Olectra Greentech Limited’s (NSE:OLECTRA) last week’s 15% decline must have disappointed private companies who have a significant stake

To get a sense of who is truly in control of Olectra Greentech Limited (NSE:OLECTRA), it is important to understand the ownership structure of the business. With 56% stake, private companies possess the maximum shares in the company. Put another way, the group faces the maximum upside potential (or downside risk).

As market cap fell to ₹46b last week, private companies would have faced the highest losses than any other shareholder groups of the company.

In the chart below, we zoom in on the different ownership groups of Olectra Greentech.

View our latest analysis for Olectra Greentech

What Does The Institutional Ownership Tell Us About Olectra Greentech?

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.

Olectra Greentech already has institutions on the share registry. Indeed, they own a respectable stake in the company. 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. It is not uncommon to see a big share price drop if two large institutional investors try to sell out of a stock at the same time. So it is worth checking the past earnings trajectory of Olectra Greentech, (below). Of course, keep in mind that there are other factors to consider, too.

We note that hedge funds don’t have a meaningful investment in Olectra Greentech. Megha Engineering & Infrastructures Limited is currently the company’s largest shareholder with 50% of shares outstanding. This implies that they have majority interest control of the future of the company. With 4.2% and 3.8% of the shares outstanding respectively, Gyanmay Investment Advisors LLP and Nomura Asset Management Co., Ltd. are the second and third largest shareholders.

While studying institutional ownership for a company can add value to your research, it is also a good practice to research analyst recommendations to get a deeper understand of a stock’s expected performance. Our information suggests that there isn’t any analyst coverage of the stock, so it is probably little known.

Insider Ownership Of Olectra Greentech

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.

Insider ownership is positive when it signals leadership are thinking like the true owners of the company. However, high insider ownership can also give immense power to a small group within the company. This can be negative in some circumstances.

Our most recent data indicates that insiders own some shares in Olectra Greentech Limited. As individuals, the insiders collectively own ₹2.7b worth of the ₹46b company. It is good to see some investment by insiders, but it might be worth checking if those insiders have been buying.

General Public Ownership

The general public, who are usually individual investors, hold a 31% stake in Olectra Greentech. 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.

Private Company Ownership

Our data indicates that Private Companies hold 56%, of the company’s shares. It might be worth looking deeper into this. If related parties, such as insiders, have an interest in one of these private companies, that should be disclosed in the annual report. Private companies may also have a strategic interest in the company.

Next Steps:

While it is well worth considering the different groups that own a company, there are other factors that are even more important. Take risks for example – Olectra Greentech has 1 warning sign we think you should be aware of.

Of course this may not be the best stock to buy. Therefore, you may wish to see our free collection of interesting prospects boasting favorable financials.

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.