Stock Analysis

Is EIH Limited (NSE:EIHOTEL) Popular Amongst Institutions?

NSEI:EIHOTEL
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If you want to know who really controls EIH Limited (NSE:EIHOTEL), then you'll have to look at the makeup of its share registry. Institutions will often hold stock in bigger companies, and we expect to see insiders owning a noticeable percentage of the smaller ones. Companies that have been privatized tend to have low insider ownership.

EIH has a market capitalization of ₹63b, so we would expect some institutional investors to have noticed the stock. Our analysis of the ownership of the company, below, shows that institutions own shares in the company. Let's take a closer look to see what the different types of shareholders can tell us about EIH.

See our latest analysis for EIH

ownership-breakdown
NSEI:EIHOTEL Ownership Breakdown December 10th 2020

What Does The Institutional Ownership Tell Us About EIH?

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.

We can see that EIH does have institutional investors; and they hold a good portion of the company's stock. This implies the analysts working for those institutions have looked at the stock and they like it. But just like anyone else, they could be wrong. 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 EIH's historic earnings and revenue below, but keep in mind there's always more to the story.

earnings-and-revenue-growth
NSEI:EIHOTEL Earnings and Revenue Growth December 10th 2020

EIH is not owned by hedge funds. Reliance Industries Limited is currently the largest shareholder, with 17% of shares outstanding. For context, the second largest shareholder holds about 15% of the shares outstanding, followed by an ownership of 14% by the third-largest shareholder. Furthermore, CEO Vikramjit Oberoi is the owner of 0.9% of the company's shares.

To make our study more interesting, we found that the top 4 shareholders control more than half of the company which implies that this group has considerable sway over the company's decision-making.

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. There is some analyst coverage of the stock, but it could still become more well known, with time.

Insider Ownership Of EIH

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.

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.

I can report that insiders do own shares in EIH Limited. It has a market capitalization of just ₹63b, and insiders have ₹3.2b worth of shares, in their own names. Some would say this shows alignment of interests between shareholders and the board. But it might be worth checking if those insiders have been selling.

General Public Ownership

The general public holds a 16% stake in EIH. 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

We can see that Private Companies own 31%, 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

Public companies currently own 31% of EIH stock. We can't be certain but it is quite possible this is a strategic stake. The businesses may be similar, or work together.

Next Steps:

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. Consider for instance, the ever-present spectre of investment risk. We've identified 3 warning signs with EIH (at least 1 which can't be ignored) , and understanding them should be part of your investment process.

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.

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This article by Simply Wall St is general in nature. 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.
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