Our Take On Reliance Power's (NSE:RPOWER) CEO Salary

Raja Krotthapalli became the CEO of Reliance Power Limited (NSE:RPOWER) in 2018, 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 look to assess whether the CEO is appropriately paid, considering recent earnings growth and investor returns for Reliance Power.

Check out our latest analysis for Reliance Power

Comparing Reliance Power Limited's CEO Compensation With the industry

At the time of writing, our data shows that Reliance Power Limited has a market capitalization of ₹12b, and reported total annual CEO compensation of ₹30m for the year to March 2020. Notably, that's an increase of 33% over the year before. Notably, the salary of ₹30m is the entirety of the CEO compensation.

On examining similar-sized companies in the industry with market capitalizations between ₹7.4b and ₹30b, we discovered that the median CEO total compensation of that group was ₹15m. Hence, we can conclude that Raja Krotthapalli is remunerated higher than the industry median.

Talking in terms of the industry, salary represents all of total compensation among the companies we analyzed, while other remuneration is, interestingly, completely ignored. At the company level, Reliance Power pays Raja Krotthapalli solely through a salary, preferring to go down a conventional route. If salary dominates total compensation, it suggests that CEO compensation is leaning less towards the variable component, which is usually linked with performance.

Reliance Power Limited's Growth

Reliance Power Limited has reduced its earnings per share by 84% a year over the last three years. It achieved revenue growth of 7.0% over the last year.

Few shareholders would be pleased to read that EPS have declined. And the modest revenue growth over 12 months isn't much comfort against the reduced EPS. It's hard to argue the company is firing on all cylinders, so shareholders might be averse to high CEO remuneration. We don't have analyst forecasts, but you could get a better understanding of its growth by checking out this more detailed historical graph of earnings, revenue and cash flow.

Has Reliance Power Limited Been A Good Investment?

With a three year total loss of 90% for the shareholders, Reliance Power Limited would certainly have some dissatisfied shareholders. Therefore, it might be upsetting for shareholders if the CEO were paid generously.

In Summary...

Reliance Power pays CEO compensation exclusively through a salary, with non-salary compensation completely ignored. As we noted earlier, Reliance Power pays its CEO higher than the norm for similar-sized companies belonging to the same industry. Unfortunately, this doesn't look great when you see shareholder returns have been negative over the last 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.

CEO pay is simply one of the many factors that need to be considered while examining business performance. We identified 2 warning signs for Reliance Power (1 is concerning!) that you should be aware of before investing here.

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. 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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