Why We Think Supreme Petrochem Limited's (NSE:SPLPETRO) CEO Compensation Is Not Excessive At All

Key Insights

• Supreme Petrochem's Annual General Meeting to take place on 4th of July
• Total pay for CEO Kiran Mujumdar includes ₹11.5m salary
• Total compensation is 58% below industry average
• Over the past three years, Supreme Petrochem's EPS fell by 10% and over the past three years, the total shareholder return was 123%

Shareholders may be wondering what CEO Kiran Mujumdar plans to do to improve the less than great performance at Supreme Petrochem Limited (NSE:SPLPETRO) recently. One way they can exercise their influence on management is through voting on resolutions, such as executive remuneration at the next AGM, coming up on 4th of July. It has been shown that setting appropriate executive remuneration incentivises the management to act in the interests of shareholders. In our opinion, CEO compensation does not look excessive and we discuss why.

See our latest analysis for Supreme Petrochem

Comparing Supreme Petrochem Limited's CEO Compensation With The Industry

At the time of writing, our data shows that Supreme Petrochem Limited has a market capitalization of ₹146b, and reported total annual CEO compensation of ₹14m for the year to March 2024. That's slightly lower by 6.0% over the previous year. Notably, the salary which is ₹11.5m, represents most of the total compensation being paid.

On comparing similar companies from the Indian Chemicals industry with market caps ranging from ₹83b to ₹267b, we found that the median CEO total compensation was ₹33m. In other words, Supreme Petrochem pays its CEO lower than the industry median. Moreover, Kiran Mujumdar also holds ₹4.6m worth of Supreme Petrochem 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	₹11m	₹12m	85%
Other	₹2.1m	₹2.0m	15%
Total Compensation	₹14m	₹14m	100%

Talking in terms of the industry, salary represented approximately 86% of total compensation out of all the companies we analyzed, while other remuneration made up 14% of the pie. There isn't a significant difference between Supreme Petrochem and the broader market, in terms of salary allocation in the overall compensation package. If salary dominates total compensation, it suggests that CEO compensation is leaning less towards the variable component, which is usually linked with performance.

Supreme Petrochem Limited's Growth

Over the last three years, Supreme Petrochem Limited has shrunk its earnings per share by 10% per year. The trailing twelve months of revenue was pretty much the same as the prior period.

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. Historical performance can sometimes be a good indicator on what's coming up next but if you want to peer into the company's future you might be interested in this free visualization of analyst forecasts.

Has Supreme Petrochem Limited Been A Good Investment?

We think that the total shareholder return of 123%, over three years, would leave most Supreme Petrochem Limited shareholders smiling. 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.

To Conclude...

Despite the strong returns on shareholders' investments, the fact that earnings have failed to grow makes us skeptical about the stock keeping up its current momentum. These concerns could be addressed to the board and shareholders should revisit their investment thesis to see if it still makes sense.

CEO compensation is a crucial aspect to keep your eyes on but investors also need to keep their eyes open for other issues related to business performance. We did our research and spotted 1 warning sign for Supreme Petrochem that investors should look into moving forward.

Important note: Supreme Petrochem 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.

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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.

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