Institutions profited after Ramkrishna Forgings Limited's (NSE:RKFORGE) market cap rose ₹6.3b last week but private companies profited the most

Key Insights

• The considerable ownership by private companies in Ramkrishna Forgings indicates that they collectively have a greater say in management and business strategy
• A total of 5 investors have a majority stake in the company with 51% ownership
• Insiders own 13% of Ramkrishna Forgings

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If you want to know who really controls Ramkrishna Forgings Limited (NSE:RKFORGE), then you'll have to look at the makeup of its share registry. With 40% stake, private companies possess the maximum shares in the company. That is, the group stands to benefit the most if the stock rises (or lose the most if there is a downturn).

While private companies were the group that benefitted the most from last week’s ₹6.3b market cap gain, institutions too had a 25% share in those profits.

In the chart below, we zoom in on the different ownership groups of Ramkrishna Forgings.

Check out our latest analysis for Ramkrishna Forgings

What Does The Institutional Ownership Tell Us About Ramkrishna Forgings?

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.

We can see that Ramkrishna Forgings 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. It is not uncommon to see a big share price drop if two large institutional investors try to sell out of a stock at the same time. So it is worth checking the past earnings trajectory of Ramkrishna Forgings, (below). Of course, keep in mind that there are other factors to consider, too.

We note that hedge funds don't have a meaningful investment in Ramkrishna Forgings. Riddhi Portfolio Private Limited is currently the company's largest shareholder with 33% of shares outstanding. Capital Research and Management Company is the second largest shareholder owning 7.5% of common stock, and Ramkrishna Rail And Infrastructure Private Limited holds about 3.6% of the company stock. Additionally, the company's CEO Naresh Jalan directly holds 3.2% of the total shares outstanding.

On looking further, we found that 51% of the shares are owned by the top 5 shareholders. In other words, these shareholders have a meaningful say in the decisions of the company.

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. There are plenty of analysts covering the stock, so it might be worth seeing what they are forecasting, too.

Insider Ownership Of Ramkrishna Forgings

The definition of an insider can differ slightly between different countries, but members of the board of directors always count. 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 information suggests that insiders maintain a significant holding in Ramkrishna Forgings Limited. It has a market capitalization of just ₹100b, and insiders have ₹13b worth of shares in their own names. That's quite significant. 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 23% stake in the company, and hence can't easily be ignored. 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 40%, of the Ramkrishna 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. Like risks, for instance. Every company has them, and we've spotted 2 warning signs for Ramkrishna Forgings (of which 1 is a bit concerning!) you should know about.

If you would prefer discover what analysts are predicting in terms of future growth, do not miss this free report on analyst forecasts.

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.