Increases to Kothari Products Limited's (NSE:KOTHARIPRO) CEO Compensation Might Cool off for now

Key Insights

• Kothari Products' Annual General Meeting to take place on 25th of September
• Total pay for CEO Deepak Kothari includes ₹2.40m salary
• Total compensation is 246% above industry average
• Over the past three years, Kothari Products' EPS fell by 23% and over the past three years, the total shareholder return was 110%

Kothari Products Limited (NSE:KOTHARIPRO) 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. These concerns will be at the front of shareholders' minds as they go into the AGM coming up on 25th of September. It would also be an opportunity for them to influence management through exercising their voting power on company resolutions, including CEO and executive remuneration, which could impact on firm performance in the future. From what we gathered, we think shareholders should be wary of raising CEO compensation until the company shows some marked improvement.

See our latest analysis for Kothari Products

How Does Total Compensation For Deepak Kothari Compare With Other Companies In The Industry?

According to our data, Kothari Products Limited has a market capitalization of ₹3.7b, and paid its CEO total annual compensation worth ₹4.5m over the year to March 2023. That's slightly lower by 5.8% over the previous year. In particular, the salary of ₹2.40m, makes up a fairly large portion of the total compensation being paid to the CEO.

On comparing similar-sized companies in the India Trade Distributors industry with market capitalizations below ₹17b, we found that the median total CEO compensation was ₹1.3m. This suggests that Deepak Kothari is paid more than the median for the industry. Moreover, Deepak Kothari also holds ₹2.1b worth of Kothari Products stock directly under their own name, which reveals to us that they have a significant personal stake in the company.

Component	2023	2022	Proportion (2023)
Salary	₹2.4m	₹2.4m	54%
Other	₹2.1m	₹2.4m	46%
Total Compensation	₹4.5m	₹4.8m	100%

Speaking on an industry level, all of total compensation represents salary, while non-salary remuneration is completely ignored. It's interesting to note that Kothari Products allocates a smaller portion of compensation to salary in comparison to the broader industry. 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.

A Look at Kothari Products Limited's Growth Numbers

Over the last three years, Kothari Products Limited has shrunk its earnings per share by 23% per year. Its revenue is down 47% over the previous year.

The decline in EPS is a bit concerning. And the fact that revenue is down year on year arguably paints an ugly picture. It's hard to argue the company is firing on all cylinders, so shareholders might be averse to high CEO remuneration. 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 Kothari Products Limited Been A Good Investment?

Most shareholders would probably be pleased with Kothari Products Limited for providing a total return of 110% over three years. As a result, some may believe the CEO should be paid more than is normal for companies of similar size.

In Summary...

While the return to shareholders does look promising, it's hard to ignore the lack of earnings growth and this makes us question whether these strong returns will continue. 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.

CEO pay is simply one of the many factors that need to be considered while examining business performance. We identified 2 warning signs for Kothari Products (1 shouldn't be ignored!) that you should be aware of before investing here.

Important note: Kothari Products 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.