Following recent decline, Newgen Software Technologies Limited's (NSE:NEWGEN) top shareholder Top Key Executive T. Varadarajan sees holdings value drop by 6.1%

Key Insights

• Newgen Software Technologies' significant insider ownership suggests inherent interests in company's expansion
• 54% of the business is held by the top 3 shareholders
• 16% of Newgen Software Technologies is held by Institutions

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A look at the shareholders of Newgen Software Technologies Limited (NSE:NEWGEN) can tell us which group is most powerful. We can see that individual insiders own the lion's share in the company with 54% ownership. In other words, the group stands to gain the most (or lose the most) from their investment into the company.

And last week, insiders endured the biggest losses as the stock fell by 6.1%.

In the chart below, we zoom in on the different ownership groups of Newgen Software Technologies.

See our latest analysis for Newgen Software Technologies

What Does The Institutional Ownership Tell Us About Newgen Software Technologies?

Many institutions measure their performance against an index that approximates the local market. So they usually pay more attention to companies that are included in major indices.

Newgen Software Technologies already has institutions on the share registry. Indeed, they own a respectable stake in the company. 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. It is not uncommon to see a big share price drop if two large institutional investors try to sell out of a stock at the same time. So it is worth checking the past earnings trajectory of Newgen Software Technologies, (below). Of course, keep in mind that there are other factors to consider, too.

We note that hedge funds don't have a meaningful investment in Newgen Software Technologies. From our data, we infer that the largest shareholder is T. Varadarajan (who also holds the title of Top Key Executive) with 22% of shares outstanding. Its 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 play the role of a key stakeholder. For context, the second largest shareholder holds about 22% of the shares outstanding, followed by an ownership of 9.3% by the third-largest shareholder. Interestingly, the second and third-largest shareholders also happen to be the Top Key Executive and Member of the Board of Directors, respectively. This once again signifies considerable insider ownership amongst the company's top shareholders.

After doing some more digging, we found that the top 3 shareholders collectively control more than half of the company's shares, implying that they have considerable power to influence the company's decisions.

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. There are a reasonable number of analysts covering the stock, so it might be useful to find out their aggregate view on the future.

Insider Ownership Of Newgen Software Technologies

The definition of an insider can differ slightly between different countries, but members of the board of directors always count. 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 information suggests that insiders own more than half of Newgen Software Technologies Limited. This gives them effective control of the company. That means insiders have a very meaningful ₹95b stake in this ₹176b business. 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-- including retail investors -- own 25% stake in the company, and hence can't easily be ignored. While this group can't necessarily call the shots, it can certainly have a real influence on how the company is run.

Private Equity Ownership

Private equity firms hold a 5.5% stake in Newgen Software Technologies. This suggests they can be influential in key policy decisions. Sometimes we see private equity stick around for the long term, but generally speaking they have a shorter investment horizon and -- as the name suggests -- don't invest in public companies much. After some time they may look to sell and redeploy capital elsewhere.

Next Steps:

While it is well worth considering the different groups that own a company, there are other factors that are even more important. Consider for instance, the ever-present spectre of investment risk. We've identified 3 warning signs with Newgen Software Technologies (at least 1 which can't be ignored) , and understanding them should be part of your investment process.

If you would prefer discover what analysts are predicting in terms of future growth, do not miss this free report on analyst forecasts.

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.