Unichem Laboratories Limited's (NSE:UNICHEMLAB) last week's 7.8% decline must have disappointed public companies who have a significant stake

Key Insights

• Significant control over Unichem Laboratories by public companies implies that the general public has more power to influence management and governance-related decisions
• 53% of the company is held by a single shareholder (Ipca Laboratories Limited)
• 19% of Unichem Laboratories is held by insiders

To get a sense of who is truly in control of Unichem Laboratories Limited (NSE:UNICHEMLAB), it is important to understand the ownership structure of the business. And the group that holds the biggest piece of the pie are public companies with 53% ownership. In other words, the group stands to gain the most (or lose the most) from their investment into the company.

While insiders, who own 19% shares weren’t spared from last week’s ₹4.3b market cap drop, public companies as a group suffered the maximum losses

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

View our latest analysis for Unichem Laboratories

What Does The Institutional Ownership Tell Us About Unichem Laboratories?

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 Unichem Laboratories. This implies the analysts working for those institutions have looked at the stock and they like it. But just like anyone else, they could be wrong. 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 Unichem Laboratories' earnings history below. Of course, the future is what really matters.

Unichem Laboratories is not owned by hedge funds. Our data shows that Ipca Laboratories Limited is the largest shareholder with 53% of shares outstanding. With such a huge stake in the ownership, we infer that they have significant control of the future of the company. With 16% and 8.0% of the shares outstanding respectively, Prakash Mody and HDFC Asset Management Company Limited are the second and third largest shareholders.

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 Unichem Laboratories

While the precise definition of an insider can be subjective, almost everyone considers board members to be insiders. Company management run the business, but the CEO will answer to the board, even if he or she is a member of it.

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 Unichem Laboratories Limited. It has a market capitalization of just ₹51b, and insiders have ₹9.4b 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 13% stake in the company, and hence can't easily be ignored. 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.

Public Company Ownership

We can see that public companies hold 53% of the Unichem Laboratories shares on issue. We can't be certain but it is quite possible this is a strategic stake. The businesses may be similar, or work together.

Next Steps:

While it is well worth considering the different groups that own a company, there are other factors that are even more important. For instance, we've identified 1 warning sign for Unichem Laboratories that you should be aware of.

If you would prefer check out another company -- one with potentially superior financials -- then do not miss this free list of interesting companies, backed by strong financial data.

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.