Lemon Tree Hotels Limited's (NSE:LEMONTREE) large institutional owners must be happy as stock continues to impress, up 4.5% over the past week

Key Insights

• Given the large stake in the stock by institutions, Lemon Tree Hotels' stock price might be vulnerable to their trading decisions
• A total of 5 investors have a majority stake in the company with 52% ownership
• Ownership research along with analyst forecasts data help provide a good understanding of opportunities in a stock

Every investor in Lemon Tree Hotels Limited (NSE:LEMONTREE) should be aware of the most powerful shareholder groups. We can see that institutions own the lion's share in the company with 46% ownership. That is, the group stands to benefit the most if the stock rises (or lose the most if there is a downturn).

And things are looking up for institutional investors after the company gained ₹4.7b in market cap last week. The gains from last week would have further boosted the one-year return to shareholders which currently stand at 79%.

Let's take a closer look to see what the different types of shareholders can tell us about Lemon Tree Hotels.

See 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.

As you can see, institutional investors have a fair amount of stake in Lemon Tree Hotels. 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 Lemon Tree Hotels' historic earnings and revenue below, but keep in mind there's always more to the story.

Hedge funds don't have many shares 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. There are plenty of analysts covering the stock, so it might be worth seeing what they are forecasting, too.

Insider Ownership Of Lemon Tree Hotels

The definition of company insiders can be subjective and does vary between jurisdictions. Our data reflects individual insiders, capturing board members at the very least. 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.

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.

Our most recent data indicates that insiders own less than 1% of Lemon Tree Hotels Limited. But they may have an indirect interest through a corporate structure that we haven't picked up on. Keep in mind that it's a big company, and the insiders own ₹404m worth of shares. The absolute value might be more important than the proportional share. It is always good to see at least some insider ownership, but it might be worth checking if those insiders have been selling.

General Public Ownership

The general public-- including retail investors -- own 27% stake in the company, and hence can't easily be ignored. 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 27%, 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:

While it is well worth considering the different groups that own a company, there are other factors that are even more important. Take risks for example - Lemon Tree Hotels has 1 warning sign we think you should be aware of.

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. 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.