Why We Think The Tata Power Company Limited's (NSE:TATAPOWER) CEO Compensation Is Not Excessive At All

By
Simply Wall St
Published
June 28, 2021
NSEI:TATAPOWER
Source: Shutterstock

Shareholders may be wondering what CEO Praveer Sinha plans to do to improve the less than great performance at The Tata Power Company Limited (NSE:TATAPOWER) 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 05 July 2021. Voting on executive pay could be a powerful way to influence management, as studies have shown that the right compensation incentives impact company performance. We think CEO compensation looks appropriate given the data we have put together.

Check out our latest analysis for Tata Power

Comparing The Tata Power Company Limited's CEO Compensation With the industry

Our data indicates that The Tata Power Company Limited has a market capitalization of ₹392b, and total annual CEO compensation was reported as ₹71m for the year to March 2021. Notably, that's an increase of 34% over the year before. We think total compensation is more important but our data shows that the CEO salary is lower, at ₹15m.

On comparing similar companies from the same industry with market caps ranging from ₹297b to ₹890b, we found that the median CEO total compensation was ₹260m. That is to say, Praveer Sinha is paid under the industry median.

Component20212020Proportion (2021)
Salary ₹15m ₹21m 21%
Other ₹56m ₹32m 79%
Total Compensation₹71m ₹53m100%

Speaking on an industry level, nearly 64% of total compensation represents salary, while the remainder of 36% is other remuneration. Tata Power sets aside a smaller share of compensation for salary, in comparison to the overall industry. If non-salary compensation dominates total pay, it's an indicator that the executive's salary is tied to company performance.

ceo-compensation
NSEI:TATAPOWER CEO Compensation June 29th 2021

A Look at The Tata Power Company Limited's Growth Numbers

Over the last three years, The Tata Power Company Limited has shrunk its earnings per share by 28% per year. In the last year, its revenue is up 11%.

Overall this is not a very positive result for shareholders. While the revenue growth is good to see, it is outweighed by the fact that EPS are down, over three years. So given this relatively weak performance, shareholders would probably not want to see high compensation for the CEO. Looking ahead, you might want to check this free visual report on analyst forecasts for the company's future earnings..

Has The Tata Power Company Limited Been A Good Investment?

We think that the total shareholder return of 84%, over three years, would leave most The Tata Power Company 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.

In Summary...

While the return to shareholders does look promising, it's hard to ignore the lack of earnings growth and this makes us wonder if these strong returns can continue. These are are some concerns that shareholders may want to address the board when they revisit their investment thesis.

We can learn a lot about a company by studying its CEO compensation trends, along with looking at other aspects of the business. That's why we did our research, and identified 2 warning signs for Tata Power (of which 1 is potentially serious!) that you should know about in order to have a holistic understanding of the stock.

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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Simply Wall St is focused on providing unbiased, high-quality research coverage on every listed company in the world. Our research team consists of data scientists and multiple equity analysts with over two decades worth of financial markets experience between them.