Atul Ltd's (NSE:ATUL) market cap touched ₹170b last week, benefiting both private companies who own 43% as well as institutions

Key Insights

• The considerable ownership by private companies in Atul indicates that they collectively have a greater say in management and business strategy
• A total of 7 investors have a majority stake in the company with 51% ownership
• 32% of Atul is held by Institutions

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Every investor in Atul Ltd (NSE:ATUL) should be aware of the most powerful shareholder groups. And the group that holds the biggest piece of the pie are private companies with 43% ownership. That is, the group stands to benefit the most if the stock rises (or lose the most if there is a downturn).

Following a 4.2% increase in the stock price last week, private companies profited the most, but institutions who own 32% stock also stood to gain from the increase.

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

View our latest analysis for Atul

What Does The Institutional Ownership Tell Us About Atul?

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 Atul does have institutional investors; and they hold a good portion of the company's stock. 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 Atul's 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 Atul. Aagam Holdings Pvt Ltd. is currently the largest shareholder, with 23% of shares outstanding. In comparison, the second and third largest shareholders hold about 9.5% and 5.4% of the stock. Additionally, the company's CEO Sunil Lalbhai directly holds 0.7% of the total shares outstanding.

We also observed that the top 7 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.

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. There are plenty of analysts covering the stock, so it might be worth seeing what they are forecasting, too.

Insider Ownership Of Atul

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. 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.

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 Atul Ltd. This is a big company, so it is good to see this level of alignment. Insiders own ₹7.9b worth of shares (at current prices). If you would like to explore the question of insider alignment, you can click here to see if insiders have been buying or selling.

General Public Ownership

The general public-- including retail investors -- own 20% 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 43%, of the shares on issue. 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.

Next Steps:

While it is well worth considering the different groups that own a company, there are other factors that are even more important. Consider risks, for instance. Every company has them, and we've spotted 1 warning sign for Atul you should know about.

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.