Centrum Capital Limited's (NSE:CENTRUM) market cap dropped ₹1.7b last week; Private companies bore the brunt

Key Insights

• The considerable ownership by private companies in Centrum Capital indicates that they collectively have a greater say in management and business strategy
• The top 3 shareholders own 51% of the company
• 13% of Centrum Capital is held by insiders

To get a sense of who is truly in control of Centrum Capital Limited (NSE:CENTRUM), it is important to understand the ownership structure of the business. We can see that private companies own the lion's share in the company with 60% ownership. That is, the group stands to benefit the most if the stock rises (or lose the most if there is a downturn).

And last week, private companies endured the biggest losses as the stock fell by 11%.

In the chart below, we zoom in on the different ownership groups of Centrum Capital.

View our latest analysis for Centrum Capital

What Does The Lack Of Institutional Ownership Tell Us About Centrum Capital?

Small companies that are not very actively traded often lack institutional investors, but it's less common to see large companies without them.

There are multiple explanations for why institutions don't own a stock. The most common is that the company is too small relative to funds under management, so the institution does not bother to look closely at the company. It is also possible that fund managers don't own the stock because they aren't convinced it will perform well. Centrum Capital's earnings and revenue track record (below) may not be compelling to institutional investors -- or they simply might not have looked at the business closely.

Hedge funds don't have many shares in Centrum Capital. The company's largest shareholder is Businessmatch Services India Pvt Ltd, with ownership of 32%. For context, the second largest shareholder holds about 13% of the shares outstanding, followed by an ownership of 6.2% by the third-largest shareholder.

A more detailed study of the shareholder registry showed us that 3 of the top shareholders have a considerable amount of ownership in the company, via their 51% stake.

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. As far as we can tell there isn't analyst coverage of the company, so it is probably flying under the radar.

Insider Ownership Of Centrum Capital

The definition of an insider can differ slightly between different countries, but members of the board of directors always count. 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 a reasonable proportion of Centrum Capital Limited. It has a market capitalization of just ₹13b, and insiders have ₹1.7b worth of shares in their own names. We would say this shows alignment with shareholders, but it is worth noting that the company is still quite small; some insiders may have founded the business. You can click here to see if those insiders have been buying or selling.

General Public Ownership

The general public-- including retail investors -- own 27% stake in the company, and hence can't easily be ignored. 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 60%, of the company's shares. 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:

It's always worth thinking about the different groups who own shares in a company. But to understand Centrum Capital better, we need to consider many other factors. Be aware that Centrum Capital is showing 1 warning sign in our investment analysis , you should know about...

If you would prefer check out another company -- one with potentially superior financials -- then do not miss this free list of interesting companies, backed by strong financial data.

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.