In This Article:
Satish Kagliwal is the CEO of Techindia Nirman Limited (NSEI:TECHIN), which has recently grown to a market capitalization of IN₨162.46M. Understanding how CEOs are incentivised to run and grow their company is an important aspect of investing in a stock. This is because, if incentives are aligned, more value is created for shareholders which directly impacts your returns as an investor. Today we will assess Kagliwal’s pay and compare this to the company’s performance over the same period, as well as measure it against other Indian CEOs leading companies of similar size and profitability. View our latest analysis for Techindia Nirman
Did Kagliwal create value?
Performance can be measured based on factors such as earnings and total shareholder return (TSR). I believe earnings is a cleaner proxy, since many factors can impact share price, and therefore, TSR. Recently, TECHIN delivered negative earnings of -IN₨33.65M , which is a further decline from prior year’s loss of -IN₨30.82M. Additionally, on average, TECHIN has been loss-making in the past, with a 5-year average EPS of -IN₨1.81. During times of negative earnings, the company may be going through a period of reinvestment and growth, or it can be an indication of some headwind. In any case, CEO compensation should represent the current condition of the business. In the most recent report, Kagliwal’s total remuneration remained stable at IN₨0 since the previous year. Although I couldn’t find information on the breakdown of Kagliwal’s pay, if some portion were non-cash items such as stocks and options, then fluxes in TECHIN’s share price can move the true level of what the CEO actually receives.
What’s a reasonable CEO compensation?
Despite the fact that there is no cookie-cutter approach, since compensation should be tailored to the specific company and market, we can evaluate a high-level base line to see if TECHIN is an outlier. This outcome can help shareholders ask the right question about Kagliwal’s incentive alignment. Normally, a BSE or NSEI small-cap has a value of ₹9.88 Arab, produces earnings of ₹43 Crore, and pays its CEO at roughly ₹73 Lakh per year. Usually I would use earnings and market cap to account for variations in performance, however, TECHIN’s negative earnings lower the effectiveness of this method. Looking at the range of compensation for small-cap executives, it seems like
Kagliwal is remunerated sensibly relative to peers. On the whole, though TECHIN is unprofitable, it seems like the CEO’s pay is sound.