We Think The Compensation For Grasim Industries Limited's (NSE:GRASIM) CEO Looks About Right

Key Insights

• Grasim Industries will host its Annual General Meeting on 20th of August
• Salary of ₹58.5m is part of CEO Hari Agarwal's total remuneration
• Total compensation is similar to the industry average
• Grasim Industries' total shareholder return over the past three years was 73% while its EPS was down 2.5% over the past three years

Despite strong share price growth of 73% for Grasim Industries Limited (NSE:GRASIM) over the last few years, earnings growth has been disappointing, which suggests something is amiss. Some of these issues will occupy shareholders' minds as the AGM rolls around on 20th of August. 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.

View our latest analysis for Grasim Industries

How Does Total Compensation For Hari Agarwal Compare With Other Companies In The Industry?

At the time of writing, our data shows that Grasim Industries Limited has a market capitalization of ₹1.7t, and reported total annual CEO compensation of ₹88m for the year to March 2024. We note that's a decrease of 12% compared to last year. We note that the salary portion, which stands at ₹58.5m constitutes the majority of total compensation received by the CEO.

For comparison, other companies in the Indian Basic Materials industry with market capitalizations above ₹672b, reported a median total CEO compensation of ₹93m. So it looks like Grasim Industries compensates Hari Agarwal in line with the median for the industry. Moreover, Hari Agarwal also holds ₹124m worth of Grasim Industries stock directly under their own name, which reveals to us that they have a significant personal stake in the company.

Component	2024	2023	Proportion (2024)
Salary	₹58m	₹60m	67%
Other	₹29m	₹40m	33%
Total Compensation	₹88m	₹100m	100%

Talking in terms of the industry, salary represented approximately 84% of total compensation out of all the companies we analyzed, while other remuneration made up 16% of the pie. Grasim Industries pays a modest slice of remuneration through salary, as compared 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 Grasim Industries Limited's Growth Numbers

Over the last three years, Grasim Industries Limited has shrunk its earnings per share by 2.5% per year. Its revenue is up 11% over the last year.

The lack of EPS growth is certainly uninspiring. While the revenue growth is good to see, it is outweighed by the fact that EPS are down, over three years. So given this relatively weak performance, shareholders would probably not want to see high compensation for the CEO. Moving away from current form for a second, it could be important to check this free visual depiction of what analysts expect for the future.

Has Grasim Industries Limited Been A Good Investment?

Boasting a total shareholder return of 73% over three years, Grasim Industries Limited has done well by shareholders. So they may not be at all concerned if the CEO were to be paid more than is normal for companies around the same size.

In Summary...

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.

CEO pay is simply one of the many factors that need to be considered while examining business performance. We identified 4 warning signs for Grasim Industries (2 are significant!) that you should be aware of before investing here.

Arguably, business quality is much more important than CEO compensation levels. So check out this free list of interesting companies that have HIGH return on equity 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.