Rain Industries Limited's (NSE:RAIN) stock price dropped 8.1% last week; individual investors would not be happy

Key Insights

• The considerable ownership by individual investors in Rain Industries indicates that they collectively have a greater say in management and business strategy
• A total of 11 investors have a majority stake in the company with 50% ownership
• Insider ownership in Rain Industries is 28%

To get a sense of who is truly in control of Rain Industries Limited (NSE:RAIN), it is important to understand the ownership structure of the business. And the group that holds the biggest piece of the pie are individual investors with 43% ownership. That is, the group stands to benefit the most if the stock rises (or lose the most if there is a downturn).

Following a 8.1% decrease in the stock price last week, individual investors suffered the most losses, but insiders who own 28% stock also took a hit.

Let's take a closer look to see what the different types of shareholders can tell us about Rain Industries.

View our latest analysis for Rain Industries

What Does The Institutional Ownership Tell Us About Rain Industries?

Many institutions measure their performance against an index that approximates the local market. So they usually pay more attention to companies that are included in major indices.

Rain Industries already has institutions on the share registry. Indeed, they own a respectable stake in the company. 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 Rain Industries' earnings history below. Of course, the future is what really matters.

We note that hedge funds don't have a meaningful investment in Rain Industries. With a 14% stake, CEO N. Reddy is the largest shareholder. With 8.1% and 7.5% of the shares outstanding respectively, Nellore Anupama Reddy and Focus India Brands Private Limited are the second and third largest shareholders.

A closer look at our ownership figures suggests that the top 11 shareholders have a combined ownership of 50% implying that no single shareholder has a majority.

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. 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 Rain Industries

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.

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.

Our information suggests that insiders maintain a significant holding in Rain Industries Limited. Insiders have a ₹15b stake in this ₹54b business. It is great to see insiders so invested in the business. It might be worth checking if those insiders have been buying recently.

General Public Ownership

The general public, who are usually individual investors, hold a 43% stake in Rain Industries. 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

We can see that Private Companies own 16%, of the shares on issue. 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. Consider for instance, the ever-present spectre of investment risk. We've identified 3 warning signs with Rain Industries (at least 2 which are a bit unpleasant) , 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com