Private companies in RSWM Limited (NSE:RSWM) are its biggest bettors, and their bets paid off as stock gained 12% last week

Key Insights

• Significant control over RSWM by private companies implies that the general public has more power to influence management and governance-related decisions
• 52% of the business is held by the top 8 shareholders
• Ownership research, combined with past performance data can help provide a good understanding of opportunities in a stock

To get a sense of who is truly in control of RSWM Limited (NSE:RSWM), it is important to understand the ownership structure of the business. The group holding the most number of shares in the company, around 56% to be precise, is private companies. Put another way, the group faces the maximum upside potential (or downside risk).

As a result, private companies collectively scored the highest last week as the company hit ₹9.6b market cap following a 12% gain in the stock.

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

Check out our latest analysis for RSWM

What Does The Institutional Ownership Tell Us About RSWM?

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.

Institutions have a very small stake in RSWM. That indicates that the company is on the radar of some funds, but it isn't particularly popular with professional investors at the moment. So if the company itself can improve over time, we may well see more institutional buyers in the future. When multiple institutional investors want to buy shares, we often see a rising share price. The past revenue trajectory (shown below) can be an indication of future growth, but there are no guarantees.

RSWM is not owned by hedge funds. The company's largest shareholder is Micro Base Ltd, with ownership of 16%. For context, the second largest shareholder holds about 11% of the shares outstanding, followed by an ownership of 6.7% by the third-largest shareholder. Furthermore, CEO Riju Jhunjhunwala is the owner of 0.8% of the company's shares.

We also observed that the top 8 shareholders account for more than half of the share register, with a few smaller shareholders to balance the interests of the larger ones to a certain extent.

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. 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 RSWM

The definition of company insiders can be subjective and does vary between jurisdictions. Our data reflects individual insiders, capturing board members at the very least. 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.

We can see that insiders own shares in RSWM Limited. In their own names, insiders own ₹721m worth of stock in the ₹9.6b company. It is good to see some investment by insiders, but we usually like to see higher insider holdings. It might be worth checking if those insiders have been buying.

General Public Ownership

The general public, who are usually individual investors, hold a 32% stake in RSWM. 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 56%, of the RSWM stock. It might be worth looking deeper into this. If related parties, such as insiders, have an interest in one of these private companies, that should be disclosed in the annual report. Private companies may also have a strategic interest in the company.

Next Steps:

It's always worth thinking about the different groups who own shares in a company. But to understand RSWM 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 RSWM (at least 1 which doesn't sit too well with us) , and understanding them should be part of your investment process.

If you would prefer check out another company -- one with potentially superior financials -- then do not miss this free list of interesting companies, backed by strong financial data.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com