Institutional owners may ignore Zomato Limited's (NSE:ZOMATO) recent ₹173b market cap decline as longer-term profits stay in the green

Key Insights

• Institutions' substantial holdings in Zomato implies that they have significant influence over the company's share price
• 51% of the business is held by the top 22 shareholders
• Analyst forecasts along with ownership data serve to give a strong idea about prospects for a business

A look at the shareholders of Zomato Limited (NSE:ZOMATO) can tell us which group is most powerful. The group holding the most number of shares in the company, around 48% to be precise, is institutions. In other words, the group stands to gain the most (or lose the most) from their investment into the company.

Losing money on investments is something no shareholder enjoys, least of all institutional investors who saw their holdings value drop by 8.2% last week. Still, the 65% one-year gains may have helped mitigate their overall losses. They should, however, be mindful of further losses in the future.

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

See our latest analysis for Zomato

What Does The Institutional Ownership Tell Us About Zomato?

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 Zomato 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. 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 Zomato, (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 Zomato. Our data shows that Info Edge (India) Limited is the largest shareholder with 13% of shares outstanding. The second and third largest shareholders are Temasek Holdings (Private) Limited and Deepinder Goyal, with an equal amount of shares to their name at 4.1%. Deepinder Goyal, who is the third-largest shareholder, also happens to hold the title of Member of the Board of Directors.

After doing some more digging, we found that the top 22 have the combined ownership of 51% in the company, suggesting that no single shareholder has significant control over the company.

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 Zomato

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.

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 most recent data indicates that insiders own some shares in Zomato Limited. The insiders have a meaningful stake worth ₹87b. Most would say this shows a good alignment of interests between shareholders and the board. Still, it might be worth checking if those insiders have been selling.

General Public Ownership

With a 29% ownership, the general public, mostly comprising of individual investors, have some degree of sway over Zomato. 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

Our data indicates that Private Companies hold 3.6%, 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.

Public Company Ownership

It appears to us that public companies own 13% of Zomato. 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:

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 - Zomato has 1 warning sign we think you should be aware of.

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.