Owning 46% in Sobha Limited (NSE:SOBHA) means that insiders are heavily invested in the company's future

Key Insights

• Sobha's significant insider ownership suggests inherent interests in company's expansion
• A total of 4 investors have a majority stake in the company with 53% ownership
• Institutions own 25% of Sobha

A look at the shareholders of Sobha Limited (NSE:SOBHA) can tell us which group is most powerful. The group holding the most number of shares in the company, around 46% to be precise, is individual insiders. Put another way, the group faces the maximum upside potential (or downside risk).

So it follows, every decision made by insiders of Sobha regarding the company's future would be crucial to them.

In the chart below, we zoom in on the different ownership groups of Sobha.

See our latest analysis for Sobha

What Does The Institutional Ownership Tell Us About Sobha?

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.

As you can see, institutional investors have a fair amount of stake in Sobha. 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. 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 Sobha's historic earnings and revenue below, but keep in mind there's always more to the story.

Sobha is not owned by hedge funds. Our data shows that Sobha Menon is the largest shareholder with 27% of shares outstanding. With 17% and 5.6% of the shares outstanding respectively, P. N. Menon and Godrej Industries Limited are the second and third largest shareholders. P. N. Menon, who is the second-largest shareholder, also happens to hold the title of Top Key Executive.

Our research also brought to light the fact that roughly 53% of the company is controlled by the top 4 shareholders suggesting that these owners wield significant influence on the business.

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 plenty of analysts covering the stock, so it might be worth seeing what they are forecasting, too.

Insider Ownership Of Sobha

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.

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.

Our information suggests that insiders maintain a significant holding in Sobha Limited. Insiders own ₹79b worth of shares in the ₹170b company. That's quite meaningful. Most would be pleased to see the board is investing alongside them. You may wish to access this free chart showing recent trading by insiders.

General Public Ownership

The general public-- including retail investors -- own 23% 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.

Public Company Ownership

It appears to us that public companies own 5.6% of Sobha. This may be a strategic interest and the two companies may have related business interests. It could be that they have de-merged. This holding is probably worth investigating further.

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. Like risks, for instance. Every company has them, and we've spotted 4 warning signs for Sobha (of which 1 makes us a bit uncomfortable!) you should know about.

If you are like me, you may want to think about whether this company will grow or shrink. Luckily, you can check this free report showing analyst forecasts for its future.

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.