Lupin Limited's (NSE:LUPIN) market cap touched ₹933b last week, benefiting both private companies who own 46% as well as institutions

Key Insights

• Lupin's significant private companies ownership suggests that the key decisions are influenced by shareholders from the larger public
• A total of 2 investors have a majority stake in the company with 51% ownership
• Institutional ownership in Lupin is 38%

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To get a sense of who is truly in control of Lupin Limited (NSE:LUPIN), it is important to understand the ownership structure of the business. We can see that private companies own the lion's share in the company with 46% ownership. That is, the group stands to benefit the most if the stock rises (or lose the most if there is a downturn).

While private companies were the group that reaped the most benefits after last week’s 5.1% price gain, institutions also received a 38% cut.

In the chart below, we zoom in on the different ownership groups of Lupin.

View our latest analysis for Lupin

What Does The Institutional Ownership Tell Us About Lupin?

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 Lupin. 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 Lupin's 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 Lupin. Lupin Investments Pvt. Ltd. is currently the largest shareholder, with 45% of shares outstanding. In comparison, the second and third largest shareholders hold about 5.3% and 3.2% of the stock.

A more detailed study of the shareholder registry showed us that 2 of the top shareholders have a considerable amount of ownership in the company, via their 51% stake.

Researching institutional ownership is a good way to gauge and filter a stock's expected performance. The same can be achieved by studying analyst sentiments. 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 Lupin

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.

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.

We can see that insiders own shares in Lupin Limited. It is a very large company, and board members collectively own ₹13b worth of shares (at current prices). 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-- 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.

Private Company Ownership

It seems that Private Companies own 46%, of the Lupin stock. It might be worth looking deeper into this. If related parties, such as insiders, have an interest in one of these private companies, that should be disclosed in the annual report. Private companies may also have a strategic interest in the company.

Next Steps:

It's always worth thinking about the different groups who own shares in a company. But to understand Lupin better, we need to consider many other factors. For example, we've discovered 1 warning sign for Lupin that you should be aware of before investing here.

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.