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

Indo National Limited (NSE:NIPPOBATRY) 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 27 September 2022. One way that shareholders can influence managerial decisions is through voting on CEO and executive remuneration packages, which studies show could impact company performance. From the data that we gathered, we think that shareholders should hold off on a raise on CEO compensation until performance starts to show some improvement.

Check out our latest analysis for Indo National

How Does Total Compensation For P. Reddy Compare With Other Companies In The Industry?

According to our data, Indo National Limited has a market capitalization of ₹3.0b, and paid its CEO total annual compensation worth ₹12m over the year to March 2022. That's a notable decrease of 15% on last year. In particular, the salary of ₹8.40m, makes up a huge portion of the total compensation being paid to the CEO.

For comparison, other companies in the industry with market capitalizations below ₹16b, reported a median total CEO compensation of ₹5.0m. Hence, we can conclude that P. Reddy is remunerated higher than the industry median. Moreover, P. Reddy also holds ₹1.3b worth of Indo National stock directly under their own name, which reveals to us that they have a significant personal stake in the company.

Component	2022	2021	Proportion (2022)
Salary	₹8.4m	₹6.0m	70%
Other	₹3.6m	₹8.1m	30%
Total Compensation	₹12m	₹14m	100%

Talking in terms of the industry, salary represented approximately 79% of total compensation out of all the companies we analyzed, while other remuneration made up 21% of the pie. Indo National pays a modest slice of remuneration through salary, as compared to the broader industry. If total compensation veers towards salary, it suggests that the variable portion - which is generally tied to performance, is lower.

A Look at Indo National Limited's Growth Numbers

Over the last three years, Indo National Limited has shrunk its earnings per share by 45% per year. Its revenue is up 8.7% over the last year.

The decline in EPS is a bit concerning. The modest increase in revenue in the last year isn't enough to make us overlook the disappointing change in EPS. So given this relatively weak performance, shareholders would probably not want to see high compensation 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 Indo National Limited Been A Good Investment?

We think that the total shareholder return of 79%, over three years, would leave most Indo National Limited shareholders smiling. 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...

Although shareholders would be quite happy with the returns they have earned on their initial investment, earnings have failed to grow and this could mean returns may be hard to keep up. In the upcoming AGM, shareholders will get the opportunity to discuss any concerns with the board, including those related to CEO remuneration and assess if the board's plan will likely improve performance in the future.

CEO compensation is an important area to keep your eyes on, but we've also need to pay attention to other attributes of the company. That's why we did our research, and identified 4 warning signs for Indo National (of which 2 are significant!) that you should know about in order to have a holistic understanding of the stock.

Of course, you might find a fantastic investment by looking at a different set of stocks. So take a peek at this free list of interesting companies.

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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.