Centum Electronics Limited (NSE:CENTUM) CEO Apparao Mallavarapu's holdings dropped 12% in value as a result of the recent pullback

Key Insights

• Centum Electronics' significant insider ownership suggests inherent interests in company's expansion
• A total of 2 investors have a majority stake in the company with 51% ownership
• Ownership research, combined with past performance data can help provide a good understanding of opportunities in a stock

If you want to know who really controls Centum Electronics Limited (NSE:CENTUM), then you'll have to look at the makeup of its share registry. We can see that individual insiders own the lion's share in the company with 69% ownership. That is, the group stands to benefit the most if the stock rises (or lose the most if there is a downturn).

As market cap fell to ₹21b last week, insiders would have faced the highest losses than any other shareholder groups of the company.

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

Check out our latest analysis for Centum Electronics

What Does The Institutional Ownership Tell Us About Centum Electronics?

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.

As you can see, institutional investors have a fair amount of stake in Centum Electronics. This can indicate that the company has a certain degree of credibility in the investment community. However, it is best to be wary of relying on the supposed validation that comes with institutional investors. They too, get it wrong sometimes. When multiple institutions own a stock, there's always a risk that they are in a 'crowded trade'. When such a trade goes wrong, multiple parties may compete to sell stock fast. This risk is higher in a company without a history of growth. You can see Centum Electronics' historic earnings and revenue below, but keep in mind there's always more to the story.

We note that hedge funds don't have a meaningful investment in Centum Electronics. With a 46% stake, CEO Apparao Mallavarapu is the largest shareholder. In comparison, the second and third largest shareholders hold about 5.1% and 5.0% of the stock. Interestingly, the second and third-largest shareholders also happen to be the Senior Key Executive and Member of the Board of Directors, respectively. This once again signifies considerable insider ownership amongst the company's top shareholders.

A more detailed study of the shareholder registry showed us that 2 of the top shareholders have a considerable amount of ownership in the company, via their 51% stake.

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 Centum Electronics

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.

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 own more than half of Centum Electronics Limited. This gives them effective control of the company. Given it has a market cap of ₹21b, that means they have ₹14b worth of shares. It is good to see this level of investment. You can check here to see if those insiders have been buying recently.

General Public Ownership

With a 21% ownership, the general public, mostly comprising of individual investors, have some degree of sway over Centum Electronics. While this group can't necessarily call the shots, it can certainly have a real influence on how the company is run.

Next Steps:

I find it very interesting to look at who exactly owns a company. But to truly gain insight, we need to consider other information, too. Like risks, for instance. Every company has them, and we've spotted 3 warning signs for Centum Electronics (of which 1 makes us a bit uncomfortable!) you should know about.

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.