Could Adroit Infotech Limited's (NSE:ADROITINFO) Investor Composition Influence The Stock Price?

By
Simply Wall St
Published
May 23, 2020
NSEI:ADROITINFO

Every investor in Adroit Infotech Limited (NSE:ADROITINFO) should be aware of the most powerful shareholder groups. Institutions often own shares in more established companies, while it's not unusual to see insiders own a fair bit of smaller companies. Warren Buffett said that he likes "a business with enduring competitive advantages that is run by able and owner-oriented people." So it's nice to see some insider ownership, because it may suggest that management is owner-oriented.

Adroit Infotech is not a large company by global standards. It has a market capitalization of ₹114m, which means it wouldn't have the attention of many institutional investors. Taking a look at our data on the ownership groups (below), it's seems that institutions don't own many shares in the company. Let's delve deeper into each type of owner, to discover more about Adroit Infotech.

View our latest analysis for Adroit Infotech

NSEI:ADROITINFO Ownership Summary May 24th 2020
NSEI:ADROITINFO Ownership Summary May 24th 2020

What Does The Institutional Ownership Tell Us About Adroit Infotech?

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.

Less than 5% of Adroit Infotech is held by institutional investors. This suggests that some funds have the company in their sights, but many have not yet bought shares in it. If the company is growing earnings, that may indicate that it is just beginning to catch the attention of these deep-pocketed investors. We sometimes see a rising share price when a few big institutions want to buy a certain stock at the same time. The history of earnings and revenue, which you can see below, could be helpful in considering if more institutional investors will want the stock. Of course, there are plenty of other factors to consider, too.

NSEI:ADROITINFO Income Statement May 24th 2020
NSEI:ADROITINFO Income Statement May 24th 2020

Hedge funds don't have many shares in Adroit Infotech. Softpoint Technologies Pvt Limited is currently the largest shareholder, with 46% of shares outstanding. Next, we have Sunkerneni Reddy and Bonanza Portfolio Limited, Asset Management Arm as the second and third largest shareholders, holding 5.7% and 2.3%, of the shares outstanding, respectively. Sunkerneni Reddy also happens to hold the title of Chief Executive Officer.

Our analysis suggests that the top 2 shareholders collectively control 52% of the company's shares, implying that they have considerable power to influence the company's decisions.

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 Adroit Infotech

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. 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.

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 a reasonable proportion of Adroit Infotech Limited. Insiders have a ₹23m stake in this ₹114m business. I would say this shows alignment with shareholders, but it is worth noting that the company is still quite small; some insiders may have founded the business. You can click here to see if those insiders have been buying or selling.

General Public Ownership

The general public holds a 26% stake in ADROITINFO. While this group can't necessarily call the shots, it can certainly have a real influence on how the company is run.

Private Company Ownership

It seems that Private Companies own 50%, of the ADROITINFO stock. 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.

Next Steps:

It's always worth thinking about the different groups who own shares in a company. But to understand Adroit Infotech better, we need to consider many other factors. Consider for instance, the ever-present spectre of investment risk. We've identified 3 warning signs with Adroit Infotech (at least 2 which can't be ignored) , and understanding them should be part of your investment process.

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. 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. Thank you for reading.

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