Shareholders May Be More Conservative With McLeod Russel India Limited's (NSE:MCLEODRUSS) CEO Compensation For Now

Key Insights

• McLeod Russel India will host its Annual General Meeting on 29th of September
• CEO AK Khaitan's total compensation includes salary of ₹18.0m
• The overall pay is 1,097% above the industry average
• Over the past three years, McLeod Russel India's EPS fell by 101% and over the past three years, the total shareholder return was 33%

The share price of McLeod Russel India Limited (NSE:MCLEODRUSS) has been growing in the past few years, however, the per-share earnings growth has been lacking, suggesting something is amiss. The upcoming AGM on 29th of September may be an opportunity for shareholders to bring up any concerns they may have for the board’s attention. One way that shareholders can influence managerial decisions is through voting on CEO and executive remuneration packages, which studies show could impact company performance. In our analysis below, we show why shareholders may consider holding off a raise for the CEO's compensation until company performance improves.

View our latest analysis for McLeod Russel India

How Does Total Compensation For AK Khaitan Compare With Other Companies In The Industry?

According to our data, McLeod Russel India Limited has a market capitalization of ₹2.2b, and paid its CEO total annual compensation worth ₹36m over the year to March 2023. That's mostly flat as compared to the prior year's compensation. In particular, the salary of ₹18.0m, makes up a fairly large portion of the total compensation being paid to the CEO.

For comparison, other companies in the Indian Food industry with market capitalizations below ₹17b, reported a median total CEO compensation of ₹3.0m. Accordingly, our analysis reveals that McLeod Russel India Limited pays AK Khaitan north of the industry median.

Component	2023	2022	Proportion (2023)
Salary	₹18m	₹18m	50%
Other	₹18m	₹18m	50%
Total Compensation	₹36m	₹36m	100%

Talking in terms of the industry, salary represented approximately 95% of total compensation out of all the companies we analyzed, while other remuneration made up 5% of the pie. In McLeod Russel India's case, non-salary compensation represents a greater slice of total remuneration, in comparison to the broader industry. If salary dominates total compensation, it suggests that CEO compensation is leaning less towards the variable component, which is usually linked with performance.

A Look at McLeod Russel India Limited's Growth Numbers

Over the last three years, McLeod Russel India Limited has shrunk its earnings per share by 101% per year. Revenue was pretty flat on last year.

The decline in EPS is a bit concerning. And the flat revenue hardly impresses. It's hard to argue the company is firing on all cylinders, so shareholders might be averse to high CEO remuneration. 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 McLeod Russel India Limited Been A Good Investment?

With a total shareholder return of 33% over three years, McLeod Russel India Limited shareholders would, in general, be reasonably content. But they probably wouldn't be so happy as to think the CEO should be paid more than is normal, for companies around this size.

In Summary...

Despite the positive returns on shareholders' investments, the fact that earnings have failed to grow makes us skeptical about whether these returns will continue. The upcoming AGM will provide shareholders the opportunity to revisit the company’s remuneration policies and evaluate if the board’s judgement and decision-making is aligned with that of the company’s shareholders.

It is always advisable to analyse CEO pay, along with performing a thorough analysis of the company's key performance areas. We did our research and identified 3 warning signs (and 1 which is significant) in McLeod Russel India we think you should know about.

Important note: McLeod Russel India 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.