Both private companies who control a good portion of Torrent Power Limited (NSE:TORNTPOWER) along with institutions must be dismayed after last week's 6.0% decrease

Key Insights

• The considerable ownership by private companies in Torrent Power indicates that they collectively have a greater say in management and business strategy
• 54% of the company is held by a single shareholder (Torrent Investments Private Limited)
• Institutional ownership in Torrent Power is 33%

To get a sense of who is truly in control of Torrent Power Limited (NSE:TORNTPOWER), it is important to understand the ownership structure of the business. And the group that holds the biggest piece of the pie are private companies with 54% ownership. In other words, the group stands to gain the most (or lose the most) from their investment into the company.

Following a 6.0% decrease in the stock price last week, private companies suffered the most losses, but institutions who own 33% stock also took a hit.

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

See our latest analysis for Torrent Power

What Does The Institutional Ownership Tell Us About Torrent Power?

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.

Torrent Power 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. 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 Torrent Power's historic earnings and revenue below, but keep in mind there's always more to the story.

We note that hedge funds don't have a meaningful investment in Torrent Power. Torrent Investments Private Limited is currently the largest shareholder, with 54% of shares outstanding. This implies that they have majority interest control of the future of the company. Gujarat State Financial Services Ltd., Asset Management Arm is the second largest shareholder owning 9.8% of common stock, and Axis Asset Management Company Limited holds about 5.8% of the company stock.

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

Insider Ownership Of Torrent Power

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. 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.

Our data suggests that insiders own under 1% of Torrent Power Limited in their own names. We do note, however, it is possible insiders have an indirect interest through a private company or other corporate structure. It is a very large company, so it would be surprising to see insiders own a large proportion of the company. Though their holding amounts to less than 1%, we can see that board members collectively own ₹34m worth of shares (at current prices). It is good to see board members owning shares, but it might be worth checking if those insiders have been buying.

General Public Ownership

With a 11% ownership, the general public, mostly comprising of individual investors, have some degree of sway over Torrent Power. While this size of ownership may not be enough to sway a policy decision in their favour, they can still make a collective impact on company policies.

Private Company Ownership

Our data indicates that Private Companies hold 54%, of the company's shares. 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.

Next Steps:

It's always worth thinking about the different groups who own shares in a company. But to understand Torrent Power better, we need to consider many other factors. For instance, we've identified 2 warning signs for Torrent Power 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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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.