Aarti Industries Limited's (NSE:AARTIIND) stock price dropped 6.4% last week; retail investors would not be happy

Key Insights

• Significant control over Aarti Industries by retail investors implies that the general public has more power to influence management and governance-related decisions
• The top 21 shareholders own 50% of the company
• Insiders own 28% of Aarti Industries

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A look at the shareholders of Aarti Industries Limited (NSE:AARTIIND) can tell us which group is most powerful. The group holding the most number of shares in the company, around 29% to be precise, is retail investors. In other words, the group stands to gain the most (or lose the most) from their investment into the company.

While insiders, who own 28% shares weren’t spared from last week’s ₹10b market cap drop, retail investors as a group suffered the maximum losses

In the chart below, we zoom in on the different ownership groups of Aarti Industries.

See our latest analysis for Aarti Industries

What Does The Institutional Ownership Tell Us About Aarti Industries?

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.

We can see that Aarti Industries does have institutional investors; and they hold a good portion of the company's stock. 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. If multiple institutions change their view on a stock at the same time, you could see the share price drop fast. It's therefore worth looking at Aarti Industries' earnings history below. Of course, the future is what really matters.

Hedge funds don't have many shares in Aarti Industries. The company's largest shareholder is Life Insurance Corporation of India, Asset Management Arm, with ownership of 6.8%. Meanwhile, the second and third largest shareholders, hold 4.1% and 3.1%, of the shares outstanding, respectively.

A closer look at our ownership figures suggests that the top 21 shareholders have a combined ownership of 50% implying that no single shareholder has a majority.

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 Aarti Industries

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. Management ultimately answers to the board. However, it is not uncommon for managers to be executive board members, especially if they are a founder or the CEO.

Most consider insider ownership a positive because it can indicate the board is well aligned with other shareholders. However, on some occasions too much power is concentrated within this group.

Our most recent data indicates that insiders own a reasonable proportion of Aarti Industries Limited. It has a market capitalization of just ₹153b, and insiders have ₹42b worth of shares in their own names. That's quite significant. 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

The general public-- including retail investors -- own 29% stake in the company, and hence can't easily be ignored. 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 Company Ownership

We can see that Private Companies own 16%, 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:

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. To that end, you should learn about the 2 warning signs we've spotted with Aarti Industries (including 1 which is a bit unpleasant) .

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.