Institutions along with private companies who hold considerable shares inAditya Birla Fashion and Retail Limited (NSE:ABFRL) come under pressure; lose 5.4% of holdings value

Key Insights

• Significant control over Aditya Birla Fashion and Retail by private companies implies that the general public has more power to influence management and governance-related decisions
• A total of 4 investors have a majority stake in the company with 51% ownership
• 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. With 35% stake, private companies possess the maximum shares in the company. Put another way, the group faces the maximum upside potential (or downside risk).

While the holdings of private companies took a hit after last week’s 5.4% price drop, institutions with their 22% holdings also suffered.

In the chart below, we zoom in on the different ownership groups of Aditya Birla Fashion and Retail.

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.

Aditya Birla Fashion and Retail already has institutions on the share registry. Indeed, they own a respectable stake in the company. 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. 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.

We note that hedge funds don't have a meaningful investment in Aditya Birla Fashion and Retail. Looking at our data, we can see that the largest shareholder is Birla Group Holdings Private Limited with 22% of shares outstanding. In comparison, the second and third largest shareholders hold about 13% and 9.2% of the stock.

Our research also brought to light the fact that roughly 51% 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. 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

While the precise definition of an insider can be subjective, almost everyone considers board members to be insiders. 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 data suggests that insiders own under 1% of Aditya Birla Fashion and Retail Limited in their own names. However, it's possible that insiders might have an indirect interest through a more complex structure. It is a pretty big company, so it would be possible for board members to own a meaningful interest in the company, without owning much of a proportional interest. In this case, they own around ₹742m worth of shares (at current prices). 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 15% ownership, the general public, mostly comprising of individual investors, have some degree of sway over Aditya Birla Fashion and Retail. 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 Equity Ownership

With an ownership of 6.9%, private equity firms are in a position to play a role in shaping corporate strategy with a focus on value creation. 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 35%, 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.

Public Company Ownership

It appears to us that public companies own 14% of Aditya Birla Fashion and Retail. This may be a strategic interest and the two companies may have related business interests. It could be that they have de-merged. This holding is probably worth investigating further.

Next Steps:

It's always worth thinking about the different groups who own shares in a company. But to understand Aditya Birla Fashion and Retail better, we need to consider many other factors. 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.

If you are like me, you may want to think about whether this company will grow or shrink. Luckily, you can check this free report showing analyst forecasts for its future.

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.