Redtape Limited's (NSE:REDTAPE) most bullish insider, CEO Shuja Mirza must be pleased with the recent 7.5% gain

Key Insights

• Significant insider control over Redtape implies vested interests in company growth
• Shuja Mirza owns 58% of the company
• Past performance of a company along with ownership data serve to give a strong idea about prospects for a business

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 74% ownership. Put another way, the group faces the maximum upside potential (or downside risk).

As a result, insiders scored the highest last week as the company hit ₹107b market cap following a 7.5% gain in the stock.

Let's take a closer look to see what the different types of shareholders can tell us about Redtape.

Check out 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.

As you can see, institutional investors have a fair amount of stake in Redtape. 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. 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.

We note that hedge funds don't have a meaningful investment 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. With 13% and 4.0% of the shares outstanding respectively, Rashid Mirza and HDFC Asset Management Company Limited are the second and third largest shareholders. 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 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. 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. 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.

Insider ownership is positive when it signals leadership are thinking like the true owners of the company. However, high insider ownership can also give immense power to a small group within the company. This can be negative in some circumstances.

Our most recent data indicates that insiders own the majority of Redtape Limited. This means they can collectively make decisions for the company. Insiders own ₹79b worth of shares in the ₹107b company. That's extraordinary! 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

With a 17% ownership, the general public, mostly comprising of individual investors, have some degree of sway over Redtape. 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.

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.