In This Article:
In this analysis, my focus will be on developing a perspective on The Fertilisers And Chemicals Travancore Limited’s (NSEI:FACT) latest ownership structure, a less discussed, but important factor. Ownership structure has been found to have an impact on shareholder returns in both short- and long-term. 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 FACT’s shareholder registry.
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Institutional Ownership
Institutional investors are one of the largest group of market participants and their buy-sell decisions on a company’s stock can significantly impact prices, more so, when there are relatively small amounts of shares available on the market to trade. With an institutional ownership of 8.56%, FACT doesn’t seem too exposed to higher volatility resulting from institutional trading.
Insider Ownership
Another important group of shareholders are company insiders. Insider ownership has to do more with how the company is managed and less to do with the direct impact of the magnitude of shares trading on the market. Although individuals in FACT hold only a minor stake, it’s a good sign for shareholders as the company’s executives and directors have their incentives directly linked to the company’s performance. It would also be interesting to check what insiders have been doing with their shareholding recently. Insider buying can be a positive indicator of future performance, but a selling decision can be simply driven by personal financial requirements.
General Public Ownership
With 1.00% ownership, the general public are a relatively smaller ownership class in FACT. This size of ownership, while considerably small for a public company, may not be enough to change company policy if the decision is not in sync with other large shareholders.
Next Steps:
With a low level of institutional ownership, investors in FACT need not worry about non-fundamental factors such as ownership structure causing large impact on stock prices. However, ownership structure should not be the only determining factor when you’re building an investment thesis for FACT. Instead, you should be evaluating company-specific factors such as the intrinsic valuation, which is a key driver of Fertilisers And Chemicals Travancore’s share price. I urge you to complete your research by taking a look at the following: