Why we think the compensation of the CEO of Tata Power Company Limited (NSE: TATAPOWER) is not at all excessive


Shareholders may be wondering what CEO Praveer Sinha plans to do to improve the less than excellent performance of The Tata Power Company Limited (NSE: TATAPOWER) recently. One way for them to exert their influence over management is to vote on resolutions, such as executive compensation at the next annual general meeting, which will take place on July 5, 2021. The vote on executive compensation could be a powerful way to influence management, as studies have shown that the right compensation incentives have an impact on company performance. We believe the CEO compensation seems appropriate given the data we’ve gathered.

Check out our latest analysis for Tata Power

The Tata Power Company Limited CEO Compensation Comparison with Industry

Our data indicates that The Tata Power Company Limited has a market capitalization of 392 billion yen and that the CEO’s total annual compensation has been reported at 71 million yen for the year up to March 2021. These include an increase of 34% over the previous year. We think the total compensation is more important, but our data shows that the CEO salary is less, at 15 million euros.

Comparing similar companies in the same industry with market caps ranging from 297 billion yen to 890 billion yen, we found that the median total CEO compensation was 260 million yen. That is, Praveer Sinha is paid below the industry median.

Component 2021 2020 Proportion (2021)
Salary ₹ 15m ₹ 21m 21%
Other ₹ 56m ₹ 32m 79%
Total compensation ₹ 71m ₹ 53m 100%

At the industry level, almost 64% of total compensation is salary, while the remainder 36% is other compensation. Tata Power sets aside a smaller share of pay for pay, compared to the industry as a whole. If non-salary compensation dominates total salary, it is an indicator that the executive salary is linked to the performance of the company.

Compensation of the CEO of NSEI: TATAPOWER June 29, 2021

A look at the growth figures of The Tata Power Company Limited

Over the past three years, The Tata Power Company Limited has reduced its earnings per share by 28% per year. Last year, its turnover increased by 11%.

Overall, this is not a very positive result for shareholders. While revenue growth is good to see, it is offset by the fact that EPS is down, over three years. So given this relatively weak performance, shareholders probably wouldn’t want high CEO compensation. Going forward, you might want to check out this free visual report at analyst forecasts for the future profits of the company.

Was the Tata Power Company Limited a good investment?

We believe that the 84% three-year total shareholder return would put a smile on the face of most shareholders of The Tata Power Company Limited. So they might not be affected at all if the CEO were to be paid more than is normal for companies of the same size.

In summary…

While the return to shareholders looks promising, it’s hard to ignore the lack of earnings growth and it makes us wonder if these strong returns can continue. These are some of the concerns shareholders may want to raise with the board when they review their investment thesis.

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

Arguably, the quality of the company is much more important than the compensation levels of CEOs. So look at this free list of interesting companies that have a HIGH return on equity and low leverage.

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This Simply Wall St article is general in nature. It does not constitute a recommendation to buy or sell shares and does not take into account your goals or your financial situation. Our aim is to bring you long-term, targeted analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price sensitive companies or qualitative material. Simply Wall St has no position in any of the stocks mentioned.
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