Asian Paints Limited's (NSE:ASIANPAINT) top owners are private companies with 40% stake, while 27% is held by institutions

Key Insights

• The considerable ownership by private companies in Asian Paints indicates that they collectively have a greater say in management and business strategy
• 51% of the business is held by the top 16 shareholders
• 27% of Asian Paints is held by Institutions

If you want to know who really controls Asian Paints Limited (NSE:ASIANPAINT), then you'll have to look at the makeup of its share registry. With 40% stake, private companies possess the maximum shares in the company. Put another way, the group faces the maximum upside potential (or downside risk).

Institutions, on the other hand, account for 27% of the company's stockholders. Institutions often own shares in more established companies, while it's not unusual to see insiders own a fair bit of smaller companies.

In the chart below, we zoom in on the different ownership groups of Asian Paints.

View our latest analysis for Asian Paints

What Does The Institutional Ownership Tell Us About Asian Paints?

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

Hedge funds don't have many shares in Asian Paints. Life Insurance Corporation of India, Asset Management Arm is currently the largest shareholder, with 7.0% of shares outstanding. For context, the second largest shareholder holds about 5.7% of the shares outstanding, followed by an ownership of 5.4% by the third-largest shareholder.

After doing some more digging, we found that the top 16 have the combined ownership of 51% in the company, suggesting that no single shareholder has significant control over the company.

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. Quite a few analysts cover the stock, so you could look into forecast growth quite easily.

Insider Ownership Of Asian Paints

The definition of an insider can differ slightly between different countries, but members of the board of directors always count. 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.

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.

We can report that insiders do own shares in Asian Paints Limited. It is a very large company, and board members collectively own ₹167b worth of shares (at current prices). It is good to see this level of investment. 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

It seems that Private Companies own 40%, of the Asian Paints stock. 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.

Public Company Ownership

We can see that public companies hold 4.2% of the Asian Paints shares on issue. It's hard to say for sure but this suggests they have entwined business interests. This might be a strategic stake, so it's worth watching this space for changes in ownership.

Next Steps:

It's always worth thinking about the different groups who own shares in a company. But to understand Asian Paints better, we need to consider many other factors. Consider risks, for instance. Every company has them, and we've spotted 1 warning sign for Asian Paints you should know about.

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.