Do Insiders Own Lots Of Shares In Asian Paints Limited (NSE:ASIANPAINT)?


If you want to know who really controls Asian Paints Limited (NSE:ASIANPAINT), then you’ll have to look at the makeup of its share registry. Institutions often own shares in more established companies, while it’s not unusual to see insiders own a fair bit of smaller companies. I quite like to see at least a little bit of insider ownership. As Charlie Munger said ‘Show me the incentive and I will show you the outcome.

Asian Paints is a pretty big company. It has a market capitalization of ₹2.5t. Normally institutions would own a significant portion of a company this size. In the chart below, we can see that institutional investors have bought into the company. We can zoom in on the different ownership groups, to learn more about Asian Paints.

See our latest analysis for Asian Paints

ownership-breakdown

NSEI:ASIANPAINT Ownership Breakdown January 24th 2021

What Does The Institutional Ownership Tell Us About Asian Paints?

Institutions typically measure themselves against a benchmark when reporting to their own investors, so they often become more enthusiastic about a stock once it’s included in a major index. We would expect most companies to have some institutions on the register, especially if they are growing.

Asian Paints already has institutions on the share registry. Indeed, they own a respectable stake in the company. This can indicate that the company has a certain degree of credibility in the investment community. However, it is best to be wary of relying on the supposed validation that comes with institutional investors. They too, get it wrong sometimes. When multiple institutions own a stock, there’s always a risk that they are in a ‘crowded trade’. When such a trade goes wrong, multiple parties may compete to sell stock fast. This risk is higher in a company without a history of growth. You can see Asian Paints’ historic earnings and revenue below, but keep in mind there’s always more to the story.

earnings-and-revenue-growth

NSEI:ASIANPAINT Earnings and Revenue Growth January 24th 2021

We note that hedge funds don’t have a meaningful investment in Asian Paints. Looking at our data, we can see that the largest shareholder is Sattva Holding and Trading Private Limited with 5.9% of shares outstanding. In comparison, the second and third largest shareholders hold about 5.8% and 4.9% of the stock.

A closer look at our ownership figures suggests that the top 19 shareholders have a combined ownership of 50% implying that no single shareholder has a majority.

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 are a reasonable number of analysts covering the stock, so it might be useful to find out their aggregate view on the future.

Insider Ownership Of Asian Paints

The definition of company insiders can be subjective and does vary between jurisdictions. Our data reflects individual insiders, capturing board members at the very least. 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.

Most consider insider ownership a positive because it can indicate the board is well aligned with other shareholders. However, on some occasions too much power is concentrated within this group.

Shareholders would probably be interested to learn that insiders own shares in Asian Paints Limited. It is a very large company, and board members collectively own ₹234b worth of shares (at current prices). Most would say this shows a good alignment of interests between shareholders and the board. Still, it might be worth checking if those insiders have been selling.

General Public Ownership

With a 25% ownership, the general public have some degree of sway over Asian Paints. 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

We can see that Private Companies own 34%, of the shares on issue. It’s hard to draw any conclusions from this fact alone, so its worth looking into who owns those private companies. Sometimes insiders or other related parties have an interest in shares in a public company through a separate private company.

Public Company Ownership

It appears to us that public companies own 9.1% of Asian Paints. We can’t be certain but it is quite possible this is a strategic stake. The businesses may be similar, or work together.

Next Steps:

It’s always worth thinking about the different groups who own shares in a company. But to understand Asian Paints better, we need to consider many other factors.

I like to dive deeper into how a company has performed in the past. You can find historic revenue and earnings in this detailed graph.

If you are like me, you may want to think about whether this company will grow or shrink. Luckily, you can check this free report showing analyst forecasts for its 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.

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This article by Simply Wall St is general in nature. 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.
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