Tushaar Gautam Sheela Foam Limited's (NSE:SFL) CEO is the most bullish insider, and their stock value gained 7.4%last week

Key Insights

• Insiders appear to have a vested interest in Sheela Foam's growth, as seen by their sizeable ownership
• The top 3 shareholders own 55% of the company
• Institutions own 24% of Sheela Foam

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To get a sense of who is truly in control of Sheela Foam Limited (NSE:SFL), it is important to understand the ownership structure of the business. The group holding the most number of shares in the company, around 45% to be precise, is individual insiders. In other words, the group stands to gain the most (or lose the most) from their investment into the company.

As a result, insiders were the biggest beneficiaries of last week’s 7.4% gain.

In the chart below, we zoom in on the different ownership groups of Sheela Foam.

See our latest analysis for Sheela Foam

What Does The Institutional Ownership Tell Us About Sheela Foam?

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

We note that hedge funds don't have a meaningful investment in Sheela Foam. The company's CEO Tushaar Gautam is the largest shareholder with 31% of shares outstanding. For context, the second largest shareholder holds about 12% of the shares outstanding, followed by an ownership of 12% by the third-largest shareholder. Interestingly, the third-largest shareholder, Rahul Gautam is also a Chairman of the Board, again, indicating strong insider ownership amongst the company's top shareholders.

After doing some more digging, we found that the top 3 shareholders collectively control more than half of the company's shares, implying that they have considerable power to influence the company's decisions.

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. While there is some analyst coverage, the company is probably not widely covered. So it could gain more attention, down the track.

Insider Ownership Of Sheela Foam

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.

Most consider insider ownership a positive because it can indicate the board is well aligned with other shareholders. However, on some occasions too much power is concentrated within this group.

It seems insiders own a significant proportion of Sheela Foam Limited. Insiders own ₹36b worth of shares in the ₹79b company. This may suggest that the founders still own a lot of shares. You can click here to see if they have been buying or selling.

General Public Ownership

The general public-- including retail investors -- own 18% 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.

Private Company Ownership

Our data indicates that Private Companies hold 12%, of the company's shares. 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 Sheela Foam better, we need to consider many other factors. For instance, we've identified 2 warning signs for Sheela Foam that you should be aware of.

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.