Sumitomo Chemical India Limited's (NSE:SUMICHEM) stock price dropped 12% last week; public companies would not be happy

Key Insights

• Significant control over Sumitomo Chemical India by public companies implies that the general public has more power to influence management and governance-related decisions
• 75% of the company is held by a single shareholder (Sumitomo Chemical Company, Limited)
• 10% of Sumitomo Chemical India is held by Institutions

A look at the shareholders of Sumitomo Chemical India Limited (NSE:SUMICHEM) can tell us which group is most powerful. With 75% stake, public companies possess the maximum shares in the company. Put another way, the group faces the maximum upside potential (or downside risk).

As market cap fell to ₹235b last week, public 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 Sumitomo Chemical India.

View our latest analysis for Sumitomo Chemical India

What Does The Institutional Ownership Tell Us About Sumitomo Chemical India?

Institutional investors commonly compare their own returns to the returns of a commonly followed index. So they generally do consider buying larger companies that are included in the relevant benchmark index.

As you can see, institutional investors have a fair amount of stake in Sumitomo Chemical India. This suggests some credibility amongst professional investors. But we can't rely on that fact alone since institutions make bad investments sometimes, just like everyone does. If multiple institutions change their view on a stock at the same time, you could see the share price drop fast. It's therefore worth looking at Sumitomo Chemical India's earnings history below. Of course, the future is what really matters.

We note that hedge funds don't have a meaningful investment in Sumitomo Chemical India. Sumitomo Chemical Company, Limited is currently the company's largest shareholder with 75% of shares outstanding. This implies that they have majority interest control of the future of the company. For context, the second largest shareholder holds about 1.2% of the shares outstanding, followed by an ownership of 1.1% by the third-largest shareholder.

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 Sumitomo Chemical India

The definition of an insider can differ slightly between different countries, but members of the board of directors always count. Company management run the business, but the CEO will answer to the board, even if he or she is a member of it.

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 information suggests that Sumitomo Chemical India Limited insiders own under 1% of the company. It is a pretty big company, so it would be possible for board members to own a meaningful interest in the company, without owning much of a proportional interest. In this case, they own around ₹3.8m worth of shares (at current prices). Arguably, recent buying and selling is just as important to consider. You can click here to see if insiders have been buying or selling.

General Public Ownership

The general public-- including retail investors -- own 15% stake in the company, and hence can't easily be ignored. 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.

Public Company Ownership

It appears to us that public companies own 75% of Sumitomo Chemical India. 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:

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.

I always like to check for a history of revenue growth. You can too, by accessing this free chart of 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. 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.