The big shareholder groups in REC Limited (NSE:RECLTD) have power over the company. Institutions will often hold stock in bigger companies, and we expect to see insiders owning a noticeable percentage of the smaller ones. Companies that have been privatized tend to have low insider ownership.
REC has a market capitalization of ₹248b, so it's too big to fly under the radar. We'd expect to see both institutions and retail investors owning a portion of the company. Taking a look at our data on the ownership groups (below), it seems that institutions are noticeable on the share registry. Let's delve deeper into each type of owner, to discover more about REC.
What Does The Institutional Ownership Tell Us About REC?
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 REC 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 REC, (below). Of course, keep in mind that there are other factors to consider, too.
REC is not owned by hedge funds. Looking at our data, we can see that the largest shareholder is Power Finance Corporation Limited with 53% of shares outstanding. This essentially means that they have extensive influence, if not outright control, over the future of the corporation. In comparison, the second and third largest shareholders hold about 2.9% and 1.4% of the stock.
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. We're not picking up on any analyst coverage of the stock at the moment, so the company is unlikely to be widely held.
Insider Ownership Of REC
While the precise definition of an insider can be subjective, almost everyone considers board members to be insiders. 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.
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 information suggests that REC Limited insiders own under 1% of the company. It's a big company, so even a small proportional interest can create alignment between the board and shareholders. In this case insiders own ₹30k worth of shares. It is always good to see at least some insider ownership, but it might be worth checking if those insiders have been selling.
General Public Ownership
The general public, who are usually individual investors, hold a 18% stake in REC. While this group can't necessarily call the shots, it can certainly have a real influence on how the company is run.
Public Company Ownership
It appears to us that public companies own 53% of REC. It's hard to say for sure but this suggests they have entwined business interests. This might be a strategic stake, so it's worth watching this space for changes in ownership.
I find it very interesting to look at who exactly owns a company. But to truly gain insight, we need to consider other information, too. Be aware that REC is showing 2 warning signs in our investment analysis , and 1 of those doesn't sit too well with us...
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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.
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.