We Take A Look At Why Cummins India Limited's (NSE:CUMMINSIND) CEO Has Earned Their Pay Packet

Key Insights

• Cummins India to hold its Annual General Meeting on 7th of August
• Salary of ₹62.3m is part of CEO Ashwath Ram's total remuneration
• Total compensation is similar to the industry average
• Cummins India's EPS grew by 39% over the past three years while total shareholder return over the past three years was 350%

The performance at Cummins India Limited (NSE:CUMMINSIND) has been quite strong recently and CEO Ashwath Ram has played a role in it. The pleasing results would be something shareholders would keep in mind at the upcoming AGM on 7th of August. The focus will probably be on the future company strategy as shareholders cast their votes on resolutions such as executive remuneration and other matters. In light of the great performance, we discuss the case why we think CEO compensation is not excessive.

See our latest analysis for Cummins India

How Does Total Compensation For Ashwath Ram Compare With Other Companies In The Industry?

According to our data, Cummins India Limited has a market capitalization of ₹1.1t, and paid its CEO total annual compensation worth ₹62m over the year to March 2024. That's a notable increase of 31% on last year. It is worth noting that the CEO compensation consists entirely of the salary, worth ₹62m.

In comparison with other companies in the Indian Machinery industry with market capitalizations over ₹670b, the reported median total CEO compensation was ₹69m. From this we gather that Ashwath Ram is paid around the median for CEOs in the industry. What's more, Ashwath Ram holds ₹53m worth of shares in the company in their own name, indicating that they have a lot of skin in the game.

Component	2024	2023	Proportion (2024)
Salary	₹62m	₹48m	100%
Other	-	-	-
Total Compensation	₹62m	₹48m	100%

On an industry level, around 92% of total compensation represents salary and 8% is other remuneration. Speaking on a company level, Cummins India prefers to tread along a traditional path, disbursing all compensation through a salary. If total compensation veers towards salary, it suggests that the variable portion - which is generally tied to performance, is lower.

A Look at Cummins India Limited's Growth Numbers

Cummins India Limited's earnings per share (EPS) grew 39% per year over the last three years. In the last year, its revenue is up 16%.

Shareholders would be glad to know that the company has improved itself over the last few years. It's a real positive to see this sort of revenue growth in a single year. That suggests a healthy and 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 Cummins India Limited Been A Good Investment?

We think that the total shareholder return of 350%, over three years, would leave most Cummins India Limited shareholders smiling. So they may not be at all concerned if the CEO were to be paid more than is normal for companies around the same size.

To Conclude...

Cummins India pays CEO compensation exclusively through a salary, with non-salary compensation completely ignored. Given the company's decent performance, the CEO remuneration policy might not be shareholders' central point of focus 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.

CEO compensation is a crucial aspect to keep your eyes on but investors also need to keep their eyes open for other issues related to business performance. We did our research and spotted 1 warning sign for Cummins India that investors should look into moving forward.

Switching gears from Cummins India, if you're hunting for a pristine balance sheet and premium returns, this free list of high return, low debt companies is a great place to look.

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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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com