Top Key Executive Devendra Shah, Parag Milk Foods Limited's (NSE:PARAGMILK) largest shareholder sees value of holdings go down 11% after recent drop

Key Insights

• Insiders appear to have a vested interest in Parag Milk Foods' growth, as seen by their sizeable ownership
• A total of 4 investors have a majority stake in the company with 54% ownership
• Institutional ownership in Parag Milk Foods is 15%

A look at the shareholders of Parag Milk Foods Limited (NSE:PARAGMILK) can tell us which group is most powerful. The group holding the most number of shares in the company, around 47% to be precise, is individual insiders. Put another way, the group faces the maximum upside potential (or downside risk).

And last week, insiders endured the biggest losses as the stock fell by 11%.

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

Check out our latest analysis for Parag Milk Foods

What Does The Institutional Ownership Tell Us About Parag Milk 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.

We can see that Parag Milk Foods 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. 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 Parag Milk Foods' 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 Parag Milk Foods. Our data suggests that Devendra Shah, who is also the company's Top Key Executive, holds the most number of shares at 22%. When an insider holds a sizeable amount of a company's stock, investors consider it as a positive sign because it suggests that insiders are willing to have their wealth tied up in the future of the company. In comparison, the second and third largest shareholders hold about 19% and 7.6% of the stock. Interestingly, the second-largest shareholder, Pritam Shah is also Chief Financial Officer, again, pointing towards strong insider ownership amongst the company's top shareholders.

Our research also brought to light the fact that roughly 54% of the company is controlled by the top 4 shareholders suggesting that these owners wield significant influence on the business.

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 Parag Milk Foods

The definition of company insiders can be subjective and does vary between jurisdictions. Our data reflects individual insiders, capturing board members at the very least. 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 Parag Milk Foods Limited. It has a market capitalization of just ₹25b, and insiders have ₹12b worth of shares in their own names. This may suggest that the founders still own a lot of shares. You can click here to see if they have been buying or selling.

General Public Ownership

With a 16% ownership, the general public, mostly comprising of individual investors, have some degree of sway over Parag Milk 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 13% stake in Parag Milk Foods. This suggests they can be influential in key policy decisions. Sometimes we see private equity stick around for the long term, but generally speaking they have a shorter investment horizon and -- as the name suggests -- don't invest in public companies much. After some time they may look to sell and redeploy capital elsewhere.

Private Company Ownership

It seems that Private Companies own 7.9%, of the Parag Milk Foods stock. It's hard to draw any conclusions from this fact alone, so its worth looking into who owns those private companies. Sometimes insiders or other related parties have an interest in shares in a public company through a separate private 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. For example, we've discovered 1 warning sign for Parag Milk Foods that you should be aware of before investing here.

Of course this may not be the best stock to buy. So take a peek at this free free list of interesting companies.

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.