Every investor in Hikal Limited (NSE:HIKAL) should be aware of the most powerful shareholder groups. Insiders often own a large chunk of younger, smaller, companies while huge companies tend to have institutions as shareholders. I quite like to see at least a little bit of insider ownership. As Charlie Munger said ‘Show me the incentive and I will show you the outcome.’

Hikal is a smaller company with a market capitalization of ₹20.18b, so it may still be flying under the radar of many institutional investors. In the chart below below, we can see that institutions own shares in the company. Let’s take a closer look to see what the different types of shareholder can tell us about HIKAL.

View our latest analysis for Hikal

What Does The Institutional Ownership Tell Us About Hikal?

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 Hikal does have institutional investors; and they hold 14.7% of the 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 Hikal’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 Hikal. 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 Hikal

While the precise definition of an insider can be subjective, almost everyone considers board members to be insiders. 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.

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 maintain a significant holding in Hikal Limited. Insiders have a ₹2.14b stake in this ₹20.18b business. I would say this shows alignment with shareholders, but it is worth noting that the company is still quite small; some insiders may have founded the business. You can click here to see if those insiders have been buying or selling.