NMDC Steel Limited's (NSE:NSLNISP) stock price dropped 4.8% last week; state or government would not be happy

Key Insights

• Significant control over NMDC Steel by state or government implies that the general public has more power to influence management and governance-related decisions
• India owns 61% of the company
• 18% of NMDC Steel is held by Institutions

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A look at the shareholders of NMDC Steel Limited (NSE:NSLNISP) can tell us which group is most powerful. We can see that state or government own the lion's share in the company with 61% ownership. That is, the group stands to benefit the most if the stock rises (or lose the most if there is a downturn).

As market cap fell to ₹131b last week, state or government would have faced the highest losses than any other shareholder groups of the company.

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

Check out our latest analysis for NMDC Steel

What Does The Institutional Ownership Tell Us About NMDC Steel?

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 NMDC Steel does have institutional investors; and they hold a good portion of the company's stock. 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. If multiple institutions change their view on a stock at the same time, you could see the share price drop fast. It's therefore worth looking at NMDC Steel's earnings history below. Of course, the future is what really matters.

We note that hedge funds don't have a meaningful investment in NMDC Steel. Our data shows that India is the largest shareholder with 61% of shares outstanding. With such a huge stake in the ownership, we infer that they have significant control of the future of the company. Life Insurance Corporation of India, Asset Management Arm is the second largest shareholder owning 14% of common stock, and The Vanguard Group, Inc. holds about 1.1% of the company stock.

Researching institutional ownership is a good way to gauge and filter a stock's expected performance. The same can be achieved by studying analyst sentiments. We're not picking up on any analyst coverage of the stock at the moment, so the company is unlikely to be widely held.

Insider Ownership Of NMDC Steel

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. Company management run the business, but the CEO will answer to the board, even if he or she is a member of it.

Most consider insider ownership a positive because it can indicate the board is well aligned with other shareholders. However, on some occasions too much power is concentrated within this group.

Our information suggests that NMDC Steel Limited insiders own under 1% of the company. Keep in mind that it's a big company, and the insiders own ₹592m worth of shares. The absolute value might be more important than the proportional share. 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

With a 21% ownership, the general public, mostly comprising of individual investors, have some degree of sway over NMDC Steel. While this group can't necessarily call the shots, it can certainly have a real influence on how the company is run.

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 for instance, the ever-present spectre of investment risk. We've identified 2 warning signs with NMDC Steel (at least 1 which shouldn't be ignored) , and understanding them should be part of your investment process.

If you would prefer check out another company -- one with potentially superior financials -- then do not miss this free list of interesting companies, backed by strong financial data.

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.