With 40% ownership in Sudarshan Chemical Industries Limited (NSE:SUDARSCHEM), institutional investors have a lot riding on the business

Key Insights

• Given the large stake in the stock by institutions, Sudarshan Chemical Industries' stock price might be vulnerable to their trading decisions
• The top 8 shareholders own 52% of the company
• Insiders have sold recently

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To get a sense of who is truly in control of Sudarshan Chemical Industries Limited (NSE:SUDARSCHEM), it is important to understand the ownership structure of the business. The group holding the most number of shares in the company, around 40% to be precise, is institutions. Put another way, the group faces the maximum upside potential (or downside risk).

And as as result, institutional investors reaped the most rewards after the company's stock price gained 5.3% last week. The gains from last week would have further boosted the one-year return to shareholders which currently stand at 50%.

Let's delve deeper into each type of owner of Sudarshan Chemical Industries, beginning with the chart below.

See our latest analysis for Sudarshan Chemical Industries

What Does The Institutional Ownership Tell Us About Sudarshan Chemical Industries?

Many institutions measure their performance against an index that approximates the local market. So they usually pay more attention to companies that are included in major indices.

As you can see, institutional investors have a fair amount of stake in Sudarshan Chemical Industries. 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. It is not uncommon to see a big share price drop if two large institutional investors try to sell out of a stock at the same time. So it is worth checking the past earnings trajectory of Sudarshan Chemical Industries, (below). Of course, keep in mind that there are other factors to consider, too.

We note that hedge funds don't have a meaningful investment in Sudarshan Chemical Industries. Our data shows that Akash Bhanshali is the largest shareholder with 9.5% of shares outstanding. With 8.2% and 7.3% of the shares outstanding respectively, Pradeep Kumar Rathi and HDFC Asset Management Company Limited are the second and third largest shareholders. Additionally, the company's CEO Rajesh Rathi directly holds 5.4% of the total shares outstanding.

We did some more digging and found that 8 of the top shareholders account for roughly 52% of the register, implying that along with larger shareholders, there are a few smaller shareholders, thereby balancing out each others interests somewhat.

While studying institutional ownership for a company can add value to your research, it is also a good practice to research analyst recommendations to get a deeper understand of a stock's expected performance. 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 Sudarshan Chemical Industries

The definition of an insider can differ slightly between different countries, but members of the board of directors always count. 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.

I generally consider insider ownership to be a good thing. However, on some occasions it makes it more difficult for other shareholders to hold the board accountable for decisions.

Our information suggests that insiders maintain a significant holding in Sudarshan Chemical Industries Limited. It has a market capitalization of just ₹93b, and insiders have ₹35b worth of shares in their own names. That's quite significant. 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 18% stake in Sudarshan Chemical Industries. 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 3.0%, 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.

Next Steps:

While it is well worth considering the different groups that own a company, there are other factors that are even more important. Be aware that Sudarshan Chemical Industries is showing 3 warning signs in our investment analysis , you should know about...

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. 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.