Private companies are Elecon Engineering Company Limited's (NSE:ELECON) biggest owners and were hit after market cap dropped ₹4.9b

Key Insights

• Elecon Engineering's significant private companies ownership suggests that the key decisions are influenced by shareholders from the larger public
• 55% of the business is held by the top 2 shareholders
• Using data from company's past performance alongside ownership research, one can better assess the future performance of a company

We've found 21 US stocks that are forecast to pay a dividend yield of over 6% next year. See the full list for free.

Every investor in Elecon Engineering Company Limited (NSE:ELECON) should be aware of the most powerful shareholder groups. We can see that private companies own the lion's share in the company with 55% ownership. Put another way, the group faces the maximum upside potential (or downside risk).

As market cap fell to ₹106b last week, private companies would have faced the highest losses than any other shareholder groups of the company.

Let's delve deeper into each type of owner of Elecon Engineering, beginning with the chart below.

See our latest analysis for Elecon Engineering

What Does The Institutional Ownership Tell Us About Elecon Engineering?

Institutional investors commonly compare their own returns to the returns of a commonly followed index. So they generally do consider buying larger companies that are included in the relevant benchmark index.

Elecon Engineering 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 Elecon Engineering, (below). Of course, keep in mind that there are other factors to consider, too.

Hedge funds don't have many shares in Elecon Engineering. Aakaaish Investments Private Limited is currently the company's largest shareholder with 47% of shares outstanding. In comparison, the second and third largest shareholders hold about 8.7% and 1.8% of the stock. In addition, we found that Prayasvin Patel, the CEO has 1.7% of the shares allocated to their name.

After doing some more digging, we found that the top 2 shareholders collectively control more than half of the company's shares, implying that they have considerable power to influence the company's decisions.

While it makes sense to study institutional ownership data for a company, it also makes sense to study analyst sentiments to know which way the wind is blowing. There is a little analyst coverage of the stock, but not much. So there is room for it to gain more coverage.

Insider Ownership Of Elecon Engineering

The definition of an insider can differ slightly between different countries, but members of the board of directors always count. 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.

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.

Shareholders would probably be interested to learn that insiders own shares in Elecon Engineering Company Limited. This is a big company, so it is good to see this level of alignment. Insiders own ₹7.1b worth of shares (at current prices). Most would say this shows alignment of interests between shareholders and the board. Still, it might be worth checking if those insiders have been selling.

General Public Ownership

The general public-- including retail investors -- own 29% stake in the company, and hence can't easily be ignored. This size of ownership, while considerable, may not be enough to change company policy if the decision is not in sync with other large shareholders.

Private Company Ownership

Our data indicates that Private Companies hold 55%, of the company's shares. Private companies may be related parties. Sometimes insiders have an interest in a public company through a holding in a private company, rather than in their own capacity as an individual. While it's hard to draw any broad stroke conclusions, it is worth noting as an area for further research.

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 - Elecon Engineering has 1 warning sign we think you should be aware of.

But ultimately it is the future, not the past, that will determine how well the owners of this business will do. Therefore we think it advisable to take a look at this free report showing whether analysts are predicting a brighter 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.