Sun Pharma Advanced Research Company Limited (NSE:SPARC) surges 21%; private companies who own 46% shares profited along with insiders

Key Insights

• Sun Pharma Advanced Research's significant private companies ownership suggests that the key decisions are influenced by shareholders from the larger public
• The top 2 shareholders own 61% of the company
• Insiders own 26% of Sun Pharma Advanced Research

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Every investor in Sun Pharma Advanced Research Company Limited (NSE:SPARC) should be aware of the most powerful shareholder groups. With 46% stake, private companies possess the maximum shares in the company. Put another way, the group faces the maximum upside potential (or downside risk).

Following a 21% increase in the stock price last week, private companies profited the most, but insiders who own 26% stock also stood to gain from the increase.

Let's take a closer look to see what the different types of shareholders can tell us about Sun Pharma Advanced Research.

View our latest analysis for Sun Pharma Advanced Research

What Does The Institutional Ownership Tell Us About Sun Pharma Advanced Research?

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.

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

Hedge funds don't have many shares in Sun Pharma Advanced Research. Shanghvi Finance Pvt Ltd is currently the largest shareholder, with 42% of shares outstanding. For context, the second largest shareholder holds about 19% of the shares outstanding, followed by an ownership of 3.2% by the third-largest shareholder.

To make our study more interesting, we found that the top 2 shareholders have a majority ownership in the company, meaning that they are powerful enough to influence the decisions of 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. As far as we can tell there isn't analyst coverage of the company, so it is probably flying under the radar.

Insider Ownership Of Sun Pharma Advanced Research

While the precise definition of an insider can be subjective, almost everyone considers board members to be insiders. 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 Sun Pharma Advanced Research Company Limited. It has a market capitalization of just ₹52b, and insiders have ₹13b worth of shares in their own names. We would say this shows alignment with shareholders, but it is worth noting that the company is still quite small; some insiders may have founded the business. You can click here to see if those insiders have been buying or selling.

General Public Ownership

The general public-- including retail investors -- own 22% 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.

Private Company Ownership

It seems that Private Companies own 46%, of the Sun Pharma Advanced Research stock. It's hard to draw any conclusions from this fact alone, so its worth looking into who owns those private companies. Sometimes insiders or other related parties have an interest in shares in a public company through a separate private company.

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 4 warning signs with Sun Pharma Advanced Research (at least 3 which are potentially serious) , and understanding them should be part of your investment process.

Of course this may not be the best stock to buy. So take a peek at this free free list of interesting companies.

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.