What Kind Of Shareholders Own ELGI Equipments Limited (NSE:ELGIEQUIP)?

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Simply Wall St

Sun, Sep 22, 2019, 7:38 PM

Every investor in ELGI Equipments Limited (NSE:ELGIEQUIP) should be aware of the most powerful shareholder groups. Large companies usually have institutions as shareholders, and we usually see insiders owning shares in smaller companies. Warren Buffett said that he likes 'a business with enduring competitive advantages that is run by able and owner-oriented people'. So it's nice to see some insider ownership, because it may suggest that management is owner-oriented.

ELGI Equipments is not a large company by global standards. It has a market capitalization of ₹41b, which means it wouldn't have the attention of many institutional investors. In the chart below below, we can see that institutional investors have bought into the company. Let's delve deeper into each type of owner, to discover more about ELGIEQUIP.

See our latest analysis for ELGI Equipments

NSEI:ELGIEQUIP Ownership Summary, September 23rd 2019

What Does The Institutional Ownership Tell Us About ELGI Equipments?

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 ELGI Equipments does have institutional investors; and they hold 26% of the stock. 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 ELGI Equipments's historic earnings and revenue, below, but keep in mind there's always more to the story.

NSEI:ELGIEQUIP Income Statement, September 22nd 2019

Our data indicates that hedge funds own 8.7% of ELGI Equipments. That worth noting, since hedge funds are often quite active investors, who may try to influence management. Many want to see value creation (and a higher share price) in the short term or medium term. There are a reasonable number of analysts covering the stock, so it might be useful to find out their aggregate view on the future.

Insider Ownership Of ELGI Equipments

The definition of an insider can differ slightly between different countries, but members of the board of directors always count. Company management run the business, but the CEO will answer to the board, even if he or she is a member of it.

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.

It seems insiders own a significant proportion of ELGI Equipments Limited. Insiders have a ₹5.1b stake in this ₹41b business. This may suggest that the founders still own a lot of shares. You can click here to see if they have been buying or selling.

General Public Ownership

With a 27% ownership, the general public have some degree of sway over ELGIEQUIP. While this group can't necessarily call the shots, it can certainly have a real influence on how the company is run.

Private Company Ownership

It seems that Private Companies own 22%, of the ELGIEQUIP stock. It's hard to draw any conclusions from this fact alone, so its worth looking into who owns those private companies. Sometimes insiders or other related parties have an interest in shares in a public company through a separate private company.

Public Company Ownership

Public companies currently own 4.0% of ELGIEQUIP stock. This may be a strategic interest and the two companies may have related business interests. It could be that they have de-merged. This holding is probably worth investigating further.

Next Steps:

While it is well worth considering the different groups that own a company, there are other factors that are even more important.

I always like to check for a history of revenue growth. You can too, by accessing this free chart of historic revenue and earnings in this detailed graph.

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.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.

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