Is SpiceJet Limited (NSE:SPICEJET) Popular Amongst Insiders?

By
Simply Wall St
Published
February 25, 2022
NSEI:SPICEJET
Source: Shutterstock

A look at the shareholders of SpiceJet Limited (NSE:SPICEJET) can tell us which group is most powerful. Insiders often own a large chunk of younger, smaller, companies while huge companies tend to have institutions as shareholders. I generally like to see some degree of insider ownership, even if only a little. As Nassim Nicholas Taleb said, 'Don’t tell me what you think, tell me what you have in your portfolio.

SpiceJet is not a large company by global standards. It has a market capitalization of ₹34b, which means it wouldn't have the attention of many institutional investors. In the chart below, we can see that institutions are noticeable on the share registry. Let's delve deeper into each type of owner, to discover more about SpiceJet.

See our latest analysis for SpiceJet

ownership-breakdown
NSEI:SPICEJET Ownership Breakdown February 25th 2022

What Does The Institutional Ownership Tell Us About SpiceJet?

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.

SpiceJet already has institutions on the share registry. Indeed, they own a respectable stake in the company. This implies the analysts working for those institutions have looked at the stock and they like it. But just like anyone else, they could be wrong. 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 SpiceJet, (below). Of course, keep in mind that there are other factors to consider, too.

earnings-and-revenue-growth
NSEI:SPICEJET Earnings and Revenue Growth February 25th 2022

Hedge funds don't have many shares in SpiceJet. The company's CEO Ajay Singh is the largest shareholder with 59% of shares outstanding. This essentially means that they have significant control over the outcome or future of the company, which is why insider ownership is usually looked upon favourably by prospective buyers. With 3.0% and 2.5% of the shares outstanding respectively, Franklin Resources, Inc. and HDFC Asset Management Company Limited are the second and third largest shareholders.

While studying institutional ownership for a company can add value to your research, it is also a good practice to research analyst recommendations to get a deeper understand of a stock's expected performance. While there is some analyst coverage, the company is probably not widely covered. So it could gain more attention, down the track.

Insider Ownership Of SpiceJet

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.

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 insiders own more than half of SpiceJet Limited. This gives them effective control of the company. So they have a ₹21b stake in this ₹34b 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

With a 30% ownership, the general public, mostly comprising of individual investors, have some degree of sway over SpiceJet. 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 SpiceJet better, we need to consider many other factors. Like risks, for instance. Every company has them, and we've spotted 2 warning signs for SpiceJet (of which 1 is significant!) you should know about.

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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