Is Avanti Feeds Limited (NSE:AVANTIFEED) Excessively Paying Its CEO?

In 2002, Alluri Kumar was appointed CEO of Avanti Feeds Limited (NSE:AVANTIFEED). This analysis aims first to contrast CEO compensation with other companies that have similar market capitalization. After that, we will consider the growth in the business. And finally we will reflect on how common stockholders have fared in the last few years, as a secondary measure of performance. This process should give us an idea about how appropriately the CEO is paid.

See our latest analysis for Avanti Feeds

How Does Alluri Kumar's Compensation Compare With Similar Sized Companies?

According to our data, Avanti Feeds Limited has a market capitalization of ₹58b, and paid its CEO total annual compensation worth ₹168m over the year to March 2019. While we always look at total compensation first, we note that the salary component is less, at ₹30m. We note that more than half of the total compensation is not the salary; and performance requirements may apply to this non-salary portion. We looked at a group of companies with market capitalizations from ₹30b to ₹122b, and the median CEO total compensation was ₹35m.

Now let's take a look at the pay mix on an industry and company level to gain a better understanding of where Avanti Feeds stands. On an industry level, salaries remain the preferred method to compensate CEOs for a majority of companies, with non-salary benefits getting the cold shoulder. Readers will want to know that Avanti Feeds pays a modest slice of remuneration through salary, as compared to the wider sector.

Thus we can conclude that Alluri Kumar receives more in total compensation than the median of a group of companies in the same market, and of similar size to Avanti Feeds Limited. However, this doesn't necessarily mean the pay is too high. A closer look at the performance of the underlying business will give us a better idea about whether the pay is particularly generous. You can see a visual representation of the CEO compensation at Avanti Feeds, below.

Is Avanti Feeds Limited Growing?

Over the last three years Avanti Feeds Limited has seen earnings per share (EPS) move in a positive direction by an average of 5.3% per year (using a line of best fit). Its revenue is up 14% over last year.

I would argue that the modest growth in revenue is a notable positive. And the modest growth in earnings per share isn't bad, either. So while we'd stop just short of calling this a top performer, but we think it is well worth watching. You might want to check this free visual report on analyst forecasts for future earnings.

Has Avanti Feeds Limited Been A Good Investment?

Boasting a total shareholder return of 55% over three years, Avanti Feeds Limited has done well by shareholders. So they may not be at all concerned if the CEO were to be paid more than is normal for companies around the same size.

In Summary...

We compared total CEO remuneration at Avanti Feeds Limited with the amount paid at companies with a similar market capitalization. As discussed above, we discovered that the company pays more than the median of that group.

While we generally prefer to see stronger EPS growth, there's no arguing with the strong returns to shareholders, over the last three years. As a result of the juicy return to investors, the CEO remuneration may well be quite reasonable. Shifting gears from CEO pay for a second, we've picked out 2 warning signs for Avanti Feeds that investors should be aware of in a dynamic business environment.

Important note: Avanti Feeds may not be the best stock to buy. You might find something better in this list of interesting companies with high ROE and low debt.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. 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. Simply Wall St has no position in the stocks mentioned.

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