We Think The Compensation For PPAP Automotive Limited's (NSE:PPAP) CEO Looks About Right

Key Insights

• PPAP Automotive to hold its Annual General Meeting on 15th of September
• Total pay for CEO Abhishek Jain includes ₹7.00m salary
• The overall pay is comparable to the industry average
• PPAP Automotive's total shareholder return over the past three years was 8.2% while its EPS was down 41% over the past three years

Despite positive share price growth of 8.2% for PPAP Automotive Limited (NSE:PPAP) over the last few years, earnings growth has been disappointing, which suggests something is amiss. Some of these issues will occupy shareholders' minds as the AGM rolls around on 15th of September. It would also be an opportunity for them to influence management through exercising their voting power on company resolutions, including CEO and executive remuneration, which could impact on firm performance in the future. In our analysis below, we show why shareholders may consider holding off a raise for the CEO's compensation until company performance improves.

Check out our latest analysis for PPAP Automotive

How Does Total Compensation For Abhishek Jain Compare With Other Companies In The Industry?

Our data indicates that PPAP Automotive Limited has a market capitalization of ₹3.4b, and total annual CEO compensation was reported as ₹7.4m for the year to March 2023. We note that's a decrease of 42% compared to last year. In particular, the salary of ₹7.00m, makes up a huge portion of the total compensation being paid to the CEO.

In comparison with other companies in the Indian Auto Components industry with market capitalizations under ₹17b, the reported median total CEO compensation was ₹8.2m. This suggests that PPAP Automotive remunerates its CEO largely in line with the industry average. Moreover, Abhishek Jain also holds ₹246m worth of PPAP Automotive stock directly under their own name, which reveals to us that they have a significant personal stake in the company.

Component	2023	2022	Proportion (2023)
Salary	₹7.0m	₹12m	94%
Other	₹437k	₹737k	6%
Total Compensation	₹7.4m	₹13m	100%

On an industry level, around 76% of total compensation represents salary and 24% is other remuneration. According to our research, PPAP Automotive has allocated a higher percentage of pay to salary in comparison to the wider industry. If salary dominates total compensation, it suggests that CEO compensation is leaning less towards the variable component, which is usually linked with performance.

PPAP Automotive Limited's Growth

PPAP Automotive Limited has reduced its earnings per share by 41% a year over the last three years. Its revenue is up 8.1% over the last year.

The decline in EPS is a bit concerning. The fairly low revenue growth fails to impress given that the EPS is down. These factors suggest that the business performance wouldn't really justify a high pay packet for the CEO. Looking ahead, you might want to check this free visual report on analyst forecasts for the company's future earnings..

Has PPAP Automotive Limited Been A Good Investment?

With a total shareholder return of 8.2% over three years, PPAP Automotive Limited has done okay by shareholders, but there's always room for improvement. In light of that, investors might probably want to see an improvement on their returns before they feel generous about increasing the CEO remuneration.

To Conclude...

While it's true that shareholders have owned decent returns, it's hard to overlook the lack of earnings growth and this makes us question whether these returns will continue. The upcoming AGM will provide shareholders the opportunity to revisit the company’s remuneration policies and evaluate if the board’s judgement and decision-making is aligned with that of the company’s shareholders.

CEO compensation is an important area to keep your eyes on, but we've also need to pay attention to other attributes of the company. That's why we did our research, and identified 4 warning signs for PPAP Automotive (of which 3 are concerning!) that you should know about in order to have a holistic understanding of the stock.

Important note: PPAP Automotive is an exciting stock, but we understand investors may be looking for an unencumbered balance sheet and blockbuster returns. You might find something better in this list of interesting companies with high ROE and low debt.

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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.