Shareholders Will Probably Hold Off On Increasing Godrej Industries Limited's (NSE:GODREJIND) CEO Compensation For The Time Being

Key Insights

• Godrej Industries' Annual General Meeting to take place on 13th of August
• Salary of ₹78.4m is part of CEO Nadir Godrej's total remuneration
• The total compensation is 92% higher than the average for the industry
• Over the past three years, Godrej Industries' EPS fell by 44% and over the past three years, the total shareholder return was 50%

Godrej Industries Limited (NSE:GODREJIND) has exhibited strong share price growth in the past few years. However, its earnings growth has not kept up, suggesting that there may be something amiss. The upcoming AGM on 13th of August may be an opportunity for shareholders to bring up any concerns they may have for the board’s attention. They will be able to influence managerial decisions through the exercise of their voting power on resolutions, such as CEO remuneration and other matters, which may influence future company prospects. In our analysis below, we show why shareholders may consider holding off a raise for the CEO's compensation until company performance improves.

See our latest analysis for Godrej Industries

How Does Total Compensation For Nadir Godrej Compare With Other Companies In The Industry?

According to our data, Godrej Industries Limited has a market capitalization of ₹294b, and paid its CEO total annual compensation worth ₹86m over the year to March 2024. We note that's an increase of 9.1% above last year. In particular, the salary of ₹78.4m, makes up a huge portion of the total compensation being paid to the CEO.

In comparison with other companies in the India Industrials industry with market capitalizations ranging from ₹168b to ₹537b, the reported median CEO total compensation was ₹45m. This suggests that Nadir Godrej is paid more than the median for the industry. What's more, Nadir Godrej holds ₹61b 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	₹78m	₹71m	91%
Other	₹7.8m	₹7.6m	9%
Total Compensation	₹86m	₹79m	100%

On an industry level, roughly 85% of total compensation represents salary and 15% is other remuneration. Although there is a difference in how total compensation is set, Godrej Industries more or less reflects the market in terms of setting the salary. 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.

Godrej Industries Limited's Growth

Godrej Industries Limited has reduced its earnings per share by 44% a year over the last three years. In the last year, its revenue changed by just 0.5%.

Few shareholders would be pleased to read that EPS have declined. And the flat revenue is seriously uninspiring. These factors suggest that the business performance wouldn't really justify a high pay packet for the CEO. While we don't have analyst forecasts for the company, shareholders might want to examine this detailed historical graph of earnings, revenue and cash flow.

Has Godrej Industries Limited Been A Good Investment?

Most shareholders would probably be pleased with Godrej Industries Limited for providing a total return of 50% over three years. 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.

In Summary...

Despite the strong returns on shareholders' investments, the fact that earnings have failed to grow makes us skeptical about the stock keeping up its current momentum. 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.

We can learn a lot about a company by studying its CEO compensation trends, along with looking at other aspects of the business. That's why we did our research, and identified 3 warning signs for Godrej Industries (of which 1 is a bit unpleasant!) that you should know about in order to have a holistic understanding of the stock.

Important note: Godrej Industries 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.

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