Privi Speciality Chemicals Limited's (NSE:PRIVISCL) market cap dropped ₹4.7b last week; Private companies bore the brunt

Key Insights

• The considerable ownership by private companies in Privi Speciality Chemicals indicates that they collectively have a greater say in management and business strategy
• 51% of the business is held by the top 2 shareholders
• Insider ownership in Privi Speciality Chemicals is 24%

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To get a sense of who is truly in control of Privi Speciality Chemicals Limited (NSE:PRIVISCL), it is important to understand the ownership structure of the business. The group holding the most number of shares in the company, around 54% to be precise, is private companies. Put another way, the group faces the maximum upside potential (or downside risk).

Following a 5.0% decrease in the stock price last week, private companies suffered the most losses, but insiders who own 24% stock also took a hit.

Let's take a closer look to see what the different types of shareholders can tell us about Privi Speciality Chemicals.

Check out our latest analysis for Privi Speciality Chemicals

What Does The Institutional Ownership Tell Us About Privi Speciality Chemicals?

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.

Privi Speciality Chemicals 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 Privi Speciality Chemicals' historic earnings and revenue below, but keep in mind there's always more to the story.

Privi Speciality Chemicals is not owned by hedge funds. Vivira Investment And Trading Co. Pvt. Ltd is currently the company's largest shareholder with 39% of shares outstanding. Mahesh Babani is the second largest shareholder owning 12% of common stock, and Moneymart Securities Private Limited holds about 8.7% of the company stock. Mahesh Babani, who is the second-largest shareholder, also happens to hold the title of Chief Executive Officer.

To make our study more interesting, we found that the top 2 shareholders have a majority ownership in the company, meaning that they are powerful enough to influence the decisions of the company.

Researching institutional ownership is a good way to gauge and filter a stock's expected performance. The same can be achieved by studying analyst sentiments. Our information suggests that there isn't any analyst coverage of the stock, so it is probably little known.

Insider Ownership Of Privi Speciality Chemicals

While the precise definition of an insider can be subjective, almost everyone considers board members to be insiders. Management ultimately answers to the board. However, it is not uncommon for managers to be executive board members, especially if they are a founder or the CEO.

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 a reasonable proportion of Privi Speciality Chemicals Limited. Insiders own ₹21b worth of shares in the ₹90b company. That's quite meaningful. It is good to see this level of investment. You can check here to see if those insiders have been buying recently.

General Public Ownership

The general public, who are usually individual investors, hold a 17% stake in Privi Speciality Chemicals. While this group can't necessarily call the shots, it can certainly have a real influence on how the company is run.

Private Company Ownership

Our data indicates that Private Companies hold 54%, 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:

I find it very interesting to look at who exactly owns a company. But to truly gain insight, we need to consider other information, too. Take risks for example - Privi Speciality Chemicals has 2 warning signs 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.