Ramco Systems Limited's (NSE:RAMCOSYS) last week's 10% decline must have disappointed public companies who have a significant stake

Key Insights

• The considerable ownership by public companies in Ramco Systems indicates that they collectively have a greater say in management and business strategy
• 52% of the business is held by the top 4 shareholders
• 19% of Ramco Systems is held by insiders

To get a sense of who is truly in control of Ramco Systems Limited (NSE:RAMCOSYS), it is important to understand the ownership structure of the business. And the group that holds the biggest piece of the pie are public companies with 36% ownership. Put another way, the group faces the maximum upside potential (or downside risk).

As a result, public companies as a group endured the highest losses last week after market cap fell by ₹1.6b.

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

See our latest analysis for Ramco Systems

What Does The Institutional Ownership Tell Us About Ramco Systems?

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.

We can see that Ramco Systems does have institutional investors; and they hold a good portion of the company's stock. This implies the analysts working for those institutions have looked at the stock and they like it. But just like anyone else, they could be wrong. 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 Ramco Systems' earnings history below. Of course, the future is what really matters.

Ramco Systems is not owned by hedge funds. Looking at our data, we can see that the largest shareholder is Ramco Industries Limited with 19% of shares outstanding. In comparison, the second and third largest shareholders hold about 15% and 13% of the stock. Poosapadi Ramasubrahmaneya Venketrama Raja, who is the third-largest shareholder, also happens to hold the title of Chairman of the Board.

On looking further, we found that 52% of the shares are owned by the top 4 shareholders. In other words, these shareholders have a meaningful say in the decisions of the company.

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 is a little analyst coverage of the stock, but not much. So there is room for it to gain more coverage.

Insider Ownership Of Ramco Systems

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 most recent data indicates that insiders own a reasonable proportion of Ramco Systems Limited. It has a market capitalization of just ₹14b, and insiders have ₹2.7b worth of shares in their own names. This may suggest that the founders still own a lot of shares. You can click here to see if they have been buying or selling.

General Public Ownership

With a 30% ownership, the general public, mostly comprising of individual investors, have some degree of sway over Ramco Systems. 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.

Public Company Ownership

We can see that public companies hold 36% of the Ramco Systems shares on issue. We can't be certain but it is quite possible this is a strategic stake. The businesses may be similar, or work together.

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 learn about the 3 warning signs we've spotted with Ramco Systems (including 1 which makes us a bit uncomfortable) .

If you are like me, you may want to think about whether this company will grow or shrink. Luckily, you can check this free report showing analyst forecasts for its future.

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.