With 71% institutional ownership, Tata Chemicals Limited (NSE:TATACHEM) is a favorite amongst the big guns

Key Insights

• Institutions' substantial holdings in Tata Chemicals implies that they have significant influence over the company's share price
• A total of 4 investors have a majority stake in the company with 52% ownership
• Ownership research along with analyst forecasts data help provide a good understanding of opportunities in a stock

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Every investor in Tata Chemicals Limited (NSE:TATACHEM) should be aware of the most powerful shareholder groups. The group holding the most number of shares in the company, around 71% to be precise, is institutions. In other words, the group stands to gain the most (or lose the most) from their investment into the company.

Since institutional have access to huge amounts of capital, their market moves tend to receive a lot of scrutiny by retail or individual investors. Hence, having a considerable amount of institutional money invested in a company is often regarded as a desirable trait.

In the chart below, we zoom in on the different ownership groups of Tata Chemicals.

View our latest analysis for Tata Chemicals

What Does The Institutional Ownership Tell Us About Tata Chemicals?

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.

We can see that Tata Chemicals 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 Tata Chemicals' earnings history below. Of course, the future is what really matters.

Since institutional investors own more than half the issued stock, the board will likely have to pay attention to their preferences. We note that hedge funds don't have a meaningful investment in Tata Chemicals. Looking at our data, we can see that the largest shareholder is Tata Sons Private Limited with 32% of shares outstanding. With 9.2% and 6.0% of the shares outstanding respectively, Life Insurance Corporation of India, Asset Management Arm and Tata Investment Corporation Limited are the second and third largest shareholders.

Our research also brought to light the fact that roughly 52% of the company is controlled by the top 4 shareholders suggesting that these owners wield significant influence on the business.

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. Quite a few analysts cover the stock, so you could look into forecast growth quite easily.

Insider Ownership Of Tata Chemicals

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.

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 data suggests that insiders own under 1% of Tata Chemicals Limited in their own names. Keep in mind that it's a big company, and the insiders own ₹96m worth of shares. The absolute value might be more important than the proportional share. It is good to see board members owning shares, but it might be worth checking if those insiders have been buying.

General Public Ownership

With a 28% ownership, the general public, mostly comprising of individual investors, have some degree of sway over Tata Chemicals. 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.

Next Steps:

It's always worth thinking about the different groups who own shares in a company. But to understand Tata Chemicals better, we need to consider many other factors. For instance, we've identified 1 warning sign for Tata Chemicals that you should be aware of.

Ultimately the future is most important. You can access this free report on analyst forecasts for the company.

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.