Institutional investors may overlook Redington (India) Limited's (NSE:REDINGTON) recent ₹10b market cap drop as long-term gains remain positive

By
Simply Wall St
Published
January 22, 2022
NSEI:REDINGTON
Source: Shutterstock

A look at the shareholders of Redington (India) Limited (NSE:REDINGTON) can tell us which group is most powerful. We can see that institutions own the lion's share in the company with 39% ownership. In other words, the group stands to gain the most (or lose the most) from their investment into the company.

Institutional investors was the group most impacted after the company's market cap fell to ₹125b last week. Still, the 141% one-year gains may have helped mitigate their overall losses. They should, however, be mindful of further losses in the future.

In the chart below, we zoom in on the different ownership groups of Redington (India).

View our latest analysis for Redington (India)

ownership-breakdown
NSEI:REDINGTON Ownership Breakdown January 22nd 2022

What Does The Institutional Ownership Tell Us About Redington (India)?

Institutional investors commonly compare their own returns to the returns of a commonly followed index. So they generally do consider buying larger companies that are included in the relevant benchmark index.

We can see that Redington (India) does have institutional investors; and they hold a good portion of the company's stock. 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 Redington (India)'s historic earnings and revenue below, but keep in mind there's always more to the story.

earnings-and-revenue-growth
NSEI:REDINGTON Earnings and Revenue Growth January 22nd 2022

Hedge funds don't have many shares in Redington (India). Our data shows that Synnex Technology International Corporation is the largest shareholder with 24% of shares outstanding. For context, the second largest shareholder holds about 9.2% of the shares outstanding, followed by an ownership of 7.6% by the third-largest shareholder.

We also observed that the top 6 shareholders account for more than half of the share register, with a few smaller shareholders to balance the interests of the larger ones to a certain extent.

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. Quite a few analysts cover the stock, so you could look into forecast growth quite easily.

Insider Ownership Of Redington (India)

While the precise definition of an insider can be subjective, almost everyone considers board members to be insiders. The company management answer to the board and the latter should represent the interests of shareholders. Notably, sometimes top-level managers are on the board themselves.

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 information suggests that Redington (India) Limited insiders own under 1% of the company. We do note, however, it is possible insiders have an indirect interest through a private company or other corporate structure. It is a pretty big company, so it would be possible for board members to own a meaningful interest in the company, without owning much of a proportional interest. In this case, they own around ₹554m worth of shares (at current prices). Arguably, recent buying and selling is just as important to consider. You can click here to see if insiders have been buying or selling.

General Public Ownership

The general public, who are usually individual investors, hold a 30% stake in Redington (India). 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.

Private Company Ownership

It seems that Private Companies own 6.1%, of the Redington (India) stock. Private companies may be related parties. Sometimes insiders have an interest in a public company through a holding in a private company, rather than in their own capacity as an individual. While it's hard to draw any broad stroke conclusions, it is worth noting as an area for further research.

Public Company Ownership

Public companies currently own 24% of Redington (India) stock. 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:

It's always worth thinking about the different groups who own shares in a company. But to understand Redington (India) better, we need to consider many other factors. For instance, we've identified 1 warning sign for Redington (India) that you should be aware of.

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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