In this analysis, my focus will be on developing a perspective on Nandani Creation Limited’s (NSEI:NANDANI) latest ownership structure, a less discussed, but important factor. A company’s ownership structure is often linked to its share performance in both the long- and short-term. If an activist institution invests the same amount of capital in a stock as a passive long-term pension fund, the implications are potentially different for key corporate financing decisions such as the use of excess cash or the source of financing. While these are more of a long-term investor’s concern, short-term investors may find the impact of institutional trading overwhelming enough to lose out on what could be a potential opportunity. Therefore, it is beneficial for us to examine NANDANI’s ownership structure in more detail.View our latest analysis for Nandani Creation
Institutional OwnershipDue to the big order sizes of institutional investors, a company’s shares can experience large, one-sided momentum, driven by high volume of shares removed from, or injected into, the market. A low institutional ownership of 4.54% puts NANDANI on a list of companies that are not likely exposed to spikes in volatility resulting from institutional trading.
Insider OwnershipI find insiders are another important group of stakeholders, who are directly involved in making key decisions related to the use of capital. In essence, insider ownership is more about the alignment of shareholders’ interests with the management. A major group of owners of NANDANI is individual insiders, sitting with a hefty 54.15% stake in the company. Broadly, insider ownership of this level has been found to negatively affect companies with consistently low PE ratio (underperforming). And a positive impact has been seen on companies with a high PE ratio (outperforming). Another aspect of insider ownership is to learn about their recent transactions. While insider buying is possibly a sign of a positive outlook for the company, selling doesn’t necessarily indicate a negative outlook as they may be selling to meet personal financial needs.
General Public OwnershipThe general public holds a substantial 41.30% stake in NANDANI, making it a highly popular stock among retail investors. With this size of ownership, retail investors can collectively play a role in major company policies that affect shareholders returns, including executive remuneration and the appointment of directors. They can also exercise the power to decline an acquisition or merger that may not improve profitability.
With a low level of institutional ownership, investors in NANDANI need not worry about non-fundamental factors such as ownership structure causing large impact on stock prices. However, ownership structure should not be the only focus of your research when constructing an investment thesis around NANDANI. Instead, you should be evaluating company-specific factors such as the intrinsic valuation, which is a key driver of Nandani Creation’s share price. I urge you to complete your research by taking a look at the areas below. Just a heads up – to access some parts of the Simply Wall St research tool you might be asked to create a free account, but it takes just one click and the information they provide is definitely worth it in my opinion.
- 1. Financial Health: Is NANDANI’s operations financially sustainable? Balance sheets can be hard to analyze, which is why Simply Wall St does it for us. Check out important financial health checks here.
- 2. Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore a free list of these great stocks here.