We Think Some Shareholders May Hesitate To Increase Tera Software Limited's (NSE:TERASOFT) CEO Compensation

Key Insights

• Tera Software to hold its Annual General Meeting on 9th of September
• Total pay for CEO Gopi Tummala includes ₹10.4m salary
• Total compensation is 251% above industry average
• Tera Software's total shareholder return over the past three years was 40% while its EPS grew by 58% over the past three years

CEO Gopi Tummala has done a decent job of delivering relatively good performance at Tera Software Limited (NSE:TERASOFT) recently. As shareholders go into the upcoming AGM on 9th of September, CEO compensation will probably not be their focus, but rather the steps management will take to continue the growth momentum. However, some shareholders will still be cautious of paying the CEO excessively.

View our latest analysis for Tera Software

How Does Total Compensation For Gopi Tummala Compare With Other Companies In The Industry?

At the time of writing, our data shows that Tera Software Limited has a market capitalization of ₹901m, and reported total annual CEO compensation of ₹10m for the year to March 2024. That's a notable increase of 24% on last year. It is worth noting that the CEO compensation consists entirely of the salary, worth ₹10m.

In comparison with other companies in the Indian IT industry with market capitalizations under ₹17b, the reported median total CEO compensation was ₹3.0m. This suggests that Gopi Tummala is paid more than the median for the industry. Moreover, Gopi Tummala also holds ₹106m worth of Tera Software 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	₹10m	₹8.4m	100%
Other	-	-	-
Total Compensation	₹10m	₹8.4m	100%

On an industry level, around 94% of total compensation represents salary and 6% is other remuneration. At the company level, Tera Software pays Gopi Tummala solely through a salary, preferring to go down a conventional route. 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.

Tera Software Limited's Growth

Over the past three years, Tera Software Limited has seen its earnings per share (EPS) grow by 58% per year. Its revenue is down 26% over the previous year.

Shareholders would be glad to know that the company has improved itself over the last few years. The lack of revenue growth isn't ideal, but it is the bottom line that counts most in business. Although we don't have analyst forecasts, you might want to assess this data-rich visualization of earnings, revenue and cash flow.

Has Tera Software Limited Been A Good Investment?

Boasting a total shareholder return of 40% over three years, Tera Software Limited has done well by shareholders. As a result, some may believe the CEO should be paid more than is normal for companies of similar size.

In Summary...

Tera Software pays CEO compensation exclusively through a salary, with non-salary compensation completely ignored. Given that the company's overall performance has been reasonable, the CEO remuneration policy might not be shareholders' central point of focus in the upcoming AGM. However, any decision to raise CEO pay might be met with some objections from the shareholders given that the CEO is already paid higher than the industry average.

It is always advisable to analyse CEO pay, along with performing a thorough analysis of the company's key performance areas. In our study, we found 3 warning signs for Tera Software you should be aware of, and 2 of them are a bit concerning.

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.