We Discuss Why Sathavahana Ispat Limited's (NSE:SATHAISPAT) CEO Compensation May Be Closely Reviewed

By
Simply Wall St
Published
January 25, 2022
NSEI:SATHAISPAT
Source: Shutterstock

Shareholders will probably not be too impressed with the underwhelming results at Sathavahana Ispat Limited (NSE:SATHAISPAT) recently. At the upcoming AGM on 31 January 2022, shareholders can hear from the board including their plans for turning around performance. It would also be an opportunity for shareholders to influence management through voting on company resolutions such as executive remuneration, which could impact the firm significantly. We present the case why we think CEO compensation is out of sync with company performance.

View our latest analysis for Sathavahana Ispat

Comparing Sathavahana Ispat Limited's CEO Compensation With the industry

At the time of writing, our data shows that Sathavahana Ispat Limited has a market capitalization of ₹191m, and reported total annual CEO compensation of ₹6.0m for the year to March 2021. This was the same as last year. Notably, the salary which is ₹5.89m, represents most of the total compensation being paid.

For comparison, other companies in the industry with market capitalizations below ₹15b, reported a median total CEO compensation of ₹3.0m. Hence, we can conclude that Naresh Adusumilli is remunerated higher than the industry median. What's more, Naresh Adusumilli holds ₹14m worth of shares in the company in their own name, indicating that they have a lot of skin in the game.

Component20212020Proportion (2021)
Salary ₹5.9m ₹5.9m 98%
Other ₹113k ₹113k 2%
Total Compensation₹6.0m ₹6.0m100%

On an industry level, around 100% of total compensation represents salary and 0.3493% is other remuneration. Sathavahana Ispat has gone down a largely traditional route, paying Naresh Adusumilli a high salary, giving it preference over non-salary benefits. If salary is the major component in total compensation, it suggests that the CEO receives a higher fixed proportion of the total compensation, regardless of performance.

ceo-compensation
NSEI:SATHAISPAT CEO Compensation January 25th 2022

Sathavahana Ispat Limited's Growth

Over the last three years, Sathavahana Ispat Limited has shrunk its earnings per share by 11% per year. It saw its revenue drop 75% over the last year.

Overall this is not a very positive result for shareholders. 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 Sathavahana Ispat Limited Been A Good Investment?

Few Sathavahana Ispat Limited shareholders would feel satisfied with the return of -59% over three years. So shareholders would probably want the company to be less generous with CEO compensation.

In Summary...

Naresh receives almost all of their compensation through a salary. Not only have shareholders not seen a favorable return on their investment, but the business hasn't performed well either. Few shareholders would be willing to award the CEO with a pay raise. At the upcoming AGM, the board will get the chance to explain the steps it plans to take to improve business performance.

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 4 which are concerning) in Sathavahana Ispat 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.

Discounted cash flow calculation for every stock

Simply Wall St does a detailed discounted cash flow calculation every 6 hours for every stock on the market, so if you want to find the intrinsic value of any company just search here. It’s FREE.

Make Confident Investment Decisions

Simply Wall St's Editorial Team provides unbiased, factual reporting on global stocks using in-depth fundamental analysis.
Find out more about our editorial guidelines and team.