SJVN Limited's (NSE:SJVN) last week's 5.9% decline must have disappointed state or government who have a significant stake

Key Insights

• Significant control over SJVN by state or government implies that the general public has more power to influence management and governance-related decisions
• India owns 55% of the company
• Using data from analyst forecasts alongside ownership research, one can better assess the future performance of a company

Every investor in SJVN Limited (NSE:SJVN) should be aware of the most powerful shareholder groups. We can see that state or government own the lion's share in the company with 82% ownership. In other words, the group stands to gain the most (or lose the most) from their investment into the company.

As a result, state or government as a group endured the highest losses last week after market cap fell by ₹22b.

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

Check out our latest analysis for SJVN

What Does The Institutional Ownership Tell Us About SJVN?

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.

SJVN already has institutions on the share registry. Indeed, they own a respectable stake in the company. 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. 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 SJVN, (below). Of course, keep in mind that there are other factors to consider, too.

We note that hedge funds don't have a meaningful investment in SJVN. Our data shows that India is the largest shareholder with 55% of shares outstanding. This essentially means that they have extensive influence, if not outright control, over the future of the corporation. Government of Himachal Pradesh is the second largest shareholder owning 27% of common stock, and Life Insurance Corporation of India, Asset Management Arm holds about 2.5% of the company stock.

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 are plenty of analysts covering the stock, so it might be worth seeing what they are forecasting, too.

Insider Ownership Of SJVN

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. Company management run the business, but the CEO will answer to the board, even if he or she is a member of it.

Insider ownership is positive when it signals leadership are thinking like the true owners of the company. However, high insider ownership can also give immense power to a small group within the company. This can be negative in some circumstances.

Our information suggests that SJVN Limited insiders own under 1% of the company. 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 ₹278k worth of shares (at current prices). It is always good to see at least some insider ownership, but it might be worth checking if those insiders have been selling.

General Public Ownership

The general public-- including retail investors -- own 11% stake in the company, and hence can't easily be ignored. 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 SJVN better, we need to consider many other factors. Take risks for example - SJVN has 2 warning signs (and 1 which makes us a bit uncomfortable) we think you should know about.

If you are like me, you may want to think about whether this company will grow or shrink. Luckily, you can check this free report showing analyst forecasts for its 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.