Cholamandalam Investment and Finance Company Limited (NSE:CHOLAFIN) surges 3.1%; public companies who own 45% shares profited along with institutions


Key Insights

  • Significant control over Cholamandalam Investment and Finance by public companies implies that this group likely has considerable sway over management and governance-related decisions
  • The top 2 shareholders own 50% of the company
  • own 30% of Cholamandalam Investment and Finance

To get a sense of who is truly in control of Cholamandalam Investment and Finance Company Limited (NSE:CHOLAFIN), it is important to understand the ownership structure of the business. And the group that holds the biggest piece of the pie are public companies with 45% ownership. Put another way, the group faces the maximum upside potential (or downside risk).

Following a 3.1% increase in the stock price last week, public companies profited the most, but institutions who own 30% stock also stood to gain from the increase.

In the chart below, we zoom in on the different ownership groups of Cholamandalam Investment and Finance.

Check out our latest analysis for Cholamandalam Investment and Finance

Cholamandalam Investment and Finance Company Limited (NSE:CHOLAFIN) surges 3.1%; public companies who own 45% shares profited along with institutions
NSEI:CHOLAFIN Ownership Breakdown January 24th 2023

What Does The Institutional Ownership Tell Us About Cholamandalam Investment and Finance?

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.

As you can see, institutional investors have a fair amount of stake in Cholamandalam Investment and Finance. 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. If multiple institutions change their view on a stock at the same time, you could see the share price drop fast. It’s therefore worth looking at Cholamandalam Investment and Finance’s earnings history below. Of course, the future is what really matters.

earnings-and-revenue-growth
NSEI:CHOLAFIN Earnings and Revenue Growth January 24th 2023

We note that hedge funds don’t have a meaningful investment in Cholamandalam Investment and Finance. Looking at our data, we can see that the largest shareholder is Cholamandalam Financial Holdings Limited with 45% of shares outstanding. Axis Asset Management Company Limited is the second largest shareholder owning 5.0% of common stock, and Murugappa Group Ltd. holds about 4.1% of the company stock.

A more detailed study of the shareholder registry showed us that 2 of the top shareholders have a considerable amount of ownership in the company, via their 50% stake.

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. While there is some analyst coverage, the company is probably not widely covered. So it could gain more attention, down the track.

Insider Ownership Of Cholamandalam Investment and Finance

The definition of an insider can differ slightly between different countries, but members of the board of directors always count. 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.

We can see that insiders own shares in Cholamandalam Investment and Finance Company Limited. It is a pretty big company, so it is generally a positive to see some potentially meaningful alignment. In this case, they own around ₹8.1b worth of shares (at current prices). It is good to see this level of investment by insiders. You can check here to see if those insiders have been buying recently.

General Public Ownership

With a 18% ownership, the general public, mostly comprising of individual investors, have some degree of sway over Cholamandalam Investment and Finance. 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.

Private Company Ownership

Our data indicates that Private Companies hold 4.9%, of the company’s shares. Private companies may be related parties. Sometimes insiders have an interest in a public company through a holding in a private company, rather than in their own capacity as an individual. While it’s hard to draw any broad stroke conclusions, it is worth noting as an area for further research.

Public Company Ownership

Public companies currently own 45% of Cholamandalam Investment and Finance stock. 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:

It’s always worth thinking about the different groups who own shares in a company. But to understand Cholamandalam Investment and Finance better, we need to consider many other factors. For example, we’ve discovered 2 warning signs for Cholamandalam Investment and Finance 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.

Valuation is complex, but we’re helping make it simple.

Find out whether Cholamandalam Investment and Finance is potentially over or undervalued by checking out our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.

View the Free Analysis

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.

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