We Think Some Shareholders May Hesitate To Increase Savita Oil Technologies Limited's (NSE:SOTL) CEO Compensation

Key Insights

• Savita Oil Technologies' Annual General Meeting to take place on 25th of September
• Salary of ₹11.7m is part of CEO Gautam Mehra's total remuneration
• The total compensation is 139% higher than the average for the industry
• Savita Oil Technologies' total shareholder return over the past three years was 85% while its EPS was down 14% over the past three years

Despite strong share price growth of 85% for Savita Oil Technologies Limited (NSE:SOTL) 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 25th 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. From what we gathered, we think shareholders should be wary of raising CEO compensation until the company shows some marked improvement.

Check out our latest analysis for Savita Oil Technologies

How Does Total Compensation For Gautam Mehra Compare With Other Companies In The Industry?

Our data indicates that Savita Oil Technologies Limited has a market capitalization of ₹40b, and total annual CEO compensation was reported as ₹54m for the year to March 2024. We note that's an increase of 83% above last year. While this analysis focuses on total compensation, it's worth acknowledging that the salary portion is lower, valued at ₹12m.

On examining similar-sized companies in the Indian Chemicals industry with market capitalizations between ₹17b and ₹67b, we discovered that the median CEO total compensation of that group was ₹23m. This suggests that Gautam Mehra is paid more than the median for the industry. What's more, Gautam Mehra holds ₹24b 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	₹12m	₹11m	22%
Other	₹42m	₹19m	78%
Total Compensation	₹54m	₹29m	100%

Talking in terms of the industry, salary represented approximately 89% of total compensation out of all the companies we analyzed, while other remuneration made up 11% of the pie. Savita Oil Technologies sets aside a smaller share of compensation for salary, in comparison to the overall industry. It's important to note that a slant towards non-salary compensation suggests that total pay is tied to the company's performance.

A Look at Savita Oil Technologies Limited's Growth Numbers

Over the last three years, Savita Oil Technologies Limited has shrunk its earnings per share by 14% per year. In the last year, its revenue is up 3.5%.

Few shareholders would be pleased to read that EPS have declined. The modest increase in revenue in the last year isn't enough to make us overlook the disappointing change in EPS. So given this relatively weak performance, shareholders would probably not want to see high compensation for the CEO. 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 Savita Oil Technologies Limited Been A Good Investment?

Most shareholders would probably be pleased with Savita Oil Technologies Limited for providing a total return of 85% over three years. This strong performance might mean some shareholders don't mind if the CEO were to be paid more than is normal for a company of its 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. 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.

While it is important to pay attention to CEO remuneration, investors should also consider other elements of the business. That's why we did some digging and identified 1 warning sign for Savita Oil Technologies that investors should think about before committing capital to this stock.

Switching gears from Savita Oil Technologies, 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.