Is The Indian Hotels Company Limited’s (NSE:INDHOTEL) CEO Being Overpaid?

Puneet Chhatwal became the CEO of The Indian Hotels Company Limited (NSE:INDHOTEL) in 2017. This report will, first, examine the CEO compensation levels in comparison to CEO compensation at companies of similar size. Then we’ll look at a snap shot of the business growth. And finally we will reflect on how common stockholders have fared in the last few years, as a secondary measure of performance. This method should give us information to assess how appropriately the company pays the CEO.

View our latest analysis for Indian Hotels

How Does Puneet Chhatwal’s Compensation Compare With Similar Sized Companies?

At the time of writing, our data says that The Indian Hotels Company Limited has a market cap of ₹77b, and reported total annual CEO compensation of ₹60m for the year to March 2019. While we always look at total compensation first, we note that the salary component is less, at ₹44m. When we examined a selection of companies with market caps ranging from ₹30b to ₹121b, we found the median CEO total compensation was ₹36m.

Now let’s take a look at the pay mix on an industry and company level to gain a better understanding of where Indian Hotels stands. Taking a bird’s eye view of the industry, we see that a majority of companies prefer paying their CEOs through salaries, as opposed to non-salary compensation. Indian Hotels does not set aside a larger portion of remuneration in the form of salary, maintaining the same rate as the wider market.

Thus we can conclude that Puneet Chhatwal receives more in total compensation than the median of a group of companies in the same market, and of similar size to The Indian Hotels Company Limited. However, this doesn’t necessarily mean the pay is too high. We can better assess whether the pay is overly generous by looking into the underlying business performance. You can see a visual representation of the CEO compensation at Indian Hotels, below.

NSEI:INDHOTEL CEO Compensation May 13th 2020
NSEI:INDHOTEL CEO Compensation May 13th 2020

Is The Indian Hotels Company Limited Growing?

Over the last three years The Indian Hotels Company Limited has seen earnings per share (EPS) move in a positive direction by an average of 72% per year (using a line of best fit). In the last year, its revenue is up 5.0%.

This demonstrates that the company has been improving recently. A good result. It’s good to see a bit of revenue growth, as this suggests the business is able to grow sustainably. It could be important to check this free visual depiction of what analysts expect for the future.

Has The Indian Hotels Company Limited Been A Good Investment?

Since shareholders would have lost about 51% over three years, some The Indian Hotels Company Limited shareholders would surely be feeling negative emotions. It therefore might be upsetting for shareholders if the CEO were paid generously.

In Summary…

We examined the amount The Indian Hotels Company Limited pays its CEO, and compared it to the amount paid by similar sized companies. As discussed above, we discovered that the company pays more than the median of that group.

However we must not forget that the EPS growth has been very strong over three years. Having said that, shareholders may be disappointed with the weak returns over the last three years. One might thus conclude that it would be better if the company waited until growth is reflected in the share price, before increasing CEO compensation. Shifting gears from CEO pay for a second, we’ve spotted 3 warning signs for Indian Hotels you should be aware of, and 1 of them is a bit unpleasant.

Important note: Indian Hotels may not be the best stock to buy. You might find something better in this list of interesting companies with high ROE and low debt.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. 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. Simply Wall St has no position in the stocks mentioned.

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