Could The Century Textiles and Industries Limited (NSE:CENTURYTEX) Ownership Structure Tell Us Something Useful?

By
Simply Wall St
Published
June 25, 2020
NSEI:CENTURYTEX

Every investor in Century Textiles and Industries Limited (NSE:CENTURYTEX) should be aware of the most powerful shareholder groups. Institutions will often hold stock in bigger companies, and we expect to see insiders owning a noticeable percentage of the smaller ones. We also tend to see lower insider ownership in companies that were previously publicly owned.

With a market capitalization of ₹35b, Century Textiles and Industries is a small cap stock, so it might not be well known by many institutional investors. Taking a look at our data on the ownership groups (below), it's seems that institutional investors have bought into the company. Let's take a closer look to see what the different types of shareholder can tell us about Century Textiles and Industries.

Check out our latest analysis for Century Textiles and Industries

NSEI:CENTURYTEX Ownership Summary June 25th 2020
NSEI:CENTURYTEX Ownership Summary June 25th 2020

What Does The Institutional Ownership Tell Us About Century Textiles and Industries?

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 own 19% of Century Textiles and Industries. This can indicate that the company has a certain degree of credibility in the investment community. However, it is best to be wary of relying on the supposed validation that comes with institutional investors. They too, get it wrong sometimes. 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 Century Textiles and Industries's historic earnings and revenue, below, but keep in mind there's always more to the story.

NSEI:CENTURYTEX Income Statement June 25th 2020
NSEI:CENTURYTEX Income Statement June 25th 2020

Hedge funds don't have many shares in Century Textiles and Industries. Looking at our data, we can see that the largest shareholder is Pilani Investment and Industries Corporation Limited with 33% of shares outstanding. Next, we have IGH Holdings Private Ltd and Aditya Marketing & Manufacturing Ltd. as the second and third largest shareholders, holding 10.0% and 6.8%, of the shares outstanding, respectively.

On studying the facts and figures more closely, we found that the top 4 shareholders control 55% of the company which implies that this group has considerable sway over the company's decision-making.

While it makes sense to study institutional ownership data for a company, it also makes sense to study analyst sentiments to know which way the wind is blowing. Our information suggests that there isn't any analyst coverage of the stock, so it is probably little known.

Insider Ownership Of Century Textiles and Industries

While the precise definition of an insider can be subjective, almost everyone considers board members to be insiders. Company management run the business, but the CEO will answer to the board, even if he or she is a member of it.

I generally consider insider ownership to be a good thing. However, on some occasions it makes it more difficult for other shareholders to hold the board accountable for decisions.

Shareholders would probably be interested to learn that insiders own shares in Century Textiles and Industries Limited. In their own names, insiders own ₹691m worth of stock in the ₹35b company. Some would say this shows alignment of interests between shareholders and the board. But it might be worth checking if those insiders have been selling.

General Public Ownership

The general public, with a 26% stake in the company, will not 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

Our data indicates that Private Companies hold 17%, of the company's shares. 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

It appears to us that public companies own 36% of CENTURYTEX. 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:

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. Be aware that Century Textiles and Industries is showing 2 warning signs in our investment analysis , you should know about...

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of interesting companies.

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. 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.
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