How Should Investors Feel About Kolte-Patil Developers' (NSE:KOLTEPATIL) CEO Remuneration?

Gopal Sarda became the CEO of Kolte-Patil Developers Limited (NSE:KOLTEPATIL) in 2017, and we think it's a good time to look at the executive's compensation against the backdrop of overall company performance. This analysis will also evaluate the appropriateness of CEO compensation when taking into account the earnings and shareholder returns of the company.

View our latest analysis for Kolte-Patil Developers

How Does Total Compensation For Gopal Sarda Compare With Other Companies In The Industry?

According to our data, Kolte-Patil Developers Limited has a market capitalization of ₹18b, and paid its CEO total annual compensation worth ₹49m over the year to March 2020. That's a notable increase of 9.1% on last year. We note that the salary portion, which stands at ₹47.7m constitutes the majority of total compensation received by the CEO.

In comparison with other companies in the industry with market capitalizations ranging from ₹7.4b to ₹30b, the reported median CEO total compensation was ₹11m. Accordingly, our analysis reveals that Kolte-Patil Developers Limited pays Gopal Sarda north of the industry median.

On an industry level, it's fascinating to see that all of total compensation represents salary and non-salary benefits do not factor into the equation at all. Kolte-Patil Developers pays a high salary, concentrating more on this aspect of compensation in comparison to non-salary pay. 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 Kolte-Patil Developers Limited's Growth Numbers

Over the last three years, Kolte-Patil Developers Limited has shrunk its earnings per share by 60% per year. In the last year, its revenue is down 44%.

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. These factors suggest that the business performance wouldn't really justify a high pay packet 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 Kolte-Patil Developers Limited Been A Good Investment?

With a three year total loss of 27% for the shareholders, Kolte-Patil Developers Limited would certainly have some dissatisfied shareholders. Therefore, it might be upsetting for shareholders if the CEO were paid generously.

To Conclude...

Kolte-Patil Developers pays its CEO a majority of compensation through a salary. As we touched on above, Kolte-Patil Developers Limited is currently paying its CEO higher than the median pay for CEOs of companies belonging to the same industry and with similar market capitalizations. This doesn't look good against shareholder returns, which have been negative for the past three years. To make matters worse, EPS growth has also been negative during this period. Understandably, the company's shareholders might have some questions about the CEO's remuneration, given the disappointing performance.

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 2 warning signs for Kolte-Patil Developers that investors should think about before committing capital to this stock.

Important note: Kolte-Patil Developers 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. 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.
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