Private companies invested in Hindustan Foods Limited (NSE:HNDFDS) up 6.7% last week, insiders too were rewarded

Key Insights

• Significant control over Hindustan Foods by private companies implies that the general public has more power to influence management and governance-related decisions
• The top 3 shareholders own 60% of the company
• Recent sales by insiders

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To get a sense of who is truly in control of Hindustan Foods Limited (NSE:HNDFDS), it is important to understand the ownership structure of the business. The group holding the most number of shares in the company, around 41% to be precise, is private companies. In other words, the group stands to gain the most (or lose the most) from their investment into the company.

While private companies were the group that benefitted the most from last week’s ₹4.3b market cap gain, insiders too had a 26% share in those profits.

In the chart below, we zoom in on the different ownership groups of Hindustan Foods.

See our latest analysis for Hindustan Foods

What Does The Institutional Ownership Tell Us About Hindustan Foods?

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.

As you can see, institutional investors have a fair amount of stake in Hindustan Foods. 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. 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 Hindustan Foods, (below). Of course, keep in mind that there are other factors to consider, too.

Hindustan Foods is not owned by hedge funds. Vanity Case India Private Limited is currently the largest shareholder, with 40% of shares outstanding. The second and third largest shareholders are Sameer Kothari and Asha Kothari, with an equal amount of shares to their name at 10%. Sameer Kothari, who is the second-largest shareholder, also happens to hold the title of Chief Executive Officer.

After doing some more digging, we found that the top 3 shareholders collectively control more than half of the company's shares, implying that they have considerable power to influence the company's decisions.

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. There is a little analyst coverage of the stock, but not much. So there is room for it to gain more coverage.

Insider Ownership Of Hindustan Foods

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.

I generally consider insider ownership to be a good thing. However, on some occasions it makes it more difficult for other shareholders to hold the board accountable for decisions.

Our most recent data indicates that insiders own a reasonable proportion of Hindustan Foods Limited. Insiders have a ₹18b stake in this ₹69b business. 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

With a 12% ownership, the general public, mostly comprising of individual investors, have some degree of sway over Hindustan Foods. 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 Equity Ownership

Private equity firms hold a 5.6% stake in Hindustan Foods. This suggests they can be influential in key policy decisions. 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

We can see that Private Companies own 41%, 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:

While it is well worth considering the different groups that own a company, there are other factors that are even more important. Like risks, for instance. Every company has them, and we've spotted 2 warning signs for Hindustan Foods (of which 1 is a bit unpleasant!) you should know about.

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.