Institutional owners may take dramatic actions as PI Industries Limited's (NSE:PIIND) recent 3.7% drop adds to one-year losses

Key Insights

• Institutions' substantial holdings in PI Industries implies that they have significant influence over the company's share price
• 52% of the business is held by the top 7 shareholders
• Recent purchases by insiders

Every investor in PI Industries Limited (NSE:PIIND) should be aware of the most powerful shareholder groups. With 33% stake, institutions possess the maximum shares in the company. In other words, the group stands to gain the most (or lose the most) from their investment into the company.

And so it follows that institutional investors was the group most impacted after the company's market cap fell to ₹467b last week after a 3.7% drop in the share price. Needless to say, the recent loss which further adds to the one-year loss to shareholders of 15% might not go down well especially with this category of shareholders. Also referred to as "smart money", institutions have a lot of sway over how a stock's price moves. Hence, if weakness in PI Industries' share price continues, institutional investors may feel compelled to sell the stock, which might not be ideal for individual investors.

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

See our latest analysis for PI Industries

What Does The Institutional Ownership Tell Us About PI Industries?

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.

As you can see, institutional investors have a fair amount of stake in PI Industries. 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. 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 PI Industries' earnings history below. Of course, the future is what really matters.

We note that hedge funds don't have a meaningful investment in PI Industries. With a 20% stake, CEO Mayank Singhal is the largest shareholder. Meanwhile, the second and third largest shareholders, hold 9.4% and 6.1%, of the shares outstanding, respectively.

On further inspection, we found that more than half the company's shares are owned by the top 7 shareholders, suggesting that the interests of the larger shareholders are balanced out to an extent by the smaller ones.

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. 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 PI Industries

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

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.

It seems insiders own a significant proportion of PI Industries Limited. Insiders own ₹141b worth of shares in the ₹467b company. That's quite meaningful. It is good to see this level of investment. You can check here to see if those insiders have been buying recently.

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.

Private Company Ownership

Our data indicates that Private Companies hold 16%, of the company's shares. 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.

Next Steps:

While it is well worth considering the different groups that own a company, there are other factors that are even more important. Be aware that PI Industries is showing 1 warning sign in our investment analysis , you should know about...

But ultimately it is the future, not the past, that will determine how well the owners of this business will do. Therefore we think it advisable to take a look at this free report showing whether analysts are predicting a brighter future.

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.