We Think Some Shareholders May Hesitate To Increase Ester Industries Limited's (NSE:ESTER) CEO Compensation

Key Insights

• Ester Industries will host its Annual General Meeting on 27th of September
• Salary of ₹14.4m is part of CEO Arvind Singhania's total remuneration
• The total compensation is 74% higher than the average for the industry
• Over the past three years, Ester Industries' EPS fell by 100% and over the past three years, the total shareholder return was 14%

Despite positive share price growth of 14% for Ester Industries Limited (NSE:ESTER) over the last few years, earnings growth has been disappointing, which suggests something is amiss. These concerns will be at the front of shareholders' minds as they go into the AGM coming up on 27th of September. 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.

See our latest analysis for Ester Industries

How Does Total Compensation For Arvind Singhania Compare With Other Companies In The Industry?

Our data indicates that Ester Industries Limited has a market capitalization of ₹16b, and total annual CEO compensation was reported as ₹31m for the year to March 2024. This means that the compensation hasn't changed much from last year. While we always look at total compensation first, our analysis shows that the salary component is less, at ₹14m.

In comparison with other companies in the Indian Chemicals industry with market capitalizations ranging from ₹8.4b to ₹33b, the reported median CEO total compensation was ₹18m. Hence, we can conclude that Arvind Singhania is remunerated higher than the industry median. What's more, Arvind Singhania holds ₹442m 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	₹14m	₹14m	47%
Other	₹16m	₹16m	53%
Total Compensation	₹31m	₹31m	100%

Speaking on an industry level, nearly 89% of total compensation represents salary, while the remainder of 11% is other remuneration. It's interesting to note that Ester Industries allocates a smaller portion of compensation to salary in comparison to the broader industry. It's important to note that a slant towards non-salary compensation suggests that total pay is tied to the company's performance.

Ester Industries Limited's Growth

Over the last three years, Ester Industries Limited has shrunk its earnings per share by 100% per year. It achieved revenue growth of 4.3% over the last year.

Few shareholders would be pleased to read that EPS have declined. And the modest revenue growth over 12 months isn't much comfort against the reduced EPS. These factors suggest that the business performance wouldn't really justify a high pay packet 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 Ester Industries Limited Been A Good Investment?

With a total shareholder return of 14% over three years, Ester Industries Limited shareholders would, in general, be reasonably content. But they would probably prefer not to see CEO compensation far in excess of the median.

To Conclude...

While it's true that shareholders have owned decent returns, it's hard to overlook the lack of earnings growth and this makes us question whether these returns will continue. 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. We identified 4 warning signs for Ester Industries (3 make us uncomfortable!) that you should be aware of before investing here.

Switching gears from Ester Industries, 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. 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.