Fairchem Organics Limited's (NSE:FAIRCHEMOR) largest shareholders are public companies who were rewarded as market cap surged ₹1.0b last week
Key Insights
- Significant control over Fairchem Organics by public companies implies that the general public has more power to influence management and governance-related decisions
- Fairfax India Holdings Corporation owns 55% of the company
- 11% of Fairchem Organics is held by Institutions
A look at the shareholders of Fairchem Organics Limited (NSE:FAIRCHEMOR) can tell us which group is most powerful. And the group that holds the biggest piece of the pie are public companies with 55% ownership. In other words, the group stands to gain the most (or lose the most) from their investment into the company.
As a result, public companies were the biggest beneficiaries of last week’s 11% gain.
Let's take a closer look to see what the different types of shareholders can tell us about Fairchem Organics.
Check out our latest analysis for Fairchem Organics
What Does The Institutional Ownership Tell Us About Fairchem Organics?
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 Fairchem Organics does have institutional investors; and they hold a good portion of the company's stock. 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. 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 Fairchem Organics, (below). Of course, keep in mind that there are other factors to consider, too.
We note that hedge funds don't have a meaningful investment in Fairchem Organics. Our data shows that Fairfax India Holdings Corporation is the largest shareholder with 55% of shares outstanding. This essentially means that they have extensive influence, if not outright control, over the future of the corporation. For context, the second largest shareholder holds about 5.7% of the shares outstanding, followed by an ownership of 3.4% by the third-largest shareholder.
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. Our information suggests that there isn't any analyst coverage of the stock, so it is probably little known.
Insider Ownership Of Fairchem Organics
While the precise definition of an insider can be subjective, almost everyone considers board members to be insiders. 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.
Most consider insider ownership a positive because it can indicate the board is well aligned with other shareholders. However, on some occasions too much power is concentrated within this group.
Our data suggests that insiders own under 1% of Fairchem Organics Limited in their own names. We do note, however, it is possible insiders have an indirect interest through a private company or other corporate structure. It has a market capitalization of just ₹10b, and the board has only ₹21m worth of shares in their own names. Many investors in smaller companies prefer to see the board more heavily invested. You can click here to see if those insiders have been buying or selling.
General Public Ownership
With a 22% ownership, the general public, mostly comprising of individual investors, have some degree of sway over Fairchem Organics. While this group can't necessarily call the shots, it can certainly have a real influence on how the company is run.
Private Company Ownership
It seems that Private Companies own 11%, of the Fairchem Organics stock. It might be worth looking deeper into this. If related parties, such as insiders, have an interest in one of these private companies, that should be disclosed in the annual report. Private companies may also have a strategic interest in the company.
Public Company Ownership
We can see that public companies hold 55% of the Fairchem Organics 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 3 warning signs for Fairchem Organics (1 is a bit unpleasant) that you should be aware of.
Of course this may not be the best stock to buy. So take a peek at this free 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.