How Should Investors React To ESAB India's (NSE:ESABINDIA) CEO Pay?

Rohit Gambhir became the CEO of ESAB India Limited (NSE:ESABINDIA) in 2014, and we think it's a good time to look at the executive's compensation against the backdrop of overall company performance. This analysis will also look to assess whether the CEO is appropriately paid, considering recent earnings growth and investor returns for ESAB India.

Check out our latest analysis for ESAB India

How Does Total Compensation For Rohit Gambhir Compare With Other Companies In The Industry?

According to our data, ESAB India Limited has a market capitalization of ₹28b, and paid its CEO total annual compensation worth ₹19m over the year to March 2020. That's a notable decrease of 18% on last year. We note that the salary portion, which stands at ₹18.0m constitutes the majority of total compensation received by the CEO.

On examining similar-sized companies in the industry with market capitalizations between ₹15b and ₹58b, we discovered that the median CEO total compensation of that group was ₹18m. From this we gather that Rohit Gambhir is paid around the median for CEOs in the industry.

On an industry level, roughly 93% of total compensation represents salary and 7.3% is other remuneration. Investors will find it interesting that ESAB India 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.

ESAB India Limited's Growth

ESAB India Limited's earnings per share (EPS) grew 27% per year over the last three years. In the last year, its revenue is down 7.7%.

Overall this is a positive result for shareholders, showing that the company has improved in recent years. The lack of revenue growth isn't ideal, but it is the bottom line that counts most in business. We don't have analyst forecasts, but you could get a better understanding of its growth by checking out this more detailed historical graph of earnings, revenue and cash flow.

Has ESAB India Limited Been A Good Investment?

Boasting a total shareholder return of 168% over three years, ESAB India Limited has done well by shareholders. 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...

ESAB India pays its CEO a majority of compensation through a salary. As we noted earlier, ESAB India pays its CEO in line with similar-sized companies belonging to the same industry. Few would be critical of the leadership, since returns have been juicy and EPS are moving in the right direction. So one could argue that CEO compensation is quite modest, if you consider company performance! In fact, shareholders might even think the CEO deserves a raise as a reward due to the fantastic returns generated.

While it is important to pay attention to CEO remuneration, investors should also consider other elements of the business. We did our research and spotted 2 warning signs for ESAB India that investors should look into moving forward.

Switching gears from ESAB 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. 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.
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