Great week for Dr. Reddy’s Laboratories Limited (NSE:DRREDDY) institutional investors after losing 2.7% over the previous year

Key Insights

• Given the large stake in the stock by institutions, Dr. Reddy’s Laboratories’ stock price might be vulnerable to their trading decisions
• A total of 8 investors have a majority stake in the company with 50% ownership
• Insiders own 27% of Dr. Reddy’s Laboratories

A look at the shareholders of Dr. Reddy’s Laboratories Limited (NSE:DRREDDY) can tell us which group is most powerful. We can see that institutions own the lion’s share in the company with 58% ownership. Put another way, the group faces the maximum upside potential (or downside risk).

After a year of 2.7% losses, last week’s 8.3% gain would be welcomed by institutional investors as a possible sign that returns might start trending higher.

Let’s delve deeper into each type of owner of Dr. Reddy’s Laboratories, beginning with the chart below.

See our latest analysis for Dr. Reddy’s Laboratories

What Does The Institutional Ownership Tell Us About Dr. Reddy’s 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.

We can see that Dr. Reddy’s Laboratories 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. 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 Dr. Reddy’s Laboratories, (below). Of course, keep in mind that there are other factors to consider, too.

Institutional investors own over 50% of the company, so together than can probably strongly influence board decisions. Dr. Reddy’s Laboratories is not owned by hedge funds. Our data suggests that Kallam Reddy, who is also the company’s Member of Management Board, holds the most number of shares at 14%. When an insider holds a sizeable amount of a company’s stock, investors consider it as a positive sign because it suggests that insiders are willing to have their wealth tied up in the future of the company. For context, the second largest shareholder holds about 13% of the shares outstanding, followed by an ownership of 6.5% by the third-largest shareholder. Interestingly, the second-largest shareholder, Gunupati Prasad is also Member of Management Board, again, pointing towards strong insider ownership amongst the company’s top shareholders.

We did some more digging and found that 8 of the top shareholders account for roughly 50% of the register, implying that along with larger shareholders, there are a few smaller shareholders, thereby balancing out each others interests somewhat.

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 a reasonable number of analysts covering the stock, so it might be useful to find out their aggregate view on the future.

Insider Ownership Of Dr. Reddy’s Laboratories

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. 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.

It seems insiders own a significant proportion of Dr. Reddy’s Laboratories Limited. It is very interesting to see that insiders have a meaningful ₹268b stake in this ₹999b business. Most would say this shows a good degree of alignment with shareholders, especially in a company of this size. You can click here to see if those insiders have been buying or selling.

General Public Ownership

With a 14% ownership, the general public, mostly comprising of individual investors, have some degree of sway over Dr. Reddy’s Laboratories. 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.

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 example, we’ve discovered 2 warning signs for Dr. Reddy’s Laboratories (1 is a bit concerning!) that you should be aware of before investing here.

Ultimately the future is most important. You can access this free report on analyst forecasts for the company.

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.