What Does Ipca Laboratories Limited’s (NSE:IPCALAB) Ownership Structure Look Like?

David Owens

Updated Thu, Aug 9, 2018, 7:07 PM

Today, I will be analyzing Ipca Laboratories Limited’s (NSE:IPCALAB) recent ownership structure, an important but not-so-popular subject among individual investors. Ownership structure has been found to have an impact on shareholder returns in both short- and long-term. Since the effect of an active institutional investor with a similar ownership as a passive pension-fund can be vastly different on a company’s corporate governance and accountability of shareholders, investors should take a closer look at IPCALAB’s shareholder registry.

View our latest analysis for Ipca Laboratories

NSEI:IPCALAB Ownership Summary August 10th 18

Institutional Ownership

Institutions account for 37.66% of IPCALAB’s outstanding shares, a significant enough holding to move stock prices if they start buying and selling in large quantities, especially when there are relatively small amounts of shares available on the market to trade. However, as not all institutions are alike, such high volatility events, especially in the short-term, have been more frequently linked to active market participants like hedge funds. For IPCALAB shareholders, the potential of this type of share price volatility shouldn’t be as concerning as hedge fund ownership is is not significant,indicating few chances of such sudden price moves. While that hardly seems concerning, I will explore further into IPCALAB’s ownership type to find out how it can affect the company’s investment profile.

Insider Ownership

I find insiders are an important group of stakeholders, who are directly involved in making key decisions related to the use of capital. In essence, insider ownership is more about the alignment of shareholders’ interests with the management. With 8.63% ownership, IPCALAB insiders is an important ownership type. This level of ownership indicates closely aligned interests of shareholders and management. It may be interesting to see what insiders have been doing with their shares lately. Insiders buying shares can be a positive indicator of future performance, but a selling decision can be simply driven by personal financial needs.

General Public Ownership

The general public holds a substantial 15.93% stake in IPCALAB, making it a highly popular stock among retail investors. With this size of ownership, retail investors can collectively play a role in major company policies that affect shareholders returns, including executive remuneration and the appointment of directors. They can also exercise the power to decline an acquisition or merger that may not improve profitability.

Private Company Ownership

Another important group of owners for potential investors in IPCALAB are private companies that hold a stake of 37.50% in IPCALAB. These are companies that are mainly invested due to their strategic interests or are incentivized by reaping capital gains on investments their shareholdings. With this size of ownership in IPCALAB, this ownership class can affect the company’s business strategy. As a result, potential investors should further explore the company’s business relations with these companies and find out if they can affect shareholder returns in the long-term.

Next Steps:

The company’s high institutional ownership makes margin of safety a very important consideration to existing investors since long bull and bear trends often emerge when these big-ticket investors see a change in long-term potential of the company. This will enable shareholders to comfortably invest in the company while avoid getting trapped in a sustained sell-off that is often observed in stocks with this level of institutional participation. However, if you are building an investment case for IPCALAB, ownership structure alone should not dictate your decision to buy or sell the stock. Rather, you should be examining fundamental factors such as Ipca Laboratories’s past track record and financial health. I urge you to complete your research by taking a look at the following:

Future Outlook: What are well-informed industry analysts predicting for IPCALAB’s future growth? Take a look at our free research report of analyst consensus for IPCALAB’s outlook.
Past Track Record: Has IPCALAB been consistently performing well irrespective of the ups and downs in the market? Go into more detail in the past performance analysis and take a look at the free visual representations of IPCALAB’s historicals for more clarity.
Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.

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.

To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.

The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at editorial-team@simplywallst.com.

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