Institutional owners may consider drastic measures as Tata Steel Limited's (NSE:TATASTEEL) recent ₹173b drop adds to long-term losses

Key Insights

• Institutions' substantial holdings in Tata Steel implies that they have significant influence over the company's share price
• A total of 7 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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To get a sense of who is truly in control of Tata Steel Limited (NSE:TATASTEEL), it is important to understand the ownership structure of the business. The group holding the most number of shares in the company, around 35% to be precise, is institutions. Put another way, the group faces the maximum upside potential (or downside risk).

And so it follows that institutional investors was the group most impacted after the company's market cap fell to ₹1.8t last week after a 9.0% drop in the share price. Needless to say, the recent loss which further adds to the one-year loss to shareholders of 12% might not go down well especially with this category of shareholders. Often called “market movers", institutions wield significant power in influencing the price dynamics of any stock. Hence, if weakness in Tata Steel's 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 Tata Steel.

Check out our latest analysis for Tata Steel

What Does The Institutional Ownership Tell Us About Tata Steel?

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.

As you can see, institutional investors have a fair amount of stake in Tata Steel. This implies the analysts working for those institutions have looked at the stock and they like it. But just like anyone else, they could be wrong. 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 Steel's earnings history below. Of course, the future is what really matters.

Hedge funds don't have many shares in Tata Steel. Looking at our data, we can see that the largest shareholder is Tata Sons Private Limited with 32% of shares outstanding. With 7.6% and 3.6% of the shares outstanding respectively, Life Insurance Corporation of India, Asset Management Arm and SBI Funds Management Limited are the second and third largest shareholders.

We did some more digging and found that 7 of the top shareholders account for roughly 52% of the register, implying that along with larger shareholders, there are a few smaller shareholders, thereby balancing out each others interests somewhat.

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 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 Tata 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. 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.

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 Tata Steel Limited insiders own under 1% of the company. But they may have an indirect interest through a corporate structure that we haven't picked up on. It is a very large company, so it would be surprising to see insiders own a large proportion of the company. Though their holding amounts to less than 1%, we can see that board members collectively own ₹421m worth of shares (at current prices). Arguably recent buying and selling is just as important to consider. You can click here to see if insiders have been buying or selling.

General Public Ownership

The general public-- including retail investors -- own 31% 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

Our data indicates that Private Companies hold 32%, 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:

It's always worth thinking about the different groups who own shares in a company. But to understand Tata Steel better, we need to consider many other factors. Consider risks, for instance. Every company has them, and we've spotted 2 warning signs for Tata Steel 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.