Stock Analysis

State or government invested in NMDC Steel Limited (NSE:NSLNISP) copped the brunt of last week's ₹5.6b market cap decline

Published
NSEI:NSLNISP

Key Insights

  • NMDC Steel's significant state or government ownership suggests that the key decisions are influenced by shareholders from the larger public
  • 61% of the company is held by a single shareholder (India)
  • Institutional ownership in NMDC Steel is 19%

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).

And last week, state or government endured the biggest losses as the stock fell by 4.4%.

Let's delve deeper into each type of owner of NMDC Steel, beginning with the chart below.

Check out our latest analysis for NMDC Steel

NSEI:NSLNISP Ownership Breakdown January 10th 2025

What Does The Institutional Ownership Tell Us About NMDC Steel?

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.

As you can see, institutional investors have a fair amount of stake in NMDC Steel. 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 NMDC Steel's historic earnings and revenue below, but keep in mind there's always more to the story.

NSEI:NSLNISP Earnings and Revenue Growth January 10th 2025

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. This essentially means that they have extensive influence, if not outright control, over the future of the corporation. In comparison, the second and third largest shareholders hold about 14% and 1.1% of the 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.

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 most recent data indicates that insiders own less than 1% of NMDC Steel Limited. It's a big company, so even a small proportional interest can create alignment between the board and shareholders. In this case insiders own ₹551m worth of shares. It is always good to see at least some insider ownership, but it might be worth checking if those insiders have been selling.

General Public Ownership

The general public-- including retail investors -- own 20% 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.

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. Take risks for example - NMDC Steel has 2 warning signs (and 1 which is significant) we think you should know about.

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.

Valuation is complex, but we're here to simplify it.

Discover if NMDC Steel might be undervalued or overvalued with our detailed analysis, featuring fair value estimates, potential risks, dividends, insider trades, and its financial condition.

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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.