Institutional investors in Lemon Tree Hotels Limited (NSE:LEMONTREE) lost 5.8% last week but have reaped the benefits of longer-term growth

Key Insights

• Significantly high institutional ownership implies Lemon Tree Hotels' stock price is sensitive to their trading actions
• The top 5 shareholders own 53% of the company
• Using data from analyst forecasts alongside ownership research, one can better assess the future performance of a company

If you want to know who really controls Lemon Tree Hotels Limited (NSE:LEMONTREE), then you'll have to look at the makeup of its share registry. And the group that holds the biggest piece of the pie are institutions with 49% ownership. That is, the group stands to benefit the most if the stock rises (or lose the most if there is a downturn).

No shareholder likes losing money on their investments, especially institutional investors who saw their holdings drop 5.8% in value last week. Still, the 46% one-year gains may have helped mitigate their overall losses. But they would probably be wary of future losses.

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

Check out our latest analysis for Lemon Tree Hotels

What Does The Institutional Ownership Tell Us About Lemon Tree Hotels?

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 Lemon Tree Hotels does have institutional investors; and they hold a good portion of the company's stock. 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. 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 Lemon Tree Hotels, (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 Lemon Tree Hotels. Spank Management Services Private Limited is currently the largest shareholder, with 22% of shares outstanding. Stichting Pensioenfonds ABP is the second largest shareholder owning 15% of common stock, and SBI Funds Management Limited holds about 7.4% of the company stock.

To make our study more interesting, we found that the top 5 shareholders control more than half of the company which implies that this group has considerable sway over the company's decision-making.

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 Lemon Tree Hotels

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.

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.

Our data suggests that insiders own under 1% of Lemon Tree Hotels Limited in their own names. But they may have an indirect interest through a corporate structure that we haven't picked up on. It's a big company, so even a small proportional interest can create alignment between the board and shareholders. In this case insiders own ₹400m worth of shares. It is good to see board members owning shares, but it might be worth checking if those insiders have been buying.

General Public Ownership

The general public, who are usually individual investors, hold a 24% stake in Lemon Tree Hotels. 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

It seems that Private Companies own 27%, of the Lemon Tree Hotels 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:

While it is well worth considering the different groups that own a company, there are other factors that are even more important. Be aware that Lemon Tree Hotels is showing 1 warning sign in our investment analysis , you should know about...

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.

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