What Is The Ownership Structure Like For Cipla Limited (NSE:CIPLA)?

By
Simply Wall St
Published
November 22, 2021
NSEI:CIPLA
Source: Shutterstock

If you want to know who really controls Cipla Limited (NSE:CIPLA), then you'll have to look at the makeup of its share registry. Large companies usually have institutions as shareholders, and we usually see insiders owning shares in smaller companies. I generally like to see some degree of insider ownership, even if only a little. As Nassim Nicholas Taleb said, 'Don’t tell me what you think, tell me what you have in your portfolio.

Cipla is a pretty big company. It has a market capitalization of ₹722b. Normally institutions would own a significant portion of a company this size. Taking a look at our data on the ownership groups (below), it seems that institutions are noticeable on the share registry. Let's take a closer look to see what the different types of shareholders can tell us about Cipla.

See our latest analysis for Cipla

ownership-breakdown
NSEI:CIPLA Ownership Breakdown November 23rd 2021

What Does The Institutional Ownership Tell Us About Cipla?

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

earnings-and-revenue-growth
NSEI:CIPLA Earnings and Revenue Growth November 23rd 2021

We note that hedge funds don't have a meaningful investment in Cipla. Our data shows that Yusuf Hamied is the largest shareholder with 20% of shares outstanding. With 5.7% and 4.3% of the shares outstanding respectively, Sophie Ahmed and Mustafa Hamied are the second and third largest shareholders. Mustafa Hamied, who is the third-largest shareholder, also happens to hold the title of Vice Chairman.

A closer look at our ownership figures suggests that the top 11 shareholders have a combined ownership of 50% implying that no single shareholder has a majority.

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 plenty of analysts covering the stock, so it might be worth seeing what they are forecasting, too.

Insider Ownership Of Cipla

While the precise definition of an insider can be subjective, almost everyone considers board members to be insiders. Company management run the business, but the CEO will answer to the board, even if he or she is a member of it.

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 most recent data indicates that insiders own a reasonable proportion of Cipla Limited. It has a market capitalization of just ₹722b, and insiders have ₹261b worth of shares in their own names. That's quite significant. Most would say this shows a good degree of alignment with shareholders, especially in a company of this size. You can click here to see if those insiders have been buying or selling.

General Public Ownership

With a 30% ownership, the general public, mostly comprising of individual investors, have some degree of sway over Cipla. 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.

Next Steps:

While it is well worth considering the different groups that own a company, there are other factors that are even more important.

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 would prefer discover what analysts are predicting in terms of future growth, do not miss this free report on analyst forecasts.

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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