The big shareholder groups in CARE Ratings Limited (NSE:CARERATING) have power over the company. Institutions often own shares in more established companies, while it's not unusual to see insiders own a fair bit of smaller companies. Companies that have been privatized tend to have low insider ownership.
CARE Ratings is a smaller company with a market capitalization of ₹16b, so it may still be flying under the radar of many institutional investors. In the chart below, we can see that institutions are noticeable on the share registry. Let's take a closer look to see what the different types of shareholders can tell us about CARE Ratings.
What Does The Institutional Ownership Tell Us About CARE Ratings?
Many institutions measure their performance against an index that approximates the local market. So they usually pay more attention to companies that are included in major indices.
As you can see, institutional investors have a fair amount of stake in CARE Ratings. This implies the analysts working for those institutions have looked at the stock and they like it. But just like anyone else, they could be wrong. 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 CARE Ratings' historic earnings and revenue below, but keep in mind there's always more to the story.
Since institutional investors own more than half the issued stock, the board will likely have to pay attention to their preferences. Hedge funds don't have many shares in CARE Ratings. Looking at our data, we can see that the largest shareholder is Life Insurance Corporation of India, Asset Management Arm with 9.9% of shares outstanding. In comparison, the second and third largest shareholders hold about 8.9% and 4.6% of the stock.
A closer look at our ownership figures suggests that the top 11 shareholders have a combined ownership of 51% implying that no single shareholder has a majority.
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 is some analyst coverage of the stock, but it could still become more well known, with time.
Insider Ownership Of CARE Ratings
The definition of an insider can differ slightly between different countries, but members of the board of directors always count. The company management answer to the board and the latter should represent the interests of shareholders. Notably, sometimes top-level managers are on the board themselves.
Most consider insider ownership a positive because it can indicate the board is well aligned with other shareholders. However, on some occasions too much power is concentrated within this group.
Our data suggests that insiders own under 1% of CARE Ratings 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 has a market capitalization of just ₹16b, and the board has only ₹66m worth of shares in their own names. Many investors in smaller companies prefer to see the board more heavily invested. You can click here to see if those insiders have been buying or selling.
General Public Ownership
The general public, with a 22% stake in the company, will not 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.
Public Company Ownership
We can see that public companies hold 10% of the CARE Ratings shares on issue. This may be a strategic interest and the two companies may have related business interests. It could be that they have de-merged. This holding is probably worth investigating further.
It's always worth thinking about the different groups who own shares in a company. But to understand CARE Ratings better, we need to consider many other factors. To that end, you should be aware of the 2 warning signs we've spotted with CARE Ratings .
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.
When trading CARE Ratings or any other investment, use the platform considered by many to be the Professional's Gateway to the Worlds Market, Interactive Brokers. You get the lowest-cost* trading on stocks, options, futures, forex, bonds and funds worldwide from a single integrated account.
This article by Simply Wall St is general in nature. 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.
*Interactive Brokers Rated Lowest Cost Broker by StockBrokers.com Annual Online Review 2020
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.