We Think Some Shareholders May Hesitate To Increase Indo National Limited's (NSE:NIPPOBATRY) CEO Compensation

Key Insights

• Indo National will host its Annual General Meeting on 27th of September
• Total pay for CEO P. Reddy includes ₹8.40m salary
• Total compensation is 96% above industry average
• Indo National's total shareholder return over the past three years was 79% while its EPS was down 63% over the past three years

The share price of Indo National Limited (NSE:NIPPOBATRY) has increased significantly over the past few years. However, the earnings growth has not kept up with the share price momentum, suggesting that some other factors may be driving the price direction. Some of these issues will occupy shareholders' minds as the AGM rolls around on 27th of September. 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. 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 ₹3.4b, and paid its CEO total annual compensation worth ₹12m over the year to March 2023. That is, the compensation was roughly the same as last year. We note that the salary portion, which stands at ₹8.40m constitutes the majority of total compensation received by the CEO.

In comparison with other companies in the Indian Electrical industry with market capitalizations under ₹17b, the reported median total CEO compensation was ₹6.1m. Accordingly, our analysis reveals that Indo National Limited pays P. Reddy north of the industry median. Furthermore, P. Reddy directly owns ₹1.5b worth of shares in the company, implying that they are deeply invested in the company's success.

Component	2023	2022	Proportion (2023)
Salary	₹8.4m	₹8.4m	71%
Other	₹3.5m	₹3.6m	29%
Total Compensation	₹12m	₹12m	100%

On an industry level, roughly 84% of total compensation represents salary and 16% is other remuneration. 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.

Indo National Limited's Growth

Over the last three years, Indo National Limited has shrunk its earnings per share by 63% per year. It saw its revenue drop 3.8% over the last year.

Overall this is not a very positive result for shareholders. This is compounded by the fact revenue is actually down on last year. So given this relatively weak performance, shareholders would probably not want to see high compensation for the CEO. 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 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. As a result, some may believe the CEO should be paid more than is normal for companies of similar size.

To Conclude...

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. Shareholders should make the most of the coming opportunity to question the board on key concerns they may have and revisit their investment thesis with regards to the company.

It is always advisable to analyse CEO pay, along with performing a thorough analysis of the company's key performance areas. That's why we did our research, and identified 5 warning signs for Indo National (of which 2 are a bit unpleasant!) that you should know about in order to have a holistic understanding of the stock.

Important note: Indo National 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.