Key ideas
- The significant control over Torrent Power by private companies means that the general public has more power to influence decisions related to management and governance.
- Torrent Investments Private Limited owns 54% of the company
- Institutions own 34% of Torrent Power
A look at the shareholders of Torrent Power Limited (NSE: TORNTPOWER) can tell us which group is more powerful. The group with the largest number of shares in the company, around 54% specifically, is that of private companies. Put another way, the group faces maximum upside potential (or downside risk).
And the institutions on the other hand have a 34% stake in the company. Large companies often have institutions as shareholders, and we often see insiders owning shares in smaller companies.
Let's dive into each type of Torrent Power owner, starting with the chart below.
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What does institutional ownership tell us about Torrent Power?
Institutional investors commonly compare their own returns to the returns of a commonly followed index. Therefore, they generally consider buying larger companies that are included in the relevant benchmark.
We can see that Torrent Power has institutional investors; and they own a good part of the shares of the company. This implies that the analysts who work for those institutions have looked at the stock and like it. But just like anyone else, they could be wrong. When multiple institutions own a stock, there is always the risk that they will find themselves in a 'crowded trade'. When such a deal goes wrong, multiple parties may compete to sell shares quickly. This risk is greater in a company with no history of growth. You can see Torrent Power's historical earnings and revenue below, but keep in mind that there's always more to the story.
Torrent Power is not owned by hedge funds. Looking at our data, we can see that the largest shareholder is Torrent Investments Private Limited with 54% of the outstanding shares. With such a large ownership stake, we infer that they have significant control of the future of the company. By comparison, the second and third largest shareholders own around 9.8% and 8.4% of the shares.
While studying a company's institutional ownership can add value to your research, it's also good practice to research analyst recommendations to gain a deeper understanding of a stock's expected return. There are a reasonable number of analysts covering the stock, so it might be helpful to get their aggregate view on the future.
Internal property of Torrent Power
The definition of inside information may differ slightly between different countries, but board members always count. The management of the company is accountable to the board of directors and the board must represent the interests of the shareholders. In particular, sometimes high-level managers are on the board.
Most view insider ownership as a positive because it can indicate that the board is well aligned with other stakeholders. However, sometimes too much power is concentrated within this group.
Our most recent data indicates that insiders own less than 1% of Torrent Power Limited. However, we note that it is possible for insiders to have an indirect interest through a private company or other corporate structure. It's a big company, so even a small proportionate interest can create alignment between the board of directors and shareholders. In this case, the insiders own shares worth Rs 10 crores. It's always nice to see at least some internal property, but it might be worth checking if those insiders have been selling.
general public property
The general public, who are usually individual investors, have a 10% stake in Torrent Power. While this group may not necessarily call the shots, they can certainly have a real influence on the way the company is run.
Private company ownership
It seems that private companies own 54% of the shares of Torrent Power. Private companies may be related parties. Sometimes insiders have an interest in a public company through a stake in a private company, rather than through their own capacity as an individual. While it's hard to draw general conclusions, it's worth noting as an area for further research.
Next steps:
While the different groups that own a business are worth considering, there are other factors that are even more important. For example, we have discovered 4 Warning Signs for Torrent Power that you should consider before investing here.
If you're like me, you might want to think about whether this company will grow or shrink. Luckily you can check This free report showing analyst forecasts for your future.
Note: The figures in this article are calculated using data from the last twelve months, which refers to the 12-month period ending on the last day of the month in which the financial statement is dated. This may not be consistent with the annual report figures for the full year.
Valuation is complex, but we are helping to simplify it.
Find out if torrent power is potentially overvalued or undervalued by consulting our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, internal transactions and financial health.
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This Simply Wall St article is general in nature. We provide feedback based on historical data and analyst forecasts using only unbiased methodology and our articles are not intended to be financial advice. It is not a recommendation to buy or sell any stock, and it does not take into account your goals or financial situation. Our goal is to provide you with long-term focused analysis driven by fundamental data. Please note that our analysis may not take into account the latest announcements from price-sensitive companies or qualitative material. Simply Wall St does not have a position in any of the mentioned stocks.
