How Should Investors Feel About Lumax Industries' (NSE:LUMAXIND) CEO Remuneration?

Vineet Sahni has been the CEO of Lumax Industries Limited (NSE:LUMAXIND) since 2018, and this article will examine the executive's compensation 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 Lumax Industries.

See our latest analysis for Lumax Industries

Comparing Lumax Industries Limited's CEO Compensation With the industry

According to our data, Lumax Industries Limited has a market capitalization of ₹12b, and paid its CEO total annual compensation worth ₹38m over the year to March 2020. That's a modest increase of 5.6% on the prior year. We think total compensation is more important but our data shows that the CEO salary is lower, at ₹10m.

For comparison, other companies in the same industry with market capitalizations ranging between ₹7.4b and ₹30b had a median total CEO compensation of ₹29m. This suggests that Lumax Industries remunerates its CEO largely in line with the industry average. Furthermore, Vineet Sahni directly owns ₹2.7m worth of shares in the company, implying that they are deeply invested in the company's success.

On an industry level, roughly 79% of total compensation represents salary and 21% is other remuneration. It's interesting to note that Lumax Industries allocates a smaller portion of compensation to salary in comparison to the broader industry. If non-salary compensation dominates total pay, it's an indicator that the executive's salary is tied to company performance.

Lumax Industries Limited's Growth

Over the last three years, Lumax Industries Limited has shrunk its earnings per share by 26% per year. Its revenue is down 28% over the previous year.

Few shareholders would be pleased to read that EPS have declined. This is compounded by the fact revenue is actually down on last year. So given this relatively weak performance, shareholders would probably not want to see high compensation for the CEO. Moving away from current form for a second, it could be important to check this free visual depiction of what analysts expect for the future.

Has Lumax Industries Limited Been A Good Investment?

Since shareholders would have lost about 20% over three years, some Lumax Industries Limited investors would surely be feeling negative emotions. Therefore, it might be upsetting for shareholders if the CEO were paid generously.

In Summary...

As we touched on above, Lumax Industries Limited is currently paying a compensation that's close to the median pay for CEOs of companies belonging to the same industry and with similar market capitalizations. On the other hand, EPS growth and total shareholder return have been negative for the last three years. Considering overall performance, shareholders will likely hold off support for a raise until results improve.

CEO pay is simply one of the many factors that need to be considered while examining business performance. In our study, we found 4 warning signs for Lumax Industries you should be aware of, and 2 of them are concerning.

Of course, you might find a fantastic investment by looking at a different set of stocks. So take a peek at this free list of interesting companies.

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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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