The Rajesh Exports Saga: How Promoters Build Wealth Despite Low Salaries

A complaint alleging irregularities in the earnings of Rajesh Exports, widely celebrated as one of India's biggest corporate success stories, eventually uncovered findings that sent shockwaves across the country.

The controversy deepened after the Enforcement Directorate (ED), during searches linked to the Bengaluru-based gold and jewellery company, found that its Managing Director was drawing a salary of just ₹17,000 a month, while the Chief Financial Officer (CFO) had reportedly not received any salary since 2020.

The disclosures emerged amid an ongoing probe into alleged financial irregularities, with the Securities and Exchange Board of India (SEBI) accusing the company of inflating revenues by ₹15.15 lakh crore over five financial years.

The unusually modest compensation figures have since sparked a broader debate about how promoters of listed companies accumulate wealth. While executive pay often attracts public attention, experts say salaries are rarely the primary source of promoter wealth. Instead, most promoters build their fortunes through shareholdings, dividend income and the long-term appreciation of their companies' value.

Why Some Promoters Take Tiny Salaries?

A low salary does not necessarily mean a promoter earns little. Promoters generally rely on ownership rather than fixed compensation because their primary financial incentive is anchored in ownership-driven payouts rather than cash compensation.

"Their wealth is tied to stock appreciation and dividends, making enormous salaries unnecessary and tax inefficient," said KR Sekar, Partner at Deloitte India.

Excessive executive pay can negatively affect shareholder perception, particularly in listed or private equity-backed companies, he added.

Promoter remuneration in listed companies is also constrained by regulatory requirements, shareholder approvals and investor expectations.

SEBI's listing regulations require shareholder approval through a special resolution if remuneration paid to promoter-directors exceeds prescribed thresholds.

"With increasing shareholder activism and scrutiny by proxy advisory firms, promoters are often reluctant to seek large compensation packages unless they can clearly justify them," said Rupinder Malik, Partner, JSA Advocates & Solicitors.

Promoters also avoid high salaries because wealth creation is linked more closely to the increase in the value of their shareholding than to the monthly income. Tax considerations also influence compensation structures, with dividends, profit-sharing and sweat equity often proving more efficient than salaries.

Salary is just one way of economic benefit. "Promoters holding substantial equity derive their wealth primarily through ownership, dividends and long-term appreciation in share value," said CA Suraj Singh, Founder, SD Singh & Associates.

How Do Dividends Create Wealth?

Experts said dividends can generate significantly larger income than executive remuneration, particularly for promoters with substantial shareholding.

For promoters with sizeable stakes, even a nominal dividend can translate into meaningful personal income easily exceeding the promoter’s remuneration.

However, Sekar noted that dividend policies depend on the company's stage of growth, with high-growth businesses often preferring to reinvest profits while mature companies distribute more cash to shareholders.

Dividends remain one of the most effective methods of rewarding promoters because "they balance wealth creation with tax efficiency while also aligning promoter interests with shareholder value," said Mukesh Kedia, CFO and Co-founder of MOAR Advisory.

A promoter holding a significant ownership stake receives a proportionate share of every dividend declared, often making dividend income several times larger than an annual salary.

"Dividends are where the real money shows up," said CA Pravin Kakade, who is a member of the Board of Studies at the Institute of Chartered Accountants of India (ICAI).

Mukesh Ambani, Chairman and MD of Reliance Industries Ltd., Azim Premji, Founder Chairman of Wipro, and Radhakishan Damani, Chairman of DMart, are some well known examples of how they've drawn relatively modest salaries and yet built enormous wealth through long-term shareholding and dividends.

Shareholding Matters More Than Compensation

Experts unanimously agreed that equity ownership is the primary driver of promoter wealth. Promoter shareholding is generally far more important than salary because ownership aligns promoters with long-term value creation.

Stable or increasing promoter stakes also reassure investors that promoters remain committed to the business. Promoter shareholding reflects "skin in the game", giving investors confidence that management decisions are aligned with long-term business performance rather than short-term financial gain, said Kedia.

For investors, understanding factors such as equity ownership, dividend income and the long-term value — and closely monitoring disclosures — offers a far more accurate picture than remuneration figures alone.

For instance, if a promoter owns 40% of a company and its market value rises by ₹1,000 crore, the promoter's wealth increases by ₹400 crore without any corresponding increase in salary.

Salary grows incrementally, "while equity compounds with the company's market capitalization," said Kakade.

Similarly, a promoter owning 70% of a company valued at ₹10,000 crore would see the value of that holding increase by approximately ₹1,400 crore if the company's market capitalisation rose by 20% in a year, Singh explained.

This is true not only for the promoters or the directors of the companies, but also for the CXOs across industries nowadays.

C-suite level executives increasingly receive a larger portion of their compensation through ESOPs and restricted stock units rather than fixed salaries, said Brijesh Damodaran, Managing Partner at Auxano Capital.

However, promoter holding alone should not be viewed in isolation, "especially in new-age companies where founder ownership may naturally be lower," he said, adding that investors should instead pay close attention to promoter share pledging.

What SEBI Requires Companies To Disclose?

Disclosure obligations vary depending on the type of economic benefit received by promoters. Listed companies must regularly disclose promoter shareholding through shareholding pattern filings.

Companies Act, 2013 and SEBI's disclosure framework together ensure significant transparency around managerial remuneration, promoter shareholding and related-party transactions, allowing investors to evaluate how value is distributed, said Ketan Mukhija, Partner, Kochhar & Co.

Dividends are disclosed at the company level, while promoter entitlement can be calculated from publicly available shareholding disclosures.

Other benefits such as consulting fees, rent, royalties, loans, guarantees, preferential allotments or similar arrangements may also require disclosure and shareholder approval where they qualify as related-party transactions or securities-linked benefits.

"Changes in promoter holdings may trigger disclosures under insider trading and takeover regulations," said JSA's Malik, adding that companies must disclose remuneration details in annual reports, including salary, bonuses, benefits, pension contributions, fixed and performance-linked pay where promoters also serve as directors or key managerial personnel.

When Low Salaries Raise Governance Questions

While low promoter salaries are generally viewed positively, experts caution that they should not be considered in isolation.

Investors should examine related-party transactions, valuation methods adopted for such transactions, dividend policies and whether profits are being reinvested appropriately, said Malik, also highlighting promoter share pledging as a key governance indicator.

Declining promoter shareholding, excessive pledging or fragmented ownership may indicate financial stress or weakening confidence in the business, Deloitte's Sekar warned.

The real governance issue is not whether promoters draw modest salaries, but whether "material promoter-related benefits and arrangements are transparently disclosed, undertaken on an arm's-length basis and aligned with the interests of minority shareholders," Mukhija remarked.