High Mgmt compensation

Lessons from Mr Market
1

on AmaraRaja thread we have Mgmt compensation discussion happening, it reminded me this particular case … to me it looked a case of excessive compensation

If you lookGandhi Special Tubes Ltd, debt free company with turnover of 90+ crore. It is not a high growth business but return on equity and capital are very good. Dividend history on Google finance shows consistent dividend from 2002 (not sure when it got listed, chart start from 2002 only)

Now the interesting part, it pays 3.98 Cr to its two promoter MD and Jt MD, which amounts to 61% of total employees expenses … in another way …

  • 1.5 times of what rest of others in the company earns in total.
  • 13% of profit before tax
  • 4% of turnover

2Cr may not seem high as standalone, but looking that business does not have much growth … what do you say it is high or ok?

What so special about this business that it has OPM of 35-40% ?

2

They operate in a niche area with products that are import substitutes.

3

I was doing some research on Gandhi Sp. Tubes but could not find any issues or concerns. Thanks for pointing out this.

The compensation aspect needs more scrutiny.

What are the other risks or concerns? If you can share a few more it would be highly appreciated.