We Think Shareholders May Want To Consider A Review Of The Indian Hume Pipe Company Limited's (NSE:INDIANHUME) CEO Compensation Package

The Indian Hume Pipe Company Limited (NSE:INDIANHUME) has not performed well recently and CEO Rajas Doshi will probably need to up their game. At the upcoming AGM on 26 August 2021, shareholders can hear from the board including their plans for turning around performance. This will be also be a chance where they can challenge the board on company direction and vote on resolutions such as executive remuneration. We present the case why we think CEO compensation is out of sync with company performance.

Check out our latest analysis for Indian Hume Pipe

How Does Total Compensation For Rajas Doshi Compare With Other Companies In The Industry?

At the time of writing, our data shows that The Indian Hume Pipe Company Limited has a market capitalization of ₹10b, and reported total annual CEO compensation of ₹31m for the year to March 2021. Notably, that's a decrease of 31% over the year before. We note that the salary portion, which stands at ₹26.1m constitutes the majority of total compensation received by the CEO.

On comparing similar-sized companies in the industry with market capitalizations below ₹15b, we found that the median total CEO compensation was ₹4.6m. This suggests that Rajas Doshi is paid more than the median for the industry. Furthermore, Rajas Doshi directly owns ₹122m worth of shares in the company, implying that they are deeply invested in the company's success.

Component	2021	2020	Proportion (2021)
Salary	₹26m	₹36m	84%
Other	₹5.0m	₹9.6m	16%
Total Compensation	₹31m	₹45m	100%

Talking in terms of the industry, salary represents all of total compensation among the companies we analyzed, while other remuneration is, interestingly, completely ignored. Indian Hume Pipe pays a modest slice of remuneration through salary, as compared to the broader industry. If salary dominates total compensation, it suggests that CEO compensation is leaning less towards the variable component, which is usually linked with performance.

The Indian Hume Pipe Company Limited's Growth

Over the last three years, The Indian Hume Pipe Company Limited has shrunk its earnings per share by 6.2% per year. In the last year, its revenue is down 4.6%.

Overall this is not a very positive result for shareholders. And the impression is worse when you consider revenue is down year-on-year. These factors suggest that the business performance wouldn't really justify a high pay packet for the CEO. Although we don't have analyst forecasts, you might want to assess this data-rich visualization of earnings, revenue and cash flow.

Has The Indian Hume Pipe Company Limited Been A Good Investment?

With a three year total loss of 24% for the shareholders, The Indian Hume Pipe Company Limited would certainly have some dissatisfied shareholders. This suggests it would be unwise for the company to pay the CEO too generously.

To Conclude...

Along with the business performing poorly, shareholders have suffered with poor share price returns on their investments, suggesting that there's little to no chance of them being in favor of a CEO pay raise. At the upcoming AGM, they can question the management's plans and strategies to turn performance around and reassess their investment thesis in regards to the company.

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 4 warning signs for Indian Hume Pipe (of which 2 don't sit too well with us!) that you should know about in order to have a holistic understanding of the stock.

Important note: Indian Hume Pipe 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.
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