State or government in MSTC Limited (NSE:MSTCLTD) are its biggest bettors, and their bets paid off as stock gained 11% last week

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. With 65% stake, state or government possess the maximum shares in the company. 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 11% gain.

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

View 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 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 MSTC's historic earnings and revenue below, but keep in mind there's always more to the story.

Hedge funds don't have many shares in MSTC. Our data shows that India is the largest shareholder with 65% of shares outstanding. This essentially means that they have extensive influence, if not outright control, over the future of the corporation. With 1.8% and 1.1% of the shares outstanding respectively, Jupiter Fund Management Plc and ValueQuest Capital LLP are the second and third largest shareholders.

While it makes sense to study institutional ownership data for a company, it also makes sense to study analyst sentiments to know which way the wind is blowing. We're not picking up on any analyst coverage of the stock at the moment, so the company is unlikely to be widely held.

Insider Ownership Of MSTC

While the precise definition of an insider can be subjective, almost everyone considers board members to be insiders. Company management run the business, but the CEO will answer to the board, even if he or she is a member of it.

I generally consider insider ownership to be a good thing. However, on some occasions it makes it more difficult for other shareholders to hold the board accountable for decisions.

Our most recent data indicates that insiders own less than 1% of MSTC Limited. It has a market capitalization of just ₹39b, and the board has only ₹349m worth of shares in their own names. We generally like to see a board more invested. However it might be worth checking if those insiders have been buying.

General Public Ownership

The general public-- including retail investors -- own 27% 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.

Next Steps:

While it is well worth considering the different groups that own a company, there are other factors that are even more important. Be aware that MSTC is showing 2 warning signs in our investment analysis , you should know about...

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.