stock, so it is probably little known.

Insider Ownership Of MSTC

The definition of an insider can differ slightly between different countries, but members of the board of directors always count. Management ultimately answers to the board. However, it is not uncommon for managers to be executive board members, especially if they are a founder or the CEO.

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 data suggests that insiders own under 1% of MSTC Limited in their own names. It seems the board members have no more than ₹307m worth of shares in the ₹34b company. Many tend to prefer to see a board with bigger shareholdings. A good next step might be to take a look at this free summary of insider buying and selling.

General Public Ownership

With a 27% ownership, the general public, mostly comprising of individual investors, have some degree of sway over MSTC. 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.

Next Steps:

It's always worth thinking about the different groups who own shares in a company. But to understand MSTC better, we need to consider many other factors. Take risks for example - MSTC has 1 warning sign we think you should be aware of.

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.

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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.