Sundaram Finance Insiders Sold ₹77m Of Shares Suggesting Hesitancy

Sundaram Finance Limited (NSE:SUNDARMFIN) shareholders might have a reason to worry after multiple insiders sold their shares over the last year. When analyzing insider transactions, it is usually more valuable to know whether insiders are buying versus knowing if they are selling, as the latter sends an ambiguous message. However, when multiple insiders sell stock over a specific duration, shareholders should take notice as that could possibly be a red flag.

While we would never suggest that investors should base their decisions solely on what the directors of a company have been doing, we would consider it foolish to ignore insider transactions altogether.

See our latest analysis for Sundaram Finance

The Last 12 Months Of Insider Transactions At Sundaram Finance

Over the last year, we can see that the biggest insider sale was by the Independent Director, Shobhana Ramachandhran, for ₹40m worth of shares, at about ₹2,344 per share. That means that even when the share price was below the current price of ₹3,224, an insider wanted to cash in some shares. As a general rule we consider it to be discouraging when insiders are selling below the current price, because it suggests they were happy with a lower valuation. While insider selling is not a positive sign, we can't be sure if it does mean insiders think the shares are fully valued, so it's only a weak sign. We note that the biggest single sale was only 5.6% of Shobhana Ramachandhran's holding.

Insiders in Sundaram Finance didn't buy any shares in 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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Sundaram Finance Insiders Are Selling The Stock

The last quarter saw substantial insider selling of Sundaram Finance shares. Specifically, insider Sashi Parthasarathy ditched ₹9.5m worth of shares in that time, and we didn't record any purchases whatsoever. Overall this makes us a bit cautious, but it's not the be all and end all.

Insider Ownership Of Sundaram Finance

For a common shareholder, it is worth checking how many shares are held by company insiders. We usually like to see fairly high levels of insider ownership. Sundaram Finance insiders own 27% of the company, currently worth about ₹96b based on the recent share price. Most shareholders would be happy to see this sort of insider ownership, since it suggests that management incentives are well aligned with other shareholders.

So What Does This Data Suggest About Sundaram Finance Insiders?

An insider sold Sundaram Finance shares recently, but they didn't buy any. And there weren't any purchases to give us comfort, over the last year. But it is good to see that Sundaram Finance is growing earnings. The company boasts high insider ownership, but we're a little hesitant, given the history of share sales. While we like knowing what's going on with the insider's ownership and transactions, we make sure to also consider what risks are facing a stock before making any investment decision. At Simply Wall St, we've found that Sundaram Finance has 3 warning signs (2 make us uncomfortable!) that deserve your attention before going any further with your analysis.

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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 of direct interests only, but not derivative transactions or indirect interests.

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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.