Private companies in Grasim Industries Limited (NSE:GRASIM) are its biggest bettors, and their bets paid off as stock gained 3.7% last week

Key Insights

• Grasim Industries' significant private companies ownership suggests that the key decisions are influenced by shareholders from the larger public
• 50% of the business is held by the top 7 shareholders
• Institutions own 27% of Grasim Industries

To get a sense of who is truly in control of Grasim Industries Limited (NSE:GRASIM), it is important to understand the ownership structure of the business. With 35% stake, private companies possess the maximum shares in the company. That is, the group stands to benefit the most if the stock rises (or lose the most if there is a downturn).

Clearly, private companies benefitted the most after the company's market cap rose by ₹66b last week.

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

See our latest analysis for Grasim Industries

What Does The Institutional Ownership Tell Us About Grasim Industries?

Institutional investors commonly compare their own returns to the returns of a commonly followed index. So they generally do consider buying larger companies that are included in the relevant benchmark index.

We can see that Grasim 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. 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 Grasim Industries' 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 Grasim Industries. Our data shows that Birla Group Holdings Private Limited is the largest shareholder with 22% of shares outstanding. Life Insurance Corporation of India, Asset Management Arm is the second largest shareholder owning 7.7% of common stock, and IGH Holdings Private Limited holds about 6.3% of the company stock.

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

Insider Ownership Of Grasim 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.

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.

Our data suggests that insiders own under 1% of Grasim Industries Limited in their own names. But they may have an indirect interest through a corporate structure that we haven't picked up on. Being so large, we would not expect insiders to own a large proportion of the stock. Collectively, they own ₹7.1b of stock. Arguably recent buying and selling is just as important to consider. You can click here to see if 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

It seems that Private Companies own 35%, of the Grasim Industries stock. 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.

Public Company Ownership

We can see that public companies hold 8.5% of the Grasim Industries shares on issue. We can't be certain but it is quite possible this is a strategic stake. The businesses may be similar, or work together.

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. Case in point: We've spotted 5 warning signs for Grasim Industries you should be aware of, and 2 of them don't sit too well with us.

If you would prefer discover what analysts are predicting in terms of future growth, do not miss this free report on analyst forecasts.

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.