Recent 8.8% decline may not have gone down well with REDTAPE Limited (NSE:REDTAPE) insiders who've been purchasing recently

Key Insights

• REDTAPE's significant insider ownership suggests inherent interests in company's expansion
• The largest shareholder of the company is Shuja Mirza with a 58% stake
• Recent purchases by insiders

A look at the shareholders of REDTAPE Limited (NSE:REDTAPE) can tell us which group is most powerful. We can see that individual insiders own the lion's share in the company with 74% ownership. In other words, the group stands to gain the most (or lose the most) from their investment into the company.

A quick look at our data suggests that insiders have been buying shares in the company recently. However, with shares price down 8.8% last week, they must be disappointed.

Let's delve deeper into each type of owner of REDTAPE, beginning with the chart below.

View our latest analysis for REDTAPE

What Does The Institutional Ownership Tell Us About REDTAPE?

Institutions typically measure themselves against a benchmark when reporting to their own investors, so they often become more enthusiastic about a stock once it's included in a major index. We would expect most companies to have some institutions on the register, especially if they are growing.

REDTAPE already has institutions on the share registry. Indeed, they own a respectable stake in the company. 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 REDTAPE's earnings history below. Of course, the future is what really matters.

Hedge funds don't have many shares in REDTAPE. The company's CEO Shuja Mirza is the largest shareholder with 58% of shares outstanding. With such a huge stake, we infer that they have significant control of the future of the company. It's usually considered a good sign when insiders own a significant number of shares in the company, and in this case, we're glad to see a company insider with such skin in the game. In comparison, the second and third largest shareholders hold about 13% and 5.0% of the stock. Interestingly, the second-largest shareholder, Rashid Mirza is also Top Key Executive, again, pointing towards strong insider ownership amongst the company's top shareholders.

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. Our information suggests that there isn't any analyst coverage of the stock, so it is probably little known.

Insider Ownership Of REDTAPE

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. 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 information suggests that insiders own more than half of REDTAPE Limited. This gives them effective control of the company. Given it has a market cap of ₹119b, that means insiders have a whopping ₹88b worth of shares in their own names. Most would argue this is a positive, showing strong alignment with shareholders. You can click here to see if they have been selling down their stake.

General Public Ownership

The general public, who are usually individual investors, hold a 15% stake in REDTAPE. 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.

Next Steps:

While it is well worth considering the different groups that own a company, there are other factors that are even more important. To that end, you should be aware of the 1 warning sign we've spotted with REDTAPE .

Of course this may not be the best stock to buy. Therefore, you may wish to see our free collection of interesting prospects boasting favorable financials.

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.