Sun Pharma Advanced Research Company Limited's (NSE:SPARC) stock price dropped 7.1% last week; private companies would not be happy
- The considerable ownership by private companies in Sun Pharma Advanced Research indicates that they collectively have a greater say in management and business strategy
- The top 2 shareholders own 61% of the company
- Insider ownership in Sun Pharma Advanced Research is 25%
Every investor in Sun Pharma Advanced Research Company Limited (NSE:SPARC) should be aware of the most powerful shareholder groups. The group holding the most number of shares in the company, around 46% to be precise, is private companies. Put another way, the group faces the maximum upside potential (or downside risk).
While the holdings of private companies took a hit after last week’s 7.1% price drop, insiders with their 25% also suffered.
Let's delve deeper into each type of owner of Sun Pharma Advanced Research, beginning with the chart below.
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What Does The Institutional Ownership Tell Us About Sun Pharma Advanced Research?
Institutions typically measure themselves against a benchmark when reporting to their own investors, so they often become more enthusiastic about a stock once it's included in a major index. We would expect most companies to have some institutions on the register, especially if they are growing.
We can see that Sun Pharma Advanced Research does have institutional investors; and they hold a good portion of the company's stock. 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 Sun Pharma Advanced Research, (below). Of course, keep in mind that there are other factors to consider, too.
Hedge funds don't have many shares in Sun Pharma Advanced Research. The company's largest shareholder is Shanghvi Finance Pvt Ltd, with ownership of 42%. 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.
After doing some more digging, we found that the top 2 shareholders collectively control more than half of the company's shares, implying that they have considerable power to influence the company's decisions.
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. We're not picking up on any analyst coverage of the stock at the moment, so the company is unlikely to be widely held.
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.
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.
It seems insiders own a significant proportion of Sun Pharma Advanced Research Company Limited. It has a market capitalization of just ₹58b, and insiders have ₹15b 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
With a 23% ownership, the general public, mostly comprising of individual investors, have some degree of sway over Sun Pharma Advanced Research. 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
We can see that Private Companies own 46%, of the shares on issue. 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.
It's always worth thinking about the different groups who own shares in a company. But to understand Sun Pharma Advanced Research better, we need to consider many other factors. For instance, we've identified 4 warning signs for Sun Pharma Advanced Research (3 don't sit too well with us) that you should be aware of.
Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this 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.
Sun Pharma Advanced Research
Sun Pharma Advanced Research Company Limited, a biopharmaceutical company, engages in the research and development of pharmaceutical products in India and internationally.
Weak fundamentals or lack of information.