Vidyashankar Krishnan is the CEO of M M Forgings Limited (NSE:MMFL), and in this article, we analyze the executive's compensation package with respect to the overall performance of the company. This analysis will also look to assess whether the CEO is appropriately paid, considering recent earnings growth and investor returns for M M Forgings.
View our latest analysis for M M Forgings
Comparing M M Forgings Limited's CEO Compensation With the industry
Our data indicates that M M Forgings Limited has a market capitalization of ₹8.4b, and total annual CEO compensation was reported as ₹31m for the year to March 2020. That's a notable decrease of 46% on last year. Notably, the salary which is ₹18.6m, represents most of the total compensation being paid.
In comparison with other companies in the industry with market capitalizations under ₹15b, the reported median total CEO compensation was ₹6.2m. Hence, we can conclude that Vidyashankar Krishnan is remunerated higher than the industry median. Moreover, Vidyashankar Krishnan also holds ₹1.0b worth of M M Forgings stock directly under their own name, which reveals to us that they have a significant personal stake in the company.
| Component | 2020 | 2019 | Proportion (2020) |
| Salary | ₹19m | ₹26m | 60% |
| Other | ₹12m | ₹31m | 40% |
| Total Compensation | ₹31m | ₹58m | 100% |
On an industry level, around 94% of total compensation represents salary and 6.1% is other remuneration. M M Forgings sets aside a smaller share of compensation for salary, in comparison to the overall industry. If salary dominates total compensation, it suggests that CEO compensation is leaning less towards the variable component, which is usually linked with performance.
M M Forgings Limited's Growth
Over the last three years, M M Forgings Limited has shrunk its earnings per share by 26% per year. In the last year, its revenue is down 33%.
Overall this is not a very positive result for shareholders. And the impression is worse when you consider revenue is down year-on-year. It's hard to argue the company is firing on all cylinders, so shareholders might be averse to high CEO remuneration. While we don't have analyst forecasts for the company, shareholders might want to examine this detailed historical graph of earnings, revenue and cash flow.
Has M M Forgings Limited Been A Good Investment?
Given the total shareholder loss of 17% over three years, many shareholders in M M Forgings Limited are probably rather dissatisfied, to say the least. So shareholders would probably want the company to be lessto generous with CEO compensation.
To Conclude...
As previously discussed, Vidyashankar is compensated more than what is normal for CEOs of companies of similar size, and which belong to the same industry. This doesn't look good against shareholder returns, which have been negative for the past three years. To make matters worse, EPS growth has also been negative during this period. Considering such poor performance, we think shareholders might be concerned if the CEO's compensation were to grow.
CEO compensation is an important area to keep your eyes on, but we've also need to pay attention to other attributes of the company. In our study, we found 4 warning signs for M M Forgings you should be aware of, and 1 of them can't be ignored.
Important note: M M Forgings is an exciting stock, but we understand investors may be looking for an unencumbered balance sheet and blockbuster returns. You might find something better in this list of interesting companies with high ROE and low debt.
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This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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About NSEI:MMFL
Good value with adequate balance sheet.
