Institutional investors are Orient Electric Limited’s (NSE:ORIENTELEC) biggest bettors and rewarded after last week’s ₹4.8bn market cap gain

If you want to know who actually controls Orient Electric Limited (NSE: ORIENTELEC), you will need to look at the composition of its share register. The group with the largest number of shares in the company, around 37% to be precise, are institutions. That is, the group will benefit the most if the stock goes up (or lose the most if there is a downturn).

And last week, institutional investors ended up benefiting the most after the company hit ₹73 billion in market capitalization. The one-year shareholder return is currently 13% and last week’s gain was the icing on the cake.

Let’s take a closer look at what different types of shareholders can tell us about Orient Electric.

See our latest analysis for Orient Electric

NSEI: ORIENTELEC Ownership Breakdown April 8, 2022

What does institutional ownership tell us about Orient Electric?

Institutional investors typically compare their own returns to the returns of a commonly tracked index. They therefore generally consider buying larger companies that are included in the relevant benchmark.

Orient Electric already has institutions registered in the share register. Indeed, they hold a respectable stake in the company. This implies that analysts working for these institutions have reviewed the stock and like it. But like everyone else, they can be wrong. It is not uncommon to see a sharp decline in the stock price if two large institutional investors attempt to sell a stock at the same time. So it’s worth checking out Orient Electric’s past earnings trajectory (below). Of course, keep in mind that there are other factors to consider as well.

earnings-and-revenue-growth
NSEI: ORIENTELEC Earnings and Revenue Growth April 8, 2022

We note that hedge funds have no significant investment in Orient Electric. Central India Industries Limited is currently the largest shareholder of the company with 25% of the outstanding shares. In comparison, the second and third shareholders hold approximately 6.4% and 6.1% of the shares.

We dug a little deeper and found that 8 of the major shareholders make up about 52% of the register, implying that along with the large shareholders, there are a few smaller shareholders, thus balancing everyone’s interests somewhat.

While studying the institutional ownership of a company can add value to your research, it is also recommended that you research analyst recommendations to better understand a stock’s expected performance. There are plenty of analysts covering the stock, so it might be interesting to see what they are predicting as well.

Insider Ownership of Orient Electric

While the precise definition of an insider can be subjective, almost everyone considers board members to be insiders. Management is ultimately responsible to the board of directors. However, it is not uncommon for managers to be members of the management board, especially if they are founders or CEOs.

Most view insider ownership as a positive because it can indicate that the board is well aligned with other shareholders. However, there are times when too much power is concentrated within this group.

We can see insiders holding shares in Orient Electric Limited. It has a market cap of just ₹73 billion, and insiders have shares worth ₹2.6 billion, in their own name. Some would say this shows the alignment of interests between shareholders and the board. But it might be worth checking to see if these insiders have sold.

General public property

With a 22% stake, the general public, consisting mainly of individual investors, has some influence over Orient Electric. This size of ownership, although considerable, may not be sufficient to change company policy if the decision is not in line with other large shareholders.

Private Company Ownership

Our data indicates that private companies own 37% of the company’s shares. Private companies can be related parties. Sometimes insiders have an interest in a public company through a stake in a private company, rather than in their own capacity as individuals. Although it is difficult to draw general conclusions, it should be noted that this is an area for further research.

Next steps:

I find it very interesting to see who exactly owns a business. But to really get insight, we also need to consider other information. Take risks for example – Orient Electric has 1 warning sign we think you should know.

If you prefer to find out what analysts are predicting in terms of future growth, don’t miss this free analyst forecast report.

NB: The figures in this article are calculated using trailing twelve month data, which refers to the 12 month period ending on the last day of the month in which the financial statements are dated. This may not be consistent with the annual report figures for the full year.

This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts only using unbiased methodology and our articles are not intended to be financial advice. It is not a recommendation to buy or sell stocks and does not take into account your objectives or financial situation. Our goal is to bring you targeted long-term analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price-sensitive companies or qualitative materials. Simply Wall St has no position in the stocks mentioned.

Comments are closed.