Who Are Golden Tobacco Limited’s (NSE:GOLDENTOBC) Major Shareholders?

Gerald Huddleston

Updated Fri, Mar 30, 2018, 1:27 AM

In this article, I will take a quick look at Golden Tobacco Limited’s (NSEI:GOLDENTOBC) recent ownership structure – an unconventional investing subject, but an important one. The impact of a company’s ownership structure affects both its short- and long-term performance. Differences in ownership structure of companies can have a profound effect on how management’s incentives are aligned with shareholder returns, which is why we’ll take a moment to analyse GOLDENTOBC’s shareholder registry.

Check out our latest analysis for Golden Tobacco

NSEI:GOLDENTOBC Ownership_summary Mar 30th 18

Institutional Ownership

With an institutional ownership of 28.24%, GOLDENTOBC can face volatile stock price movements if institutions execute block trades on the open market, more so, when there are relatively small amounts of shares available on the market to trade Although GOLDENTOBC has a high institutional ownership, such stock moves, in the short-term, are more commonly linked to a particular type of active institutional investors – hedge funds. In the case of GOLDENTOBC, investors need not worry about such volatility considering active hedge funds don’t have a significant stake. However, we should dig deeper into GOLDENTOBC’s ownership structure and find out how other key ownership classes can affect its investment profile.

Insider Ownership

I find insiders are another important group of stakeholders, who are directly involved in making key decisions related to the use of capital. In essence, insider ownership is more about the alignment of shareholders’ interests with the management. GOLDENTOBC insiders hold a not-so-significant 2.57% stake in the company, which somewhat aligns their interests with that of shareholders. However, a higher level of insider ownership has been linked to management executing on high-returning projects instead of expansion projects for the sake of apparent growth. In addition to this, it may be interesting to look at insider buying and selling activities. Keep in mind that buying may be sign of upbeat future expectations, but selling doesn’t necessarily mean the opposite as the insiders might just be doing it out of their personal financial needs.

General Public Ownership

The general public holds a substantial 40.48% stake in GOLDENTOBC, making it a highly popular stock among retail investors. This size of ownership gives retail investors collective power in deciding on major policy decisions such as executive compensation, appointment of directors and acquisitions of businesses. This level of ownership gives retail investors the power to sway key policy decisions such as board composition, executive compensation, and potential acquisitions. This is a positive sign for an investor who wants to be involved in key decision-making of the company.

Private Company Ownership

Potential investors in GOLDENTOBC should also look at another important group of investors: private companies, with a stake of 27.16%, who are primarily invested because of strategic and capital gain interests. With this size of ownership in GOLDENTOBC, this ownership class can affect the company’s business strategy. As a result, potential investors should further explore the company’s business relations with these companies and find out if they can affect shareholder returns in the long-term.

Next Steps:

GOLDENTOBC’s considerably high level of institutional ownership calls for further analysis into its margin of safety. This will allow investors to reduce the impact of non-fundamental factors, such as volatile block trading impact on their portfolio value. However, ownership structure should not be the only focus of your research when constructing an investment thesis around GOLDENTOBC. Instead, you should be evaluating company-specific factors such as the intrinsic valuation, which is a key driver of Golden Tobacco’s share price. I urge you to complete your research by taking a look at the following:

1. Financial Health: Is GOLDENTOBC’s operations financially sustainable? Balance sheets can be hard to analyze, which is why we’ve done it for you. Check out our financial health checks here.
2. Past Track Record: Has GOLDENTOBC been consistently performing well irrespective of the ups and downs in the market? Go into more detail in the past performance analysis and take a look at the free visual representations of GOLDENTOBC’s historicals for more clarity.
3. Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.

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.
To help readers see pass the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price sensitive company announcements.

The author is an independent contributor and at the time of publication had no position in the stocks mentioned.