Institutions along with public companies who hold considerable shares inSKF India Limited (NSE:SKFINDIA) come under pressure; lose 5.2% of holdings value
Key Insights
- SKF India's significant public companies ownership suggests that the key decisions are influenced by shareholders from the larger public
- The largest shareholder of the company is AB SKF (publ) with a 53% stake
- 33% of SKF India is held by Institutions
To get a sense of who is truly in control of SKF India Limited (NSE:SKFINDIA), it is important to understand the ownership structure of the business. With 53% stake, public companies possess the maximum shares in the company. That is, the group stands to benefit the most if the stock rises (or lose the most if there is a downturn).
While the holdings of public companies took a hit after last week’s 5.2% price drop, institutions with their 33% holdings also suffered.
In the chart below, we zoom in on the different ownership groups of SKF India.
Check out our latest analysis for SKF India
What Does The Institutional Ownership Tell Us About SKF India?
Institutions typically measure themselves against a benchmark when reporting to their own investors, so they often become more enthusiastic about a stock once it's included in a major index. We would expect most companies to have some institutions on the register, especially if they are growing.
As you can see, institutional investors have a fair amount of stake in SKF India. This suggests some credibility amongst professional investors. But we can't rely on that fact alone since institutions make bad investments sometimes, just like everyone does. 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 SKF India's historic earnings and revenue below, but keep in mind there's always more to the story.
SKF India is not owned by hedge funds. Looking at our data, we can see that the largest shareholder is AB SKF (publ) with 53% of shares outstanding. This essentially means that they have extensive influence, if not outright control, over the future of the corporation. HDFC Asset Management Company Limited is the second largest shareholder owning 9.8% of common stock, and Mirae Asset Global Investments Co., Ltd. holds about 7.1% of the company stock.
Researching institutional ownership is a good way to gauge and filter a stock's expected performance. The same can be achieved by studying analyst sentiments. There are plenty of analysts covering the stock, so it might be worth seeing what they are forecasting, too.
Insider Ownership Of SKF India
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.
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 cannot confirm that board members are holding shares personally. It is unusual not to have at least some personal holdings by board members, so our data might be flawed. A good next step would be to check how much the CEO is paid.
General Public Ownership
The general public-- including retail investors -- own 14% stake in the company, and hence can't easily be ignored. 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.
Public Company Ownership
We can see that public companies hold 53% of the SKF India shares on issue. We can't be certain but it is quite possible this is a strategic stake. The businesses may be similar, or work together.
Next Steps:
It's always worth thinking about the different groups who own shares in a company. But to understand SKF India better, we need to consider many other factors. Like risks, for instance. Every company has them, and we've spotted 3 warning signs for SKF India (of which 2 are concerning!) you should know about.
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.
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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.