Shareholders Will Probably Hold Off On Increasing VA Tech Wabag Limited's (NSE:WABAG) CEO Compensation For The Time Being

By
Simply Wall St
Published
August 18, 2021
NSEI:WABAG
Source: Shutterstock

In the past three years, shareholders of VA Tech Wabag Limited (NSE:WABAG) have seen a loss on their investment. Per share earnings growth is also poor, despite revenues growing. In light of this performance, shareholders will have a chance to question the board in the upcoming AGM on 25 August 2021, where they can impact on future company performance by voting on resolutions, including executive compensation. Here's why we think shareholders should hold off on a raise for the CEO at the moment.

See our latest analysis for VA Tech Wabag

How Does Total Compensation For Rajiv Mittal Compare With Other Companies In The Industry?

At the time of writing, our data shows that VA Tech Wabag Limited has a market capitalization of ₹21b, and reported total annual CEO compensation of ₹15m for the year to March 2021. Notably, that's a decrease of 30% over the year before. We note that the salary portion, which stands at ₹13.5m constitutes the majority of total compensation received by the CEO.

For comparison, other companies in the same industry with market capitalizations ranging between ₹7.4b and ₹30b had a median total CEO compensation of ₹15m. This suggests that VA Tech Wabag remunerates its CEO largely in line with the industry average. Furthermore, Rajiv Mittal directly owns ₹3.3b worth of shares in the company, implying that they are deeply invested in the company's success.

Component20212020Proportion (2021)
Salary ₹14m ₹20m 92%
Other ₹1.2m ₹1.2m 8%
Total Compensation₹15m ₹21m100%

Speaking on an industry level, nearly 74% of total compensation represents salary, while the remainder of 26% is other remuneration. According to our research, VA Tech Wabag has allocated a higher percentage of pay to salary in comparison to the wider industry. 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.

ceo-compensation
NSEI:WABAG CEO Compensation August 19th 2021

VA Tech Wabag Limited's Growth

Over the last three years, VA Tech Wabag Limited has shrunk its earnings per share by 7.1% per year. Its revenue is up 21% over the last year.

The decrease in EPS could be a concern for some investors. But on the other hand, revenue growth is strong, suggesting a brighter future. It's hard to reach a conclusion about business performance right now. This may be one to watch. 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 VA Tech Wabag Limited Been A Good Investment?

With a three year total loss of 11% for the shareholders, VA Tech Wabag Limited would certainly have some dissatisfied shareholders. So shareholders would probably want the company to be less generous with CEO compensation.

To Conclude...

The returns to shareholders is disappointing along with lack of earnings growth, which goes some way in explaining the poor returns. Shareholders will get the chance at the upcoming AGM to question the board on key matters, such as CEO remuneration or any other issues they might have and revisit their investment thesis with regards to the company.

While it is important to pay attention to CEO remuneration, investors should also consider other elements of the business. We've identified 1 warning sign for VA Tech Wabag that investors should be aware of in a dynamic business environment.

Important note: VA Tech Wabag 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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