Could The M M Forgings Limited (NSE:MMFL) Ownership Structure Tell Us Something Useful?

The big shareholder groups in M M Forgings Limited (NSE:MMFL) have power over the company. Generally speaking, as a company grows, institutions will increase their ownership. Conversely, insiders often decrease their ownership over time. Warren Buffett said that he likes "a business with enduring competitive advantages that is run by able and owner-oriented people." So it's nice to see some insider ownership, because it may suggest that management is owner-oriented.

M M Forgings is a smaller company with a market capitalization of ₹13b, so it may still be flying under the radar of many institutional investors. Our analysis of the ownership of the company, below, shows that institutional investors have bought into the company. Let's delve deeper into each type of owner, to discover more about M M Forgings.

Check out our latest analysis for M M Forgings

What Does The Institutional Ownership Tell Us About M M Forgings?

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.

M M Forgings already has institutions on the share registry. Indeed, they own a respectable stake in the company. 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 M M Forgings' historic earnings and revenue below, but keep in mind there's always more to the story.

M M Forgings is not owned by hedge funds. Symax Consultants & Trading Pvt. Ltd. is currently the largest shareholder, with 24% of shares outstanding. With 12% and 11% of the shares outstanding respectively, Vidyashankar Krishnan and Venkatramanan Krishnan are the second and third largest shareholders. Note that the second and third-largest shareholders are also Co-Chief Executive Officer and Member of the Board of Directors, respectively, meaning that the company's top shareholders are insiders.

Our research also brought to light the fact that roughly 53% of the company is controlled by the top 4 shareholders suggesting that these owners wield significant influence on the business.

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 M M Forgings

The definition of an insider can differ slightly between different countries, but members of the board of directors always count. 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.

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.

It seems insiders own a significant proportion of M M Forgings Limited. Insiders have a ₹4.1b stake in this ₹13b business. I would say this shows alignment with shareholders, but it is worth noting that the company is still quite small; some insiders may have founded the business. You can click here to see if those insiders have been buying or selling.

General Public Ownership

With a 18% ownership, the general public have some degree of sway over M M Forgings. 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

It seems that Private Companies own 28%, of the M M Forgings stock. 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:

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 M M Forgings you should be aware of, and 2 of them are a bit unpleasant.

Of course this may not be the best stock to buy. So take a peek at this free 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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