Avantel Limited's (NSE:AVANTEL) last week's 13% decline must have disappointed retail investors who have a significant stake

Key Insights

• Significant control over Avantel by retail investors implies that the general public has more power to influence management and governance-related decisions
• A total of 22 investors have a majority stake in the company with 49% ownership
• Insiders have sold recently

If you want to know who really controls Avantel Limited (NSE:AVANTEL), then you'll have to look at the makeup of its share registry. And the group that holds the biggest piece of the pie are retail investors with 51% ownership. Put another way, the group faces the maximum upside potential (or downside risk).

While insiders who own 44% came under pressure after market cap dropped to ₹28b last week,retail investors took the most losses.

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

View our latest analysis for Avantel

What Does The Institutional Ownership Tell Us About Avantel?

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.

Since institutions own only a small portion of Avantel, many may not have spent much time considering the stock. But it's clear that some have; and they liked it enough to buy in. So if the company itself can improve over time, we may well see more institutional buyers in the future. When multiple institutional investors want to buy shares, we often see a rising share price. The past revenue trajectory (shown below) can be an indication of future growth, but there are no guarantees.

Avantel is not owned by hedge funds. The company's CEO Abburi Vidyasagar is the largest shareholder with 16% of shares outstanding. With 7.8% and 6.3% of the shares outstanding respectively, Abburi Sagar and A. Sailaja are the second and third largest shareholders. Interestingly, the second-largest shareholder, Abburi Sagar is also Senior Key Executive, again, pointing towards strong insider ownership amongst the company's top shareholders.

Our studies suggest that the top 22 shareholders collectively control less than half of the company's shares, meaning that the company's shares are widely disseminated and there is no dominant shareholder.

Researching institutional ownership is a good way to gauge and filter a stock's expected performance. The same can be achieved by studying analyst sentiments. As far as we can tell there isn't analyst coverage of the company, so it is probably flying under the radar.

Insider Ownership Of Avantel

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.

I generally consider insider ownership to be a good thing. However, on some occasions it makes it more difficult for other shareholders to hold the board accountable for decisions.

Our information suggests that insiders maintain a significant holding in Avantel Limited. It has a market capitalization of just ₹28b, and insiders have ₹12b worth of shares in their own names. It is great to see insiders so invested in the business. It might be worth checking if those insiders have been buying recently.

General Public Ownership

The general public, who are usually individual investors, hold a substantial 51% stake in Avantel, suggesting it is a fairly popular stock. This level of ownership gives investors from the wider public some power to sway key policy decisions such as board composition, executive compensation, and the dividend payout ratio.

Next Steps:

While it is well worth considering the different groups that own a company, there are other factors that are even more important. For example, we've discovered 1 warning sign for Avantel that you should be aware of before investing here.

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this 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.