If you want to know who really controls Tata Communications Limited (NSE:TATACOMM), you need to look at the composition of the share register. The group with the most shares in the company, around 59%, are private companies. In other words, the group is exposed to maximum upside (or downside risk).
On the other hand, institutions own 24% of the company. In general, as a company grows, institutions increase their ownership. Conversely, insiders often diminish their holdings over time.
In the chart below, we zoom in on the different ownership groups of Tata Communications.
Check out our latest analysis for Tata Communications
What does institutional ownership tell us about Tata Communications?
Institutional investors typically compare their own returns to the returns of a commonly tracked index. As such, they typically consider buying larger companies that are included in the relevant benchmark index.
As you can see, institutional investors have a significant stake in Tata Communications. This suggests some credibility among professional investors. But we can’t rely on that alone, as institutions sometimes make bad investments, just like everyone else. If several institutes change their opinion on a stock at the same time, the share price could fall quickly. It’s therefore worth taking a look at Tata Communications’ earnings development below. Of course, what really matters is the future.
Apparently, 5.2% of Tata Communications shares are controlled by hedge funds. This catches my attention because hedge funds sometimes try to influence management or enact changes that create value for shareholders in the short term. Tata Sons Private Limited is currently the company’s largest shareholder with 59% of the outstanding shares. Essentially, this means that they have extensive influence, if not control, over the future of the company. East Bridge Capital Management Lp and Life Insurance Corporation of India, Asset Management Arm are the second and third largest shareholders with 5.2% and 3.4% of outstanding shares, respectively.
While it makes sense to study institutional ownership data for a company, it also makes sense to study analyst sentiment to know which way the wind is blowing. Quite a few analysts cover the stock, so you can easily look at the projected growth.
Insider ownership of Tata Communications
The definition of corporate insider can be subjective and varies by jurisdiction. Our data reflects individual insiders and captures at least board members. Management ultimately reports to the board of directors. However, it is not uncommon for managers to be board members, especially if they are founders or CEOs.
Insider ownership is positive when it signals leadership thinks like the true owners of the company. However, a high proportion of insiders can give immense power to even a small group within the organization. This can sometimes be negative.
Our information indicates that Tata Communications Limited insiders own less than 1% of the company. However, it is possible that insiders could have an indirect interest through a more complex structure. It’s a big company, so even a small proportional stake can create alignment between the board and shareholders. In this case, insiders own £2.2m worth of shares. It’s always good to see at least some insider owners, but it might be worth checking to see if those insiders have sold.
General Public Property
The general public, typically individual investors, own 12% of Tata Communications. While this group may not necessarily be in charge, it certainly can have a real impact on how the company is run.
Private company property
It appears that private companies own 59% of Tata Communications shares. It’s hard to draw any conclusions from this fact alone, so it’s worth investigating who owns these private companies. Sometimes insiders or other related parties have an interest in stock in a public company through a separate private company.
It’s always worth thinking about the different groups that own shares in a company. But to better understand Tata Communications, we need to consider many other factors. Note that Tata Communications is displayed 2 warning signs in our investment analysis you should know that…
If you’re like me, you might want to think about whether this company is going to grow or shrink. Luckily, you can check out this free report that includes analyst forecasts for the future.
Note: The figures in this article are calculated using data for the last twelve months, relating to the 12-month period ending on the last date of the month to which the financial statements are dated. This may not tally with the annual report figures for the full year.
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This Simply Wall St article is of a general nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended as financial advice. It is not a recommendation to buy or sell any stock and does not take into account your goals or financial situation. Our goal is to offer you long-term focused analysis based on fundamental data. Note that our analysis may not take into account the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any of the stocks mentioned.
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