Is Sonata Software Limited (NSE: SONATSOFTW) shareholder ownership biased towards insiders?
The large shareholder groups of Sonata Software Limited (NSE: SONATSOFTW) have power over the company. Generally speaking, as a business grows, institutions will increase their participation. Conversely, insiders often decrease their ownership over time. I generally like to see some degree of insider ownership, even if it’s just a little. As Nassim Nicholas Taleb said, “Don’t tell me what you think, tell me what you have in your wallet.
Sonata Software has a market cap of ₹ 61 billion, so we would expect some institutional investors to take notice of the stock. Looking at our data on ownership groups (below), it appears that institutions own shares in the company. Let’s take a closer look at what different types of shareholders can tell us about Sonata Software.
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What does institutional ownership tell us about Sonata software?
Many institutions measure their performance against an index that approximates the local market. They therefore generally pay more attention to companies that are included in the main indices.
We can see that Sonata Software has institutional investors; and they own a good portion of the shares of the company. This implies that the analysts working for these institutions have looked at the stock and they like it. But like anyone else, they could be wrong. If multiple institutions change their perspective on a stock at the same time, you could see the stock price drop quickly. So it’s worth checking out Sonata Software’s earnings history below. Of course, it’s the future that really matters.
Sonata Software is not owned by hedge funds. The company’s main shareholder is Viren Raheja, with a 23% stake. Hemendra Kothari is the second largest shareholder with 10% of the common shares and HDFC Asset Management Company Limited owns approximately 9.4% of the shares of the company. In addition, CEO Palem Reddy owns 1.2% of the company’s shares.
We also observed that the top 6 shareholders make up more than half of the share register, with a few smaller shareholders to some extent to balance the interests of the larger ones.
While it makes sense to study a company’s institutional ownership data, it also makes sense to study analysts’ sentiments to know which direction the wind is blowing. There are a reasonable number of analysts covering the stock, so it can be helpful to know their overall vision for the future.
Insider Ownership of Sonata Software
The definition of company insiders can be subjective and vary by jurisdiction. Our data reflects individual insiders, at the very least capturing board members. The company’s management runs the business, but the CEO will report to the board, even if he or she is a member of the board.
Most consider insider ownership to be positive because it can indicate that the board is well aligned with other shareholders. However, on some occasions too much power is concentrated within this group.
Our most recent data indicates that insiders own a reasonable proportion of Sonata Software Limited. Insiders have a ₹ 25 billion stake in the ₹ 61 billion company. I would say this shows alignment with shareholders, but it should be noted that the company is still quite small; some insiders may have founded the company. You can click here to see if these insiders have bought or sold.
General public property
With a 32% stake, the general public has some influence over Sonata Software. This size of ownership, while considerable, may not be enough to change company policy if the decision is not synchronized with other large shareholders.
Private company ownership
It appears that private companies hold 3.4% of Sonata Software’s stock. It is difficult to draw conclusions from this fact alone, so it is worth asking who owns these private companies. Sometimes insiders or other related parties have an interest in shares of a public company through a separate private company.
I find it very interesting to see who exactly owns a company. But to really understand better, we have to take other information into account as well. For example, we have identified 2 warning signs for Sonata software that you need to be aware of.
If you’re like me, you might want to think about how to grow or shrink this business. Fortunately, you can check out this free report showing analysts’ forecasts for its future.
NB: The figures in this article are calculated from data for the last twelve months, which refer to the 12-month period ending on the last date of the month in which the balance sheet is dated. This may not be consistent with figures in annual reports.
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