Positive week for Lemon Tree Hotels Limited (NSE:LEMONTREE) institutional investors who lost 2.5% over the past year

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
• Analyst forecasts along with ownership data serve to give a strong idea about prospects for a business

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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 47% ownership. Put another way, the group faces the maximum upside potential (or downside risk).

After a year of 2.5% losses, last week’s 5.2% gain would be welcomed by institutional investors as a possible sign that returns might start trending higher.

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

View our latest analysis for Lemon Tree Hotels

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

Institutions typically measure themselves against a benchmark when reporting to their own investors, so they often become more enthusiastic about a stock once it's included in a major index. We would expect most companies to have some institutions on the register, especially if they are growing.

We can see that Lemon Tree Hotels 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. 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.

Lemon Tree Hotels is not owned by hedge funds. The company's largest shareholder is Spank Management Services Private Limited, with ownership of 21%. Stichting Pensioenfonds ABP is the second largest shareholder owning 15% of common stock, and Franklin Resources, Inc. holds about 7.2% 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 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 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 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 information suggests that Lemon Tree Hotels Limited insiders own under 1% of the company. 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 ₹522m worth of shares. Arguably, recent buying and selling is just as important to consider. You can click here to see if insiders have been buying or selling.

General Public Ownership

The general public, who are usually individual investors, hold a 26% 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 26%, of the Lemon Tree Hotels stock. 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.

Next Steps:

While it is well worth considering the different groups that own a company, there are other factors that are even more important. To that end, you should be aware of the 1 warning sign we've spotted with Lemon Tree Hotels .

Ultimately the future is most important. You can access this free report on analyst forecasts for the company.

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.