On the noise about our salaries
I’m surprised by the unwanted noise around this whole salary news of Nikhil, Seema (my wife), & me. The headlines are misleading. We are a private company & no obligations to clarify, but we thought maybe we should, as there are folks who are misinterpreting this.
Firstly the reported figure isn’t the actual salary being drawn. This is an enabling resolution that allows us as working promoters to draw salaries up to the number in case of liquidity requirements. Didn’t anticipate that this would get this much attention.
Running a business is like trading, you can be up or down very easily. It is important to take liquidity out when you are “up” to de-risk. We have always done this, ~15% of profits. This also helps us in supporting our personal investments in small businesses & social causes.
Broking is riskier because most revenue comes from active traders with leveraged positions that carry risk, one black swan event can cause the business large losses. Also due to changing regulations, any of which can potentially impact profitability significantly.
This de-risking is something that we are enabling for everyone on our team through our ESOP buyback. A portion of the profits allocated for the buyback every year. This year it is ~ Rs 200 crores. Our PAT for FY 20/21 ~Rs 1000 crores( similar to bank brokers).
While the actual salary will be lower, it will still be high compared to the norm. Promoters don’t take out profits through salaries as it is tax-inefficient, you end up almost paying 50% in taxes. I had written about this before.
We believe that building sustainable businesses & paying taxes is a great step in contributing to society and the nation. We take great pride that we are giving back most of our success through Rainmatter Foundation & that we are among the highest tax-paying new-age businesses.