Public companies are United Spirits Limited's (NSE:MCDOWELL-N) biggest owners and were hit after market cap dropped ₹20b

By
Simply Wall St
Published
April 13, 2022
NSEI:MCDOWELL-N
Source: Shutterstock

A look at the shareholders of United Spirits Limited (NSE:MCDOWELL-N) can tell us which group is most powerful. With 57% stake, public companies possess the maximum shares in the company. In other words, the group stands to gain the most (or lose the most) from their investment into the company.

As a result, public companies as a group endured the highest losses last week after market cap fell by ₹20b.

Let's take a closer look to see what the different types of shareholders can tell us about United Spirits.

See our latest analysis for United Spirits

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NSEI:MCDOWELL-N Ownership Breakdown April 13th 2022

What Does The Institutional Ownership Tell Us About United Spirits?

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.

As you can see, institutional investors have a fair amount of stake in United Spirits. This implies the analysts working for those institutions have looked at the stock and they like it. But just like anyone else, they could be wrong. 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 United Spirits' historic earnings and revenue below, but keep in mind there's always more to the story.

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NSEI:MCDOWELL-N Earnings and Revenue Growth April 13th 2022

We note that hedge funds don't have a meaningful investment in United Spirits. Our data shows that Diageo plc is the largest shareholder with 57% of shares outstanding. This essentially means that they have extensive influence, if not outright control, over the future of the corporation. United Spirits Ltd, ESOP is the second largest shareholder owning 2.4% of common stock, and BlackRock, Inc. holds about 2.0% of the company stock.

Researching institutional ownership is a good way to gauge and filter a stock's expected performance. The same can be achieved by studying analyst sentiments. There are plenty of analysts covering the stock, so it might be worth seeing what they are forecasting, too.

Insider Ownership Of United Spirits

The definition of an insider can differ slightly between different countries, but members of the board of directors always count. The company management answer to the board and the latter should represent the interests of shareholders. Notably, sometimes top-level managers are on the board themselves.

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 information suggests that United Spirits Limited insiders own under 1% of the company. Being so large, we would not expect insiders to own a large proportion of the stock. Collectively, they own ₹56m of stock. It is good to see board members owning shares, but it might be worth checking if those insiders have been buying.

General Public Ownership

With a 19% ownership, the general public, mostly comprising of individual investors, have some degree of sway over United Spirits. 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.

Public Company Ownership

Public companies currently own 57% of United Spirits stock. We can't be certain but it is quite possible this is a strategic stake. The businesses may be similar, or work together.

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.

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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