Centum Electronics Limited (NSE:CENTUM) insiders still own 68% despite recent sales, but recent decline may have cost them

Key Insights

• Significant insider control over Centum Electronics implies vested interests in company growth
• A total of 2 investors have a majority stake in the company with 51% ownership
• Recent sales by insiders

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 68% ownership. Put another way, the group faces the maximum upside potential (or downside risk).

Despite recent sales, insiders own the most shares in the company. As a result, the group bore the brunt of last week’s ₹2.5b market cap loss.

Let's take a closer look to see what the different types of shareholders can tell us about Centum Electronics.

Check out our latest analysis for Centum Electronics

What Does The Institutional Ownership Tell Us About Centum Electronics?

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.

Centum Electronics 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 Centum Electronics, (below). Of course, keep in mind that there are other factors to consider, too.

Centum Electronics is not owned by hedge funds. The company's CEO Apparao Mallavarapu is the largest shareholder with 46% of shares outstanding. Nikhil Mallavarapu is the second largest shareholder owning 5.1% of common stock, and Tanya Mallavarapu holds about 5.0% of the company stock. Note that two of the top three shareholders are also Senior Key Executive and Member of the Board of Directors, respectively, once again pointing to significant ownership by company insiders.

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.

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. There is some analyst coverage of the stock, but it could still become more well known, with time.

Insider Ownership Of Centum Electronics

While the precise definition of an insider can be subjective, almost everyone considers board members to be insiders. 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 most recent data indicates that insiders own the majority of Centum Electronics Limited. This means they can collectively make decisions for the company. So they have a ₹15b stake in this ₹22b business. Most would argue this is a positive, showing strong alignment with shareholders. You can click here to see if those insiders have been buying or selling.

General Public Ownership

The general public, who are usually individual investors, hold a 22% stake in Centum Electronics. 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.

Next Steps:

It's always worth thinking about the different groups who own shares in a company. But to understand Centum Electronics better, we need to consider many other factors. Case in point: We've spotted 2 warning signs for Centum Electronics you should be aware of, and 1 of them doesn't sit too well with us.

But ultimately it is the future, not the past, that will determine how well the owners of this business will do. Therefore we think it advisable to take a look at this free report showing whether analysts are predicting a brighter 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.