RITES Limited's (NSE:RITES) last week's 5.2% decline must have disappointed state or government who have a significant stake

Key Insights

• The considerable ownership by state or government in RITES indicates that they collectively have a greater say in management and business strategy
• India owns 72% of the company
• 11% of RITES is held by Institutions

A look at the shareholders of RITES Limited (NSE:RITES) can tell us which group is most powerful. The group holding the most number of shares in the company, around 72% to be precise, is state or government. That is, the group stands to benefit the most if the stock rises (or lose the most if there is a downturn).

And following last week's 5.2% decline in share price, state or government suffered the most losses.

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

See our latest analysis for RITES

What Does The Institutional Ownership Tell Us About RITES?

Institutions typically measure themselves against a benchmark when reporting to their own investors, so they often become more enthusiastic about a stock once it's included in a major index. We would expect most companies to have some institutions on the register, especially if they are growing.

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

RITES is not owned by hedge funds. Looking at our data, we can see that the largest shareholder is India with 72% of shares outstanding. With such a huge stake in the ownership, we infer that they have significant control of the future of the company. With 6.3% and 2.2% of the shares outstanding respectively, Life Insurance Corporation of India, Asset Management Arm and Nippon Life India Asset Management Limited are the second and third largest shareholders.

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. There is some analyst coverage of the stock, but it could still become more well known, with time.

Insider Ownership Of RITES

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.

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 cannot confirm that board members are holding shares personally. It is unusual not to have at least some personal holdings by board members, so our data might be flawed. A good next step would be to check how much the CEO is paid.

General Public Ownership

The general public-- including retail investors -- own 17% 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 RITES is showing 1 warning sign in our investment analysis , you should know about...

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. 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.