How Should Investors React To Himadri Speciality Chemical's (NSE:HSCL) CEO Pay?

Anurag Choudhary became the CEO of Himadri Speciality Chemical Limited (NSE:HSCL) in 2010, and we think it's a good time to look at the executive's compensation against the backdrop of overall company performance. This analysis will also evaluate the appropriateness of CEO compensation when taking into account the earnings and shareholder returns of the company.

Check out our latest analysis for Himadri Speciality Chemical

Comparing Himadri Speciality Chemical Limited's CEO Compensation With the industry

At the time of writing, our data shows that Himadri Speciality Chemical Limited has a market capitalization of ₹21b, and reported total annual CEO compensation of ₹26m for the year to March 2020. That's a notable increase of 73% on last year. We note that the salary portion, which stands at ₹25.0m constitutes the majority of total compensation received by the CEO.

In comparison with other companies in the industry with market capitalizations ranging from ₹7.4b to ₹29b, the reported median CEO total compensation was ₹19m. This suggests that Anurag Choudhary is paid more than the median for the industry.

On an industry level, roughly 90% of total compensation represents salary and 9.7% is other remuneration. Himadri Speciality Chemical is focused on going down a more traditional approach and is paying a higher portion of compensation through salary, as compared to non-salary benefits. If salary dominates total compensation, it suggests that CEO compensation is leaning less towards the variable component, which is usually linked with performance.

A Look at Himadri Speciality Chemical Limited's Growth Numbers

Himadri Speciality Chemical Limited has seen its earnings per share (EPS) increase by 35% a year over the past three years. In the last year, its revenue is down 25%.

Overall this is a positive result for shareholders, showing that the company has improved in recent years. It's always a tough situation when revenues are not growing, but ultimately profits are more important. Looking ahead, you might want to check this free visual report on analyst forecasts for the company's future earnings..

Has Himadri Speciality Chemical Limited Been A Good Investment?

Since shareholders would have lost about 63% over three years, some Himadri Speciality Chemical Limited investors would surely be feeling negative emotions. This suggests it would be unwise for the company to pay the CEO too generously.

To Conclude...

Himadri Speciality Chemical pays its CEO a majority of compensation through a salary. As we touched on above, Himadri Speciality Chemical Limited is currently paying its CEO higher than the median pay for CEOs of companies belonging to the same industry and with similar market capitalizations. However, the EPS growth is certainly impressive, but it's disappointing to see negative shareholder returns over the same period. Although we'd stop short of calling it inappropriate, we think Anurag is earning a very handsome sum.

So you may want to check if insiders are buying Himadri Speciality Chemical shares with their own money (free access).

Important note: Himadri Speciality Chemical 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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