This article will reflect on the compensation paid to Dinesh Patidar who has served as CEO of Shakti Pumps (India) Limited (NSE:SHAKTIPUMP) since 2006. This analysis will also assess whether Shakti Pumps (India) pays its CEO appropriately, considering recent earnings growth and total shareholder returns.
Comparing Shakti Pumps (India) Limited's CEO Compensation With the industry
At the time of writing, our data shows that Shakti Pumps (India) Limited has a market capitalization of ₹4.4b, and reported total annual CEO compensation of ₹31m for the year to March 2020. We note that's an increase of 34% above last year. It is worth noting that the CEO compensation consists entirely of the salary, worth ₹31m.
For comparison, other companies in the industry with market capitalizations below ₹15b, reported a median total CEO compensation of ₹5.9m. Hence, we can conclude that Dinesh Patidar is remunerated higher than the industry median. What's more, Dinesh Patidar holds ₹1.0b worth of shares in the company in their own name, indicating that they have a lot of skin in the game.
Speaking on an industry level, nearly 91% of total compensation represents salary, while the remainder of 9.1% is other remuneration. At the company level, Shakti Pumps (India) pays Dinesh Patidar solely through a salary, preferring to go down a conventional route. If total compensation veers towards salary, it suggests that the variable portion - which is generally tied to performance, is lower.
Shakti Pumps (India) Limited's Growth
Over the last three years, Shakti Pumps (India) Limited has shrunk its earnings per share by 45% per year. It saw its revenue drop 5.8% over the last year.
Few shareholders would be pleased to read that EPS have declined. 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. Although we don't have analyst forecasts, you might want to assess this data-rich visualization of earnings, revenue and cash flow.
Has Shakti Pumps (India) Limited Been A Good Investment?
Given the total shareholder loss of 42% over three years, many shareholders in Shakti Pumps (India) Limited are probably rather dissatisfied, to say the least. This suggests it would be unwise for the company to pay the CEO too generously.
Shakti Pumps (India) pays CEO compensation exclusively through a salary, with non-salary compensation completely ignored. As previously discussed, Dinesh is compensated more than what is normal for CEOs of companies of similar size, and which belong to the same industry. Unfortunately, this doesn't look great when you see shareholder returns have been negative over the last three years. Add to that declining EPS growth, and you have the perfect recipe for shareholder irritation. Considering such poor performance, we think shareholders might be concerned if the CEO's compensation were to grow.
We can learn a lot about a company by studying its CEO compensation trends, along with looking at other aspects of the business. We did our research and identified 6 warning signs (and 2 which are concerning) in Shakti Pumps (India) we think you should know about.
Switching gears from Shakti Pumps (India), if you're hunting for a pristine balance sheet and premium returns, this free list of high return, low debt companies is a great place to look.
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This article by Simply Wall St is general in nature. 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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