A Quick Analysis On Rico Auto Industries' (NSE:RICOAUTO) CEO Compensation

The CEO of Rico Auto Industries Limited (NSE:RICOAUTO) is Arvind Kapur, and this article examines the executive's compensation against the backdrop of overall company performance. This analysis will also assess whether Rico Auto Industries pays its CEO appropriately, considering recent earnings growth and total shareholder returns.

Check out our latest analysis for Rico Auto Industries

Comparing Rico Auto Industries Limited's CEO Compensation With the industry

At the time of writing, our data shows that Rico Auto Industries Limited has a market capitalization of ₹3.9b, and reported total annual CEO compensation of ₹46m for the year to March 2020. Notably, that's an increase of 22% over the year before. In particular, the salary of ₹36.3m, makes up a huge portion of the total compensation being paid to the CEO.

In comparison with other companies in the industry with market capitalizations under ₹15b, the reported median total CEO compensation was ₹12m. Hence, we can conclude that Arvind Kapur is remunerated higher than the industry median. Moreover, Arvind Kapur also holds ₹421m worth of Rico Auto Industries stock directly under their own name, which reveals to us that they have a significant personal stake in the company.

On an industry level, roughly 79% of total compensation represents salary and 21% is other remuneration. Our data reveals that Rico Auto Industries allocates salary more or less in line with the wider market. If salary is the major component in total compensation, it suggests that the CEO receives a higher fixed proportion of the total compensation, regardless of performance.

A Look at Rico Auto Industries Limited's Growth Numbers

Over the last three years, Rico Auto Industries Limited has shrunk its earnings per share by 36% per year. It saw its revenue drop 16% over the last year.

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. Looking ahead, you might want to check this free visual report on analyst forecasts for the company's future earnings..

Has Rico Auto Industries Limited Been A Good Investment?

With a three year total loss of 70% for the shareholders, Rico Auto Industries Limited would certainly have some dissatisfied shareholders. This suggests it would be unwise for the company to pay the CEO too generously.

To Conclude...

As we noted earlier, Rico Auto Industries pays its CEO higher than the norm for similar-sized companies belonging 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. Understandably, the company's shareholders might have some questions about the CEO's remuneration, given the disappointing performance.

CEO compensation is a crucial aspect to keep your eyes on but investors also need to keep their eyes open for other issues related to business performance. That's why we did some digging and identified 3 warning signs for Rico Auto Industries that investors should think about before committing capital to this stock.

Arguably, business quality is much more important than CEO compensation levels. So check out this free list of interesting companies that have HIGH return on equity 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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