Stock Analysis

Private companies invested in Sterlite Technologies Limited (NSE:STLTECH) copped the brunt of last week's ₹4.8b market cap decline

Source: Shutterstock

Key Insights

  • The considerable ownership by private companies in Sterlite Technologies indicates that they collectively have a greater say in management and business strategy
  • Twin Star Overseas Ltd. owns 53% of the company
  • Institutions own 14% of Sterlite Technologies

A look at the shareholders of Sterlite Technologies Limited (NSE:STLTECH) can tell us which group is most powerful. With 59% stake, private companies possess the maximum shares in the company. Put another way, the group faces the maximum upside potential (or downside risk).

As market cap fell to ₹64b last week, private companies would have faced the highest losses than any other shareholder groups of the company.

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

See our latest analysis for Sterlite Technologies

NSEI:STLTECH Ownership Breakdown March 16th 2023

What Does The Institutional Ownership Tell Us About Sterlite Technologies?

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.

We can see that Sterlite Technologies 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 Sterlite Technologies' historic earnings and revenue below, but keep in mind there's always more to the story.

NSEI:STLTECH Earnings and Revenue Growth March 16th 2023

Sterlite Technologies is not owned by hedge funds. The company's largest shareholder is Twin Star Overseas Ltd., with ownership of 53%. This essentially means that they have extensive influence, if not outright control, over the future of the corporation. Blue Diamond Properties Pvt Ltd is the second largest shareholder owning 5.2% of common stock, and Nippon Life India Asset Management Limited holds about 3.5% of the company stock.

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

Insider Ownership Of Sterlite Technologies

The definition of an insider can differ slightly between different countries, but members of the board of directors always count. 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.

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.

Shareholders would probably be interested to learn that insiders own shares in Sterlite Technologies Limited. As individuals, the insiders collectively own ₹1.9b worth of the ₹64b company. It is good to see some investment by insiders, but it might be worth checking if those insiders have been buying.

General Public Ownership

The general public, who are usually individual investors, hold a 23% stake in Sterlite Technologies. While this group can't necessarily call the shots, it can certainly have a real influence on how the company is run.

Private Company Ownership

We can see that Private Companies own 59%, of the shares on issue. It might be worth looking deeper into this. If related parties, such as insiders, have an interest in one of these private companies, that should be disclosed in the annual report. Private companies may also have a strategic interest in the company.

Next Steps:

While it is well worth considering the different groups that own a company, there are other factors that are even more important. Consider for instance, the ever-present spectre of investment risk. We've identified 3 warning signs with Sterlite Technologies (at least 1 which doesn't sit too well with us) , and understanding them should be part of your investment process.

Ultimately the future is most important. You can access this free report on analyst forecasts for the company.

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.

Valuation is complex, but we're helping make it simple.

Find out whether Sterlite Technologies is potentially over or undervalued by checking out our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.

View the Free Analysis