Institutional owners may ignore TD Power Systems Limited's (NSE:TDPOWERSYS) recent ₹4.6b market cap decline as longer-term profits stay in the green

Key Insights

• Given the large stake in the stock by institutions, TD Power Systems' stock price might be vulnerable to their trading decisions
• The top 6 shareholders own 51% of the company
• Insiders have been selling lately

To get a sense of who is truly in control of TD Power Systems Limited (NSE:TDPOWERSYS), it is important to understand the ownership structure of the business. And the group that holds the biggest piece of the pie are institutions with 49% ownership. Put another way, the group faces the maximum upside potential (or downside risk).

No shareholder likes losing money on their investments, especially institutional investors who saw their holdings drop 6.8% in value last week. However, the 57% one-year return to shareholders may have helped lessen their pain. But they would probably be wary of future losses.

Let's delve deeper into each type of owner of TD Power Systems, beginning with the chart below.

See our latest analysis for TD Power Systems

What Does The Institutional Ownership Tell Us About TD Power Systems?

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 TD Power Systems. 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. If multiple institutions change their view on a stock at the same time, you could see the share price drop fast. It's therefore worth looking at TD Power Systems' earnings history below. Of course, the future is what really matters.

We note that hedge funds don't have a meaningful investment in TD Power Systems. Saphire Finman Services Private Limited is currently the largest shareholder, with 15% of shares outstanding. In comparison, the second and third largest shareholders hold about 11% and 8.0% of the stock. Nikhil Kumar, who is the second-largest shareholder, also happens to hold the title of Chief Executive Officer.

On further inspection, we found that more than half the company's shares are owned by the top 6 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. 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 TD Power Systems

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.

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 a reasonable proportion of TD Power Systems Limited. Insiders own ₹14b worth of shares in the ₹65b 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-- including retail investors -- own 14% stake in the company, and hence can't easily be ignored. While this group can't necessarily call the shots, it can certainly have a real influence on how the company is run.

Private Company Ownership

It seems that Private Companies own 15%, of the TD Power Systems stock. 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.

Next Steps:

It's always worth thinking about the different groups who own shares in a company. But to understand TD Power Systems better, we need to consider many other factors. Consider for instance, the ever-present spectre of investment risk. We've identified 2 warning signs with TD Power Systems , and understanding them should be part of your investment process.

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this 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.