Institutional investors in Dr. Reddy's Laboratories Limited (NSE:DRREDDY) lost 3.4% last week but have reaped the benefits of longer-term growth

Key Insights

• Given the large stake in the stock by institutions, Dr. Reddy's Laboratories' stock price might be vulnerable to their trading decisions
• The top 13 shareholders own 50% of the company
• Insiders own 27% of Dr. Reddy's Laboratories

If you want to know who really controls Dr. Reddy's Laboratories Limited (NSE:DRREDDY), then you'll have to look at the makeup of its share registry. The group holding the most number of shares in the company, around 39% to be precise, is institutions. That is, the group stands to benefit the most if the stock rises (or lose the most if there is a downturn).

Losing money on investments is something no shareholder enjoys, least of all institutional investors who saw their holdings value drop by 3.4% last week. Still, the 20% one-year gains may have helped mitigate their overall losses. They should, however, be mindful of further losses in the future.

In the chart below, we zoom in on the different ownership groups of Dr. Reddy's Laboratories.

See our latest analysis for Dr. Reddy's Laboratories

What Does The Institutional Ownership Tell Us About Dr. Reddy's Laboratories?

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.

Dr. Reddy's Laboratories already has institutions on the share registry. Indeed, they own a respectable stake in the company. 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 Dr. Reddy's Laboratories' historic earnings and revenue below, but keep in mind there's always more to the story.

We note that hedge funds don't have a meaningful investment in Dr. Reddy's Laboratories. Because actions speak louder than words, we consider it a good sign when insiders own a significant stake in a company. In Dr. Reddy's Laboratories' case, its Member of Management Board, Kallam Reddy, is the largest shareholder, holding 14% of shares outstanding. With 13% and 5.5% of the shares outstanding respectively, Gunupati Prasad and Life Insurance Corporation of India, Asset Management Arm are the second and third largest shareholders. Interestingly, the second-largest shareholder, Gunupati Prasad is also Member of Management Board, again, pointing towards strong insider ownership amongst the company's top shareholders.

Looking at the shareholder registry, we can see that 50% of the ownership is controlled by the top 13 shareholders, meaning that no single shareholder has a majority interest in the ownership.

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

Insider Ownership Of Dr. Reddy's Laboratories

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.

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 insiders maintain a significant holding in Dr. Reddy's Laboratories Limited. It is very interesting to see that insiders have a meaningful ₹298b stake in this ₹1.1t business. 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

The general public-- including retail investors -- own 33% stake in the company, and hence can't easily be ignored. While this group can't necessarily call the shots, it can certainly have a real influence on how the company is run.

Next Steps:

It's always worth thinking about the different groups who own shares in a company. But to understand Dr. Reddy's Laboratories better, we need to consider many other factors. Case in point: We've spotted 1 warning sign for Dr. Reddy's Laboratories you should be aware of.

Ultimately the future is most important. You can access this free report on analyst forecasts for the company.

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.