Private companies who have a significant stake must be disappointed along with institutions after Radico Khaitan Limited's (NSE:RADICO) market cap dropped by ₹27b

Key Insights

• The considerable ownership by private companies in Radico Khaitan indicates that they collectively have a greater say in management and business strategy
• A total of 6 investors have a majority stake in the company with 50% ownership
• Institutional ownership in Radico Khaitan is 36%

Every investor in Radico Khaitan Limited (NSE:RADICO) should be aware of the most powerful shareholder groups. The group holding the most number of shares in the company, around 40% to be precise, is private companies. Put another way, the group faces the maximum upside potential (or downside risk).

While institutions who own 36% came under pressure after market cap dropped to ₹273b last week,private companies took the most losses.

In the chart below, we zoom in on the different ownership groups of Radico Khaitan.

Check out our latest analysis for Radico Khaitan

What Does The Institutional Ownership Tell Us About Radico Khaitan?

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 Radico Khaitan. 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 Radico Khaitan's historic earnings and revenue below, but keep in mind there's always more to the story.

Hedge funds don't have many shares in Radico Khaitan. Sapphire Intrex Limited is currently the largest shareholder, with 34% of shares outstanding. Meanwhile, the second and third largest shareholders, hold 3.9% and 3.5%, of the shares outstanding, respectively.

We also observed that the top 6 shareholders account for more than half of the share register, with a few smaller shareholders to balance the interests of the larger ones to a certain extent.

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 Radico Khaitan

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 some shares in Radico Khaitan Limited. This is a big company, so it is good to see this level of alignment. Insiders own ₹3.7b worth of shares (at current prices). It is good to see this level of investment by insiders. You can check here to see if those insiders have been buying recently.

General Public Ownership

The general public-- including retail investors -- own 21% stake in the company, and hence can't easily be ignored. 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 40%, of the shares on issue. 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:

It's always worth thinking about the different groups who own shares in a company. But to understand Radico Khaitan better, we need to consider many other factors.

I like to dive deeper into how a company has performed in the past. You can find historic revenue and earnings in this detailed graph.

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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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.