Piramal Pharma Limited's (NSE:PPLPHARMA) 3.9% loss last week hit both individual investors who own 36% as well as institutions

Key Insights

• Piramal Pharma's significant private companies ownership suggests that the key decisions are influenced by shareholders from the larger public
• The top 3 shareholders own 52% of the company
• Institutional ownership in Piramal Pharma is 26%

Every investor in Piramal Pharma Limited (NSE:PPLPHARMA) should be aware of the most powerful shareholder groups. The group holding the most number of shares in the company, around 36% to be precise, is private companies. Put another way, the group faces the maximum upside potential (or downside risk).

While institutions who own 26% came under pressure after market cap dropped to ₹338b last week,private companies took the most losses.

Let's delve deeper into each type of owner of Piramal Pharma, beginning with the chart below.

Check out our latest analysis for Piramal Pharma

What Does The Institutional Ownership Tell Us About Piramal Pharma?

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 Piramal 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. It is not uncommon to see a big share price drop if two large institutional investors try to sell out of a stock at the same time. So it is worth checking the past earnings trajectory of Piramal Pharma, (below). Of course, keep in mind that there are other factors to consider, too.

We note that hedge funds don't have a meaningful investment in Piramal Pharma. Looking at our data, we can see that the largest shareholder is The Sri Krishna Trust with 27% of shares outstanding. The Carlyle Group Inc. is the second largest shareholder owning 18% of common stock, and HDFC Asset Management Company Limited holds about 7.1% of the company stock.

A more detailed study of the shareholder registry showed us that 3 of the top shareholders have a considerable amount of ownership in the company, via their 52% stake.

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 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 Piramal Pharma

The definition of company insiders can be subjective and does vary between jurisdictions. Our data reflects individual insiders, capturing board members at the very least. 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 most recent data indicates that insiders own less than 1% of Piramal Pharma Limited. However, it's possible that insiders might have an indirect interest through a more complex structure. It's a big company, so even a small proportional interest can create alignment between the board and shareholders. In this case insiders own ₹662m worth of shares. It is good to see board members owning shares, but it might be worth checking if those insiders have been buying.

General Public Ownership

The general public-- including retail investors -- own 20% 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 Equity Ownership

With a stake of 18%, private equity firms could influence the Piramal Pharma board. Some investors might be encouraged by this, since private equity are sometimes able to encourage strategies that help the market see the value in the company. Alternatively, those holders might be exiting the investment after taking it public.

Private Company Ownership

Our data indicates that Private Companies hold 36%, of the company's shares. 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:

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. Consider for instance, the ever-present spectre of investment risk. We've identified 2 warning signs with Piramal Pharma (at least 1 which doesn't sit too well with us) , and understanding them should be part of your investment process.

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.