While institutions own 30% of Asian Paints Limited (NSE:ASIANPAINT), private companies are its largest shareholders with 40% ownership

Key Insights

• The considerable ownership by private companies in Asian Paints indicates that they collectively have a greater say in management and business strategy
• 52% of the business is held by the top 13 shareholders
• Institutions own 30% of Asian Paints

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To get a sense of who is truly in control of Asian Paints Limited (NSE:ASIANPAINT), it is important to understand the ownership structure of the business. 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 30% of the company's stockholders. Generally speaking, as a company grows, institutions will increase their ownership. Conversely, insiders often decrease their ownership over time.

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

See our latest analysis for Asian Paints

What Does The Institutional Ownership Tell Us About Asian Paints?

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 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.

We note that hedge funds don't have a meaningful investment in Asian Paints. Life Insurance Corporation of India, Asset Management Arm is currently the company's largest shareholder with 8.5% of shares outstanding. Smiti Holdings and Trading Company Private Limited is the second largest shareholder owning 5.8% of common stock, and Sattva Holding and Trading Private Limited holds about 5.7% of the company stock.

Looking at the shareholder registry, we can see that 52% of the ownership is controlled by the top 13 shareholders, meaning that no single shareholder has a majority interest in the ownership.

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 a reasonable number of analysts covering the stock, so it might be useful to find out their aggregate view on the future.

Insider Ownership Of Asian Paints

While the precise definition of an insider can be subjective, almost everyone considers board members to be insiders. 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.

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.

We can report that insiders do own shares in Asian Paints Limited. The insiders have a meaningful stake worth ₹201b. Most would say this shows a good alignment of interests between shareholders and the board. Still, it might be worth checking if those insiders have been selling.

General Public Ownership

With a 16% ownership, the general public, mostly comprising of individual investors, have some degree of sway over Asian Paints. 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.

Private Company Ownership

We can see that Private Companies own 40%, of the shares on issue. Private companies may be related parties. Sometimes insiders have an interest in a public company through a holding in a private company, rather than in their own capacity as an individual. While it's hard to draw any broad stroke conclusions, it is worth noting as an area for further research.

Public Company Ownership

Public companies currently own 4.2% of Asian Paints stock. This may be a strategic interest and the two companies may have related business interests. It could be that they have de-merged. This holding is probably worth investigating further.

Next Steps:

While it is well worth considering the different groups that own a company, there are other factors that are even more important. For example, we've discovered 1 warning sign for Asian Paints that you should be aware of before investing here.

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.