Institutions profited after Kansai Nerolac Paints Limited's (NSE:KANSAINER) market cap rose ₹7.7b last week but public companies profited the most

Key Insights

• Significant control over Kansai Nerolac Paints by public companies implies that the general public has more power to influence management and governance-related decisions
• 75% of the company is held by a single shareholder (Kansai Paint Co., Ltd.)
• Institutional ownership in Kansai Nerolac Paints is 13%

To get a sense of who is truly in control of Kansai Nerolac Paints Limited (NSE:KANSAINER), it is important to understand the ownership structure of the business. We can see that public companies own the lion's share in the company with 75% ownership. In other words, the group stands to gain the most (or lose the most) from their investment into the company.

While public companies were the group that benefitted the most from last week’s ₹7.7b market cap gain, institutions too had a 13% share in those profits.

Let's delve deeper into each type of owner of Kansai Nerolac Paints, beginning with the chart below.

Check out our latest analysis for Kansai Nerolac Paints

What Does The Institutional Ownership Tell Us About Kansai Nerolac 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.

We can see that Kansai Nerolac Paints 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 Kansai Nerolac 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 Kansai Nerolac Paints. Our data shows that Kansai Paint Co., Ltd. is the largest shareholder with 75% of shares outstanding. With such a huge stake in the ownership, we infer that they have significant control of the future of the company. With 3.6% and 1.3% of the shares outstanding respectively, Life Insurance Corporation of India, Asset Management Arm and Aditya Birla Sun Life AMC Limited are the second and third largest shareholders.

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. 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 Kansai Nerolac Paints

The definition of an insider can differ slightly between different countries, but members of the board of directors always count. Company management run the business, but the CEO will answer to the board, even if he or she is a member of it.

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 note our data does not show any board members holding shares, personally. It is unusual not to have at least some personal holdings by board members, so our data might be flawed. A good next step would be to check how much the CEO is paid.

General Public Ownership

With a 12% ownership, the general public, mostly comprising of individual investors, have some degree of sway over Kansai Nerolac 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.

Public Company Ownership

We can see that public companies hold 75% of the Kansai Nerolac 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:

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. For instance, we've identified 2 warning signs for Kansai Nerolac Paints that you should be aware of.

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.