Here's Why Shareholders Will Not Be Complaining About Sterling Tools Limited's (NSE:STERTOOLS) CEO Pay Packet

Key Insights

• Sterling Tools to hold its Annual General Meeting on 13th of September
• Salary of ₹23.7m is part of CEO Anil Aggarwal's total remuneration
• Total compensation is similar to the industry average
• Sterling Tools' total shareholder return over the past three years was 151% while its EPS grew by 19% over the past three years

The performance at Sterling Tools Limited (NSE:STERTOOLS) has been quite strong recently and CEO Anil Aggarwal has played a role in it. The pleasing results would be something shareholders would keep in mind at the upcoming AGM on 13th of September. It is likely that the focus will be on company strategy going forward as shareholders hear from the board and cast their votes on resolutions such as executive remuneration and other matters. We think the CEO has done a pretty decent job and we discuss why the CEO compensation is appropriate.

View our latest analysis for Sterling Tools

How Does Total Compensation For Anil Aggarwal Compare With Other Companies In The Industry?

Our data indicates that Sterling Tools Limited has a market capitalization of ₹18b, and total annual CEO compensation was reported as ₹28m for the year to March 2024. That's a modest increase of 7.5% on the prior year. Notably, the salary which is ₹23.7m, represents most of the total compensation being paid.

On examining similar-sized companies in the Indian Auto Components industry with market capitalizations between ₹8.4b and ₹34b, we discovered that the median CEO total compensation of that group was ₹28m. From this we gather that Anil Aggarwal is paid around the median for CEOs in the industry. Moreover, Anil Aggarwal also holds ₹3.0b worth of Sterling Tools stock directly under their own name, which reveals to us that they have a significant personal stake in the company.

Component	2024	2023	Proportion (2024)
Salary	₹24m	₹21m	84%
Other	₹4.4m	₹5.4m	16%
Total Compensation	₹28m	₹26m	100%

Speaking on an industry level, nearly 76% of total compensation represents salary, while the remainder of 24% is other remuneration. It's interesting to note that Sterling Tools pays out a greater portion of remuneration through salary, compared to the industry. If total compensation veers towards salary, it suggests that the variable portion - which is generally tied to performance, is lower.

Sterling Tools Limited's Growth

Over the past three years, Sterling Tools Limited has seen its earnings per share (EPS) grow by 19% per year. In the last year, its revenue is up 21%.

Shareholders would be glad to know that the company has improved itself over the last few years. It's also good to see decent revenue growth in the last year, suggesting the business is healthy and growing. Although we don't have analyst forecasts, you might want to assess this data-rich visualization of earnings, revenue and cash flow.

Has Sterling Tools Limited Been A Good Investment?

Most shareholders would probably be pleased with Sterling Tools Limited for providing a total return of 151% over three years. This strong performance might mean some shareholders don't mind if the CEO were to be paid more than is normal for a company of its size.

In Summary...

The company's solid performance might have made most shareholders happy, possibly making CEO remuneration the least of the matters to be discussed in the AGM. However, investors will get the chance to engage on key strategic initiatives and future growth opportunities for the company and set their longer-term expectations.

While it is important to pay attention to CEO remuneration, investors should also consider other elements of the business. That's why we did some digging and identified 1 warning sign for Sterling Tools that you should be aware of before investing.

Arguably, business quality is much more important than CEO compensation levels. So check out this free list of interesting companies that have HIGH return on equity 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.