Institutional investors may overlook Balrampur Chini Mills Limited's (NSE:BALRAMCHIN) recent ₹4.2b market cap drop as long-term gains remain positive

Key Insights

• Institutions' substantial holdings in Balrampur Chini Mills implies that they have significant influence over the company's share price
• A total of 6 investors have a majority stake in the company with 51% ownership
• Insider ownership in Balrampur Chini Mills is 37%

Every investor in Balrampur Chini Mills Limited (NSE:BALRAMCHIN) should be aware of the most powerful shareholder groups. We can see that institutions own the lion's share in the company with 42% ownership. That is, the group stands to benefit the most if the stock rises (or lose the most if there is a downturn).

Institutional investors was the group most impacted after the company's market cap fell to ₹127b last week. However, the 48% one-year return to shareholders might have softened the blow. They should, however, be mindful of further losses in the future.

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

View our latest analysis for Balrampur Chini Mills

What Does The Institutional Ownership Tell Us About Balrampur Chini Mills?

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.

Balrampur Chini Mills already has institutions on the share registry. Indeed, they own a respectable stake in the company. This suggests some credibility amongst professional investors. But we can't rely on that fact alone since institutions make bad investments sometimes, just like everyone does. 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 Balrampur Chini Mills' historic earnings and revenue below, but keep in mind there's always more to the story.

We note that hedge funds don't have a meaningful investment in Balrampur Chini Mills. Looking at our data, we can see that the largest shareholder is the CEO Vivek Saraogi with 35% of shares outstanding. For context, the second largest shareholder holds about 5.4% of the shares outstanding, followed by an ownership of 3.2% by the third-largest shareholder.

On further inspection, we found that more than half the company's shares are owned by the top 6 shareholders, suggesting that the interests of the larger shareholders are balanced out to an extent by the smaller ones.

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. Quite a few analysts cover the stock, so you could look into forecast growth quite easily.

Insider Ownership Of Balrampur Chini Mills

The definition of an insider can differ slightly between different countries, but members of the board of directors always count. 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 most recent data indicates that insiders own a reasonable proportion of Balrampur Chini Mills Limited. Insiders own ₹46b worth of shares in the ₹127b company. That's quite meaningful. Most would say this shows a good degree of alignment with shareholders, especially in a company of this size. You can click here to see if those insiders have been buying or selling.

General Public Ownership

With a 15% ownership, the general public, mostly comprising of individual investors, have some degree of sway over Balrampur Chini Mills. While this group can't necessarily call the shots, it can certainly have a real influence on how the company is run.

Private Company Ownership

We can see that Private Companies own 6.0%, of the shares on issue. 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:

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. Case in point: We've spotted 3 warning signs for Balrampur Chini Mills you should be aware of, and 1 of them makes us a bit uncomfortable.

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.