NATCO Pharma Limited's (NSE:NATCOPHARM) last week's 5.4% decline must have disappointed individual investors who have a significant stake

Key Insights

• Significant control over NATCO Pharma by individual investors implies that the general public has more power to influence management and governance-related decisions
• The top 20 shareholders own 50% of the company
• Insiders own 14% of NATCO Pharma

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If you want to know who really controls NATCO Pharma Limited (NSE:NATCOPHARM), then you'll have to look at the makeup of its share registry. With 45% stake, individual investors possess the maximum shares in the company. In other words, the group stands to gain the most (or lose the most) from their investment into the company.

As market cap fell to ₹151b last week, individual investors 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 NATCO Pharma.

View our latest analysis for NATCO Pharma

What Does The Institutional Ownership Tell Us About NATCO Pharma?

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 NATCO Pharma. 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. 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 NATCO Pharma's earnings history below. Of course, the future is what really matters.

We note that hedge funds don't have a meaningful investment in NATCO Pharma. Looking at our data, we can see that the largest shareholder is Time Cap Pharma Labs Ltd. with 9.6% of shares outstanding. The second and third largest shareholders are Venkaiah Nannapaneni and Natsoft Information Systems Pvt. Ltd., with an equal amount of shares to their name at 8.9%. Venkaiah Nannapaneni, who is the second-largest shareholder, also happens to hold the title of Top Key Executive. In addition, we found that Rajeev Nannapaneni, the CEO has 0.6% of the shares allocated to their name.

After doing some more digging, we found that the top 20 have the combined ownership of 50% in the company, suggesting that no single shareholder has significant control over the company.

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. Quite a few analysts cover the stock, so you could look into forecast growth quite easily.

Insider Ownership Of NATCO Pharma

While the precise definition of an insider can be subjective, almost everyone considers board members to be insiders. The company management answer to the board and the latter should represent the interests of shareholders. Notably, sometimes top-level managers are on the board themselves.

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 NATCO Pharma Limited. Insiders own ₹21b worth of shares in the ₹151b company. That's quite meaningful. 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 45% ownership, the general public, mostly comprising of individual investors, have some degree of sway over NATCO Pharma. This size of ownership, while considerable, may not be enough to change company policy if the decision is not in sync with other large shareholders.

Private Company Ownership

We can see that Private Companies own 23%, of the shares on issue. Private companies may be related parties. Sometimes insiders have an interest in a public company through a holding in a private company, rather than in their own capacity as an individual. While it's hard to draw any broad stroke conclusions, it is worth noting as an area for further research.

Next Steps:

It's always worth thinking about the different groups who own shares in a company. But to understand NATCO Pharma better, we need to consider many other factors. For instance, we've identified 3 warning signs for NATCO Pharma (1 is concerning) that 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.