Lemon Tree Hotels Limited's (NSE:LEMONTREE) one-year returns climbed after last week's 6.8% gain, institutional investors must be happy

Key Insights

• Institutions' substantial holdings in Lemon Tree Hotels implies that they have significant influence over the company's share price
• 51% of the business is held by the top 4 shareholders
• Analyst forecasts along with ownership data serve to give a strong idea about prospects for a business

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To get a sense of who is truly in control of Lemon Tree Hotels Limited (NSE:LEMONTREE), it is important to understand the ownership structure of the business. We can see that institutions own the lion's share in the company 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).

And things are looking up for institutional investors after the company gained ₹6.8b in market cap last week. The one-year return on investment is currently 3.7% and last week's gain would have been more than welcomed.

In the chart below, we zoom in on the different ownership groups of Lemon Tree Hotels.

View 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. If multiple institutions change their view on a stock at the same time, you could see the share price drop fast. It's therefore worth looking at Lemon Tree Hotels' earnings history below. Of course, the future is what really matters.

Lemon Tree Hotels is not owned by hedge funds. Spank Management Services Private Limited is currently the company's largest shareholder with 22% of shares outstanding. For context, the second largest shareholder holds about 15% of the shares outstanding, followed by an ownership of 7.2% by the third-largest shareholder.

Our research also brought to light the fact that roughly 51% of the company is controlled by the top 4 shareholders suggesting that these owners wield significant influence on the business.

Researching institutional ownership is a good way to gauge and filter a stock's expected performance. The same can be achieved by studying analyst sentiments. 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. 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. We do note, however, it is possible insiders have an indirect interest through a private company or other corporate structure. It is a pretty big company, so it would be possible for board members to own a meaningful interest in the company, without owning much of a proportional interest. In this case, they own around ₹478m worth of shares (at current prices). 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 24% stake in the company, and hence can't easily be ignored. While this group can't necessarily call the shots, it can certainly have a real influence on how the company is run.

Private Company Ownership

We can see that Private Companies own 27%, of the shares on issue. 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:

It's always worth thinking about the different groups who own shares in a company. But to understand Lemon Tree Hotels better, we need to consider many other factors. To that end, you should be aware of the 1 warning sign we've spotted with Lemon Tree Hotels .

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.

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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.