Punjab Chemicals and Crop Protection Limited's (NSE:PUNJABCHEM) stock price dropped 11% last week; private companies would not be happy

Key Insights

• Punjab Chemicals and Crop Protection's significant private companies ownership suggests that the key decisions are influenced by shareholders from the larger public
• 57% of the business is held by the top 2 shareholders
• Past performance of a company along with ownership data serve to give a strong idea about prospects for a business

If you want to know who really controls Punjab Chemicals and Crop Protection Limited (NSE:PUNJABCHEM), then you'll have to look at the makeup of its share registry. And the group that holds the biggest piece of the pie are private companies with 60% ownership. Put another way, the group faces the maximum upside potential (or downside risk).

As market cap fell to ₹12b last week, private companies would have faced the highest losses than any other shareholder groups of the company.

In the chart below, we zoom in on the different ownership groups of Punjab Chemicals and Crop Protection.

View our latest analysis for Punjab Chemicals and Crop Protection

What Does The Lack Of Institutional Ownership Tell Us About Punjab Chemicals and Crop Protection?

We don't tend to see institutional investors holding stock of companies that are very risky, thinly traded, or very small. Though we do sometimes see large companies without institutions on the register, it's not particularly common.

There could be various reasons why no institutions own shares in a company. Typically, small, newly listed companies don't attract much attention from fund managers, because it would not be possible for large fund managers to build a meaningful position in the company. On the other hand, it's always possible that professional investors are avoiding a company because they don't think it's the best place for their money. Punjab Chemicals and Crop Protection's earnings and revenue track record (below) may not be compelling to institutional investors -- or they simply might not have looked at the business closely.

We note that hedge funds don't have a meaningful investment in Punjab Chemicals and Crop Protection. Hem-Sil Trading And Manufacturing Private Limited is currently the largest shareholder, with 33% of shares outstanding. For context, the second largest shareholder holds about 24% of the shares outstanding, followed by an ownership of 4.8% by the third-largest shareholder.

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.

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. We're not picking up on any analyst coverage of the stock at the moment, so the company is unlikely to be widely held.

Insider Ownership Of Punjab Chemicals and Crop Protection

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.

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.

We can see that insiders own shares in Punjab Chemicals and Crop Protection Limited. In their own names, insiders own ₹957m worth of stock in the ₹12b company. Some would say this shows alignment of interests between shareholders and the board, though we generally prefer to see bigger insider holdings. But it might be worth checking if those insiders have been selling.

General Public Ownership

The general public, who are usually individual investors, hold a 27% stake in Punjab Chemicals and Crop Protection. 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

Our data indicates that Private Companies hold 60%, 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.

Public Company Ownership

It appears to us that public companies own 4.8% of Punjab Chemicals and Crop Protection. 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 Punjab Chemicals and Crop Protection better, we need to consider many other factors. Be aware that Punjab Chemicals and Crop Protection is showing 1 warning sign in our investment analysis , you should know about...

Of course this may not be the best stock to buy. So take a peek at this free free list of interesting companies.

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.