EIH Limited's (NSE:EIHOTEL) biggest owners are public companies who got richer after stock soared 4.6% last week
- The considerable ownership by public companies in EIH indicates that they collectively have a greater say in management and business strategy
- 50% of the business is held by the top 3 shareholders
- Institutions own 21% of EIH
To get a sense of who is truly in control of EIH Limited (NSE:EIHOTEL), it is important to understand the ownership structure of the business. The group holding the most number of shares in the company, around 33% to be precise, is public companies. In other words, the group stands to gain the most (or lose the most) from their investment into the company.
Clearly, public companies benefitted the most after the company's market cap rose by ₹4.6b last week.
Let's take a closer look to see what the different types of shareholders can tell us about EIH.
Check out our latest analysis for EIH
What Does The Institutional Ownership Tell Us About EIH?
Institutional investors commonly compare their own returns to the returns of a commonly followed index. So they generally do consider buying larger companies that are included in the relevant benchmark index.
We can see that EIH 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. 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 EIH, (below). Of course, keep in mind that there are other factors to consider, too.
We note that hedge funds don't have a meaningful investment in EIH. The company's largest shareholder is Reliance Industries Limited, with ownership of 19%. In comparison, the second and third largest shareholders hold about 18% and 14% of the stock. In addition, we found that Vikramjit Oberoi, the CEO has 0.9% 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 50% stake.
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. 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 EIH
The definition of an insider can differ slightly between different countries, but members of the board of directors always count. 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.
Shareholders would probably be interested to learn that insiders own shares in EIH 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 ₹5.3b worth of shares (at current prices). Most would say this shows alignment of interests between shareholders and the board. Still, it might be worth checking if those insiders have been selling.
General Public Ownership
The general public, who are usually individual investors, hold a 11% stake in EIH. 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
Our data indicates that Private Companies hold 31%, of the company's shares. It's hard to draw any conclusions from this fact alone, so its worth looking into who owns those private companies. Sometimes insiders or other related parties have an interest in shares in a public company through a separate private company.
Public Company Ownership
We can see that public companies hold 33% of the EIH 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.
It's always worth thinking about the different groups who own shares in a company. But to understand EIH better, we need to consider many other factors.
Many find it useful to take an in depth look at how a company has performed in the past. You can access this detailed graph of past earnings, revenue and cash flow.
If you are like me, you may want to think about whether this company will grow or shrink. Luckily, you can check this free report showing analyst forecasts for its 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.
Valuation is complex, but we're helping make it simple.
Find out whether EIH is potentially over or undervalued by checking out our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.View the Free Analysis
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.
EIH Limited engages in the ownership, development, management, and operation of hotels and cruisers in India and internationally.
Flawless balance sheet with acceptable track record.