Institutional investors in One97 Communications Limited (NSE:PAYTM) lost 3.2% last week but have reaped the benefits of longer-term growth

Key Insights

• Given the large stake in the stock by institutions, One97 Communications' stock price might be vulnerable to their trading decisions
• 51% of the business is held by the top 6 shareholders
• Insiders own 21% of One97 Communications

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To get a sense of who is truly in control of One97 Communications Limited (NSE:PAYTM), it is important to understand the ownership structure of the business. And the group that holds the biggest piece of the pie are institutions with 46% ownership. Put another way, the group faces the maximum upside potential (or downside risk).

Losing money on investments is something no shareholder enjoys, least of all institutional investors who saw their holdings value drop by 3.2% last week. However, the 59% one-year return to shareholders may have helped lessen their pain. They should, however, be mindful of further losses in the future.

In the chart below, we zoom in on the different ownership groups of One97 Communications.

Check out our latest analysis for One97 Communications

What Does The Institutional Ownership Tell Us About One97 Communications?

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 One97 Communications 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. 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 One97 Communications' earnings history below. Of course, the future is what really matters.

One97 Communications is not owned by hedge funds. With a 19% stake, CEO Vijay Sharma is the largest shareholder. In comparison, the second and third largest shareholders hold about 11% and 5.8% of the stock.

We also observed that the top 6 shareholders account for more than half of the share register, with a few smaller shareholders to balance the interests of the larger ones to a certain extent.

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 One97 Communications

While the precise definition of an insider can be subjective, almost everyone considers board members to be insiders. Company management run the business, but the CEO will answer to the board, even if he or she is a member of it.

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 information suggests that insiders maintain a significant holding in One97 Communications Limited. It has a market capitalization of just ₹810b, and insiders have ₹167b worth of shares in their own names. That's quite significant. It is good to see this level of investment. You can check here to see if those insiders have been buying recently.

General Public Ownership

With a 17% ownership, the general public, mostly comprising of individual investors, have some degree of sway over One97 Communications. 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.

Private Equity Ownership

With an ownership of 11%, private equity firms are in a position to play a role in shaping corporate strategy with a focus on value creation. Some investors might be encouraged by this, since private equity are sometimes able to encourage strategies that help the market see the value in the company. Alternatively, those holders might be exiting the investment after taking it public.

Private Company Ownership

It seems that Private Companies own 5.9%, of the One97 Communications stock. 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 One97 Communications better, we need to consider many other factors.

I like to dive deeper into how a company has performed in the past. You can access this interactive graph of past earnings, revenue and cash flow, for free.

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.

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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.