Private companies invested in Vardhman Textiles Limited (NSE:VTL) copped the brunt of last week's ₹8.9b market cap decline

Key Insights

• The considerable ownership by private companies in Vardhman Textiles indicates that they collectively have a greater say in management and business strategy
• The top 3 shareholders own 58% of the company
• Institutional ownership in Vardhman Textiles is 21%

To get a sense of who is truly in control of Vardhman Textiles Limited (NSE:VTL), it is important to understand the ownership structure of the business. The group holding the most number of shares in the company, around 34% to be precise, is private companies. Put another way, the group faces the maximum upside potential (or downside risk).

As a result, private companies as a group endured the highest losses last week after market cap fell by ₹8.9b.

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

See our latest analysis for Vardhman Textiles

What Does The Institutional Ownership Tell Us About Vardhman Textiles?

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 Vardhman Textiles does have institutional investors; and they hold a good portion of the company's stock. This can indicate that the company has a certain degree of credibility in the investment community. However, it is best to be wary of relying on the supposed validation that comes with institutional investors. They too, get it wrong sometimes. 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 Vardhman Textiles' 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 Vardhman Textiles. Vardhman Holdings Limited is currently the largest shareholder, with 29% of shares outstanding. In comparison, the second and third largest shareholders hold about 18% and 11% of the stock. In addition, we found that Shri Oswal, the CEO has 1.0% of the shares allocated to their name.

A more detailed study of the shareholder registry showed us that 3 of the top shareholders have a considerable amount of ownership in the company, via their 58% stake.

While it makes sense to study institutional ownership data for a company, it also makes sense to study analyst sentiments to know which way the wind is blowing. Quite a few analysts cover the stock, so you could look into forecast growth quite easily.

Insider Ownership Of Vardhman Textiles

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.

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 Vardhman Textiles Limited. It is a pretty big company, so it is generally a positive to see some potentially meaningful alignment. In this case, they own around ₹2.0b worth of shares (at current prices). It is good to see this level of investment by insiders. You can check here to see if those insiders have been buying recently.

General Public Ownership

With a 15% ownership, the general public, mostly comprising of individual investors, have some degree of sway over Vardhman Textiles. While this size of ownership may not be enough to sway a policy decision in their favour, they can still make a collective impact on company policies.

Private Company Ownership

We can see that Private Companies own 34%, of the shares on issue. 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.

Public Company Ownership

We can see that public companies hold 29% of the Vardhman Textiles shares on issue. It's hard to say for sure but this suggests they have entwined business interests. This might be a strategic stake, so it's worth watching this space for changes in ownership.

Next Steps:

I find it very interesting to look at who exactly owns a company. But to truly gain insight, we need to consider other information, too. Take risks for example - Vardhman Textiles has 2 warning signs we think you should be aware of.

If you would prefer discover what analysts are predicting in terms of future growth, do not miss this free report on analyst forecasts.

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.

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

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.