Aditya Birla Fashion and Retail Limited's (NSE:ABFRL) market cap dropped ₹16b last week; individual investors who hold 37% were hit as were institutions

Key Insights

• Aditya Birla Fashion and Retail's significant private companies ownership suggests that the key decisions are influenced by shareholders from the larger public
• 54% of the business is held by the top 4 shareholders
• Institutions own 22% of Aditya Birla Fashion and Retail

If you want to know who really controls Aditya Birla Fashion and Retail Limited (NSE:ABFRL), then you'll have to look at the makeup of its share registry. The group holding the most number of shares in the company, around 37% to be precise, is private companies. That is, the group stands to benefit the most if the stock rises (or lose the most if there is a downturn).

While institutions who own 22% came under pressure after market cap dropped to ₹318b last week,private companies took the most losses.

Let's delve deeper into each type of owner of Aditya Birla Fashion and Retail, beginning with the chart below.

View our latest analysis for Aditya Birla Fashion and Retail

What Does The Institutional Ownership Tell Us About Aditya Birla Fashion and Retail?

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 Aditya Birla Fashion and Retail does have institutional investors; and they hold a good portion of the company's stock. 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. When multiple institutions own a stock, there's always a risk that they are in a 'crowded trade'. When such a trade goes wrong, multiple parties may compete to sell stock fast. This risk is higher in a company without a history of growth. You can see Aditya Birla Fashion and Retail's historic earnings and revenue below, but keep in mind there's always more to the story.

Hedge funds don't have many shares in Aditya Birla Fashion and Retail. Looking at our data, we can see that the largest shareholder is Birla Group Holdings Private Limited with 23% of shares outstanding. Meanwhile, the second and third largest shareholders, hold 14% and 9.7%, of the shares outstanding, respectively.

On looking further, we found that 54% of the shares are owned by the top 4 shareholders. In other words, these shareholders have a meaningful say in the decisions of the company.

While studying institutional ownership for a company can add value to your research, it is also a good practice to research analyst recommendations to get a deeper understand of a stock's expected performance. There are plenty of analysts covering the stock, so it might be worth seeing what they are forecasting, too.

Insider Ownership Of Aditya Birla Fashion and Retail

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.

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 Aditya Birla Fashion and Retail Limited in their own names. We do note, however, it is possible insiders have an indirect interest through a private company or other corporate structure. It's a big company, so even a small proportional interest can create alignment between the board and shareholders. In this case insiders own ₹443m worth of shares. It is always good to see at least some insider ownership, but it might be worth checking if those insiders have been selling.

General Public Ownership

With a 11% ownership, the general public, mostly comprising of individual investors, have some degree of sway over Aditya Birla Fashion and Retail. While this group can't necessarily call the shots, it can certainly have a real influence on how the company is run.

Private Equity Ownership

With a stake of 7.2%, private equity firms could influence the Aditya Birla Fashion and Retail board. Some might like this, because private equity are sometimes activists who hold management accountable. But other times, private equity is selling out, having taking the company public.

Private Company Ownership

We can see that Private Companies own 37%, of the shares on issue. 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.

Public Company Ownership

It appears to us that public companies own 15% of Aditya Birla Fashion and Retail. It's hard to say for sure but this suggests they have entwined business interests. This might be a strategic stake, so it's worth watching this space for changes in ownership.

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. Consider risks, for instance. Every company has them, and we've spotted 1 warning sign for Aditya Birla Fashion and Retail you should know about.

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.

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