REDTAPE Limited (NSE:REDTAPE) CEO Shuja Mirza's holdings dropped 9.6% in value as a result of the recent pullback

Key Insights

• REDTAPE's significant insider ownership suggests inherent interests in company's expansion
• 58% of the company is held by a single shareholder (Shuja Mirza)
• Institutional ownership in REDTAPE is 14%

To get a sense of who is truly in control of REDTAPE Limited (NSE:REDTAPE), it is important to understand the ownership structure of the business. And the group that holds the biggest piece of the pie are individual insiders with 72% ownership. Put another way, the group faces the maximum upside potential (or downside risk).

As a result, insiders as a group endured the highest losses after market cap fell by ₹9.7b.

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

See our latest analysis for REDTAPE

What Does The Institutional Ownership Tell Us About REDTAPE?

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 REDTAPE 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. 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 REDTAPE'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 REDTAPE. With a 58% stake, CEO Shuja Mirza is the largest shareholder. This implies that they possess majority interests and have significant control over the company. Investors usually consider it a good sign when the company leadership has such a significant stake, as this is widely perceived to increase the chance that the management will act in the best interests of the company. In comparison, the second and third largest shareholders hold about 13% and 7.3% 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.

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. 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 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 information suggests that insiders own more than half of REDTAPE Limited. This gives them effective control of the company. Insiders own ₹65b worth of shares in the ₹91b company. That's extraordinary! It is good to see this level of investment. You can check here to see if those insiders have been selling any of their shares.

General Public Ownership

With a 14% ownership, the general public, mostly comprising of individual investors, have some degree of sway over REDTAPE. While this group can't necessarily call the shots, it can certainly have a real influence on how the company is run.

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.

Many find it useful to take an in depth look at how a company has performed in the past. You can access this detailed graph of past earnings, revenue and cash flow.

Of course this may not be the best stock to buy. So take a peek at this free free list of interesting companies.

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.