Here's Why Shareholders May Want To Be Cautious With Increasing NCC Limited's (NSE:NCC) CEO Pay Packet

By
Simply Wall St
Published
August 20, 2021
NSEI:NCC
Source: Shutterstock

Shareholders of NCC Limited (NSE:NCC) will have been dismayed by the negative share price return over the last three years. What is concerning is that despite positive EPS growth, the share price has not tracked the trend in fundamentals. Shareholders may want to question the board on the future direction of the company at the upcoming AGM on 27 August 2021. They could also try to influence management and firm direction through voting on resolutions such as executive remuneration and other company matters. Here's our take on why we think shareholders may want to be cautious of approving a raise for the CEO at the moment.

See our latest analysis for NCC

How Does Total Compensation For Alluri Ananta Venkata Raju Compare With Other Companies In The Industry?

At the time of writing, our data shows that NCC Limited has a market capitalization of ₹47b, and reported total annual CEO compensation of ₹50m for the year to March 2021. That's a notable decrease of 21% on last year. While we always look at total compensation first, our analysis shows that the salary component is less, at ₹12m.

For comparison, other companies in the same industry with market capitalizations ranging between ₹30b and ₹119b had a median total CEO compensation of ₹50m. From this we gather that Alluri Ananta Venkata Raju is paid around the median for CEOs in the industry. Moreover, Alluri Ananta Venkata Raju also holds ₹153m worth of NCC stock directly under their own name, which reveals to us that they have a significant personal stake in the company.

Component20212020Proportion (2021)
Salary ₹12m ₹17m 24%
Other ₹38m ₹46m 76%
Total Compensation₹50m ₹63m100%

Talking in terms of the industry, salary represents all of total compensation among the companies we analyzed, while other remuneration is, interestingly, completely ignored. NCC pays a modest slice of remuneration through salary, as compared to the broader industry. If total compensation is slanted towards non-salary benefits, it indicates that CEO pay is linked to company performance.

ceo-compensation
NSEI:NCC CEO Compensation August 21st 2021

NCC Limited's Growth

Over the past three years, NCC Limited has seen its earnings per share (EPS) grow by 5.3% per year. Its revenue is up 11% over the last year.

We think the revenue growth is good. And the improvement in EPSis modest but respectable. So while we'd stop just short of calling this a top performer, but we think it is well worth watching. Looking ahead, you might want to check this free visual report on analyst forecasts for the company's future earnings..

Has NCC Limited Been A Good Investment?

Since shareholders would have lost about 18% over three years, some NCC Limited investors would surely be feeling negative emotions. Therefore, it might be upsetting for shareholders if the CEO were paid generously.

In Summary...

Shareholders have not seen their shares grow in value, rather they have seen their shares decline. The fact that the stock price hasn't grown along with earnings may indicate that other issues may be affecting that stock. Shareholders would be keen to know what's holding the stock back when earnings have grown. At the upcoming AGM, shareholders will get the opportunity to discuss any issues with the board, including those related to CEO remuneration and assess if the board's plan will likely improve performance in the future.

While CEO pay is an important factor to be aware of, there are other areas that investors should be mindful of as well. We did our research and spotted 3 warning signs for NCC that investors should look into moving forward.

Important note: NCC 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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