Did Cholamandalam Investment and Finance Company Limited (NSE:CHOLAFIN) Insiders Sell Shares?

We often see insiders buying up shares in companies that perform well over the long term. The flip side of that is that there are more than a few examples of insiders dumping stock prior to a period of weak performance. So before you buy or sell Cholamandalam Investment and Finance Company Limited (NSE:CHOLAFIN), you may well want to know whether insiders have been buying or selling.

What Is Insider Buying?

It is perfectly legal for company insiders, including board members, to buy and sell stock in a company. However, such insiders must disclose their trading activities, and not trade on inside information.

We would never suggest that investors should base their decisions solely on what the directors of a company have been doing. But logic dictates you should pay some attention to whether insiders are buying or selling shares. As Peter Lynch said, 'insiders might sell their shares for any number of reasons, but they buy them for only one: they think the price will rise'.

Check out our latest analysis for Cholamandalam Investment and Finance

The Last 12 Months Of Insider Transactions At Cholamandalam Investment and Finance

The Vice President of Human Resources, R. Chandrasekar, made the biggest insider sale in the last 12 months. That single transaction was for ₹13m worth of shares at a price of ₹388 each. That means that even when the share price was below the current price of ₹469, an insider wanted to cash in some shares. We generally consider it a negative if insiders have been selling, especially if they did so below the current price, because it implies that they considered a lower price to be reasonable. However, while insider selling is sometimes discouraging, it's only a weak signal. It is worth noting that this sale was 100% of R. Chandrasekar's holding.

Happily, we note that in the last year insiders paid ₹7.8m for 44.88k shares. But insiders sold 167.86k shares worth ₹56m. In total, Cholamandalam Investment and Finance insiders sold more than they bought over the last year. The chart below shows insider transactions (by companies and individuals) over the last year. If you want to know exactly who sold, for how much, and when, simply click on the graph below!

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Insiders at Cholamandalam Investment and Finance Have Sold Stock Recently

Over the last three months, we've seen significant insider selling at Cholamandalam Investment and Finance. Specifically, insiders ditched ₹50m worth of shares in that time, and we didn't record any purchases whatsoever. This may suggest that some insiders think that the shares are not cheap.

Insider Ownership

Looking at the total insider shareholdings in a company can help to inform your view of whether they are well aligned with common shareholders. I reckon it's a good sign if insiders own a significant number of shares in the company. Insiders own 1.3% of Cholamandalam Investment and Finance shares, worth about ₹5.0b. This level of insider ownership is good but just short of being particularly stand-out. It certainly does suggest a reasonable degree of alignment.

So What Do The Cholamandalam Investment and Finance Insider Transactions Indicate?

Insiders sold stock recently, but they haven't been buying. Zooming out, the longer term picture doesn't give us much comfort. The company boasts high insider ownership, but we're a little hesitant, given the history of share sales. In addition to knowing about insider transactions going on, it's beneficial to identify the risks facing Cholamandalam Investment and Finance. At Simply Wall St, we've found that Cholamandalam Investment and Finance has 4 warning signs (1 is concerning!) that deserve your attention before going any further with your analysis.

If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of interesting companies, that have HIGH return on equity and low debt.

For the purposes of this article, insiders are those individuals who report their transactions to the relevant regulatory body. We currently account for open market transactions and private dispositions, but not derivative transactions.

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This article by Simply Wall St is general in nature. 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.
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