Sun Pharma Advanced Research Company Limited's (NSE:SPARC) stock price dropped 12% last week; private companies would not be happy

Key Insights

• 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 26%

A look at the shareholders of Sun Pharma Advanced Research Company Limited (NSE:SPARC) can tell us which group is most powerful. With 46% stake, private companies possess the maximum shares in the company. That is, the group stands to benefit the most if the stock rises (or lose the most if there is a downturn).

While insiders who own 26% came under pressure after market cap dropped to ₹73b last week,private companies took the most losses.

In the chart below, we zoom in on the different ownership groups of Sun Pharma Advanced Research.

See 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.

We can see that Sun Pharma Advanced Research does have institutional investors; and they hold a good portion of the company's stock. 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 Sun Pharma Advanced Research'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 Sun Pharma Advanced Research. Our data shows that Shanghvi Finance Pvt Ltd is the largest shareholder with 42% of shares outstanding. Meanwhile, the second and third largest shareholders, hold 19% and 3.2%, of the shares outstanding, respectively.

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. Our information suggests that there isn't any analyst coverage of the stock, so it is probably little known.

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. 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.

It seems insiders own a significant proportion of Sun Pharma Advanced Research Company Limited. Insiders have a ₹19b stake in this ₹73b business. It is great to see insiders so invested in the business. It might be worth checking if those insiders have been buying recently.

General Public Ownership

With a 22% ownership, the general public, mostly comprising of individual investors, have some degree of sway over Sun Pharma Advanced Research. 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

Our data indicates that Private Companies hold 46%, of the company's shares. 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:

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. Be aware that Sun Pharma Advanced Research is showing 1 warning sign in our investment analysis , you should know about...

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.