Shareholders Will Probably Hold Off On Increasing Precot Limited's (NSE:PRECOT) CEO Compensation For The Time Being

Key Insights

• Precot's Annual General Meeting to take place on 20th of August
• Total pay for CEO Ashwin Chandran includes ₹11.4m salary
• The total compensation is 224% higher than the average for the industry
• Over the past three years, Precot's EPS fell by 20% and over the past three years, the total shareholder return was 118%

Precot Limited (NSE:PRECOT) 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. The upcoming AGM on 20th of August may be an opportunity for shareholders to bring up any concerns they may have for the board’s attention. 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 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 Precot

How Does Total Compensation For Ashwin Chandran Compare With Other Companies In The Industry?

According to our data, Precot Limited has a market capitalization of ₹6.3b, and paid its CEO total annual compensation worth ₹12m over the year to March 2024. We note that's an increase of 9.2% above last year. In particular, the salary of ₹11.4m, makes up a huge portion of the total compensation being paid to the CEO.

In comparison with other companies in the Indian Luxury industry with market capitalizations under ₹17b, the reported median total CEO compensation was ₹3.7m. Accordingly, our analysis reveals that Precot Limited pays Ashwin Chandran north of the industry median. What's more, Ashwin Chandran holds ₹1.2b worth of shares in the company in their own name, indicating that they have a lot of skin in the game.

Component	2024	2023	Proportion (2024)
Salary	₹11m	₹11m	95%
Other	₹600k	-	5%
Total Compensation	₹12m	₹11m	100%

On an industry level, roughly 99% of total compensation represents salary and 0.75879388% is other remuneration. Precot is focused on going down a more traditional approach and is paying a higher portion of compensation through salary, as compared to non-salary benefits. If salary dominates total compensation, it suggests that CEO compensation is leaning less towards the variable component, which is usually linked with performance.

Precot Limited's Growth

Over the last three years, Precot Limited has shrunk its earnings per share by 20% per year. Its revenue is up 2.5% over the last year.

The decline in EPS is a bit concerning. The fairly low revenue growth fails to impress given that the EPS is down. So given this relatively weak performance, shareholders would probably not want to see high compensation for the CEO. Although we don't have analyst forecasts, you might want to assess this data-rich visualization of earnings, revenue and cash flow.

Has Precot Limited Been A Good Investment?

Most shareholders would probably be pleased with Precot Limited for providing a total return of 118% over three years. As a result, some may believe the CEO should be paid more than is normal for companies of similar size.

To Conclude...

Precot pays its CEO a majority of compensation through a salary. Despite the strong returns on shareholders' investments, the fact that earnings have failed to grow makes us skeptical about the stock keeping up its current momentum. 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.

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 5 warning signs (and 1 which is a bit unpleasant) in Precot we think you should know about.

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.