We Think Action Construction Equipment Limited's (NSE:ACE) CEO Compensation Looks Fair

Key Insights

• Action Construction Equipment will host its Annual General Meeting on 27th of August
• CEO Vijay Agarwal's total compensation includes salary of ₹45.7m
• Total compensation is similar to the industry average
• Over the past three years, Action Construction Equipment's EPS grew by 47% and over the past three years, the total shareholder return was 558%

It would be hard to discount the role that CEO Vijay Agarwal has played in delivering the impressive results at Action Construction Equipment Limited (NSE:ACE) recently. Shareholders will have this at the front of their minds in the upcoming AGM on 27th of August. This would also be a chance for them to hear the board review the financial results, discuss future company strategy and vote on any resolutions such as executive remuneration. In light of the great performance, we discuss the case why we think CEO compensation is not excessive.

View our latest analysis for Action Construction Equipment

How Does Total Compensation For Vijay Agarwal Compare With Other Companies In The Industry?

According to our data, Action Construction Equipment Limited has a market capitalization of ₹155b, and paid its CEO total annual compensation worth ₹48m over the year to March 2024. That's a notable increase of 29% on last year. In particular, the salary of ₹45.7m, makes up a huge portion of the total compensation being paid to the CEO.

For comparison, other companies in the Indian Machinery industry with market capitalizations ranging between ₹84b and ₹268b had a median total CEO compensation of ₹38m. This suggests that Action Construction Equipment remunerates its CEO largely in line with the industry average. Furthermore, Vijay Agarwal directly owns ₹45b worth of shares in the company, implying that they are deeply invested in the company's success.

Component	2024	2023	Proportion (2024)
Salary	₹46m	₹35m	95%
Other	₹2.2m	₹1.8m	5%
Total Compensation	₹48m	₹37m	100%

Talking in terms of the industry, salary represented approximately 91% of total compensation out of all the companies we analyzed, while other remuneration made up 9% of the pie. Investors will find it interesting that Action Construction Equipment pays the bulk of its rewards through a traditional salary, instead of non-salary benefits. If salary is the major component in total compensation, it suggests that the CEO receives a higher fixed proportion of the total compensation, regardless of performance.

Action Construction Equipment Limited's Growth

Over the past three years, Action Construction Equipment Limited has seen its earnings per share (EPS) grow by 47% per year. In the last year, its revenue is up 30%.

This demonstrates that the company has been improving recently and is good news for the shareholders. Most shareholders would be pleased to see strong revenue growth combined with EPS growth. This combo suggests a fast growing business. Historical performance can sometimes be a good indicator on what's coming up next but if you want to peer into the company's future you might be interested in this free visualization of analyst forecasts.

Has Action Construction Equipment Limited Been A Good Investment?

We think that the total shareholder return of 558%, over three years, would leave most Action Construction Equipment Limited shareholders smiling. As a result, some may believe the CEO should be paid more than is normal for companies of similar size.

In Summary...

Action Construction Equipment pays its CEO a majority of compensation through a salary. Seeing that the company has put in a relatively good performance, the CEO remuneration policy may not be the focus at the AGM. In fact, strategic decisions that could impact the future of the business might be a far more interesting topic for investors as it would help them set their longer-term expectations.

While CEO pay is an important factor to be aware of, there are other areas that investors should be mindful of as well. That's why we did some digging and identified 1 warning sign for Action Construction Equipment that you should be aware of before investing.

Important note: Action Construction Equipment 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.