Rajeev Sharma became the CEO of Power Finance Corporation Limited (NSE:PFC) in 2016. First, this article will compare CEO compensation with compensation at similar sized companies. 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 method should give us information to assess how appropriately the company pays the CEO.
How Does Rajeev Sharma’s Compensation Compare With Similar Sized Companies?
At the time of writing, our data says that Power Finance Corporation Limited has a market cap of ₹199b, and reported total annual CEO compensation of ₹18m for the year to March 2019. While this analysis focuses on total compensation, it’s worth noting the salary is lower, valued at ₹3.8m. We note that more than half of the total compensation is not the salary; and performance requirements may apply to this non-salary portion. When we examined a selection of companies with market caps ranging from ₹151b to ₹484b, we found the median CEO total compensation was ₹58m.
Now let’s take a look at the pay mix on an industry and company level to gain a better understanding of where Power Finance stands. On an industry level, a majority of companies prefer salaries as their mode of payment for CEOs, with non-salary benefits largely snubbed. Readers will want to know that Power Finance pays a modest slice of remuneration through salary, as compared to the wider sector.
This would give shareholders a good impression of the company, since most similar size companies have to pay more, leaving less for shareholders. While this is a good thing, you’ll need to understand the business better before you can form an opinion. The graphic below shows how CEO compensation at Power Finance has changed from year to year.
Is Power Finance Corporation Limited Growing?
Over the last three years Power Finance Corporation Limited has seen earnings per share (EPS) move in a positive direction by an average of 35% per year (using a line of best fit). It achieved revenue growth of 8.7% over the last year.
Overall this is a positive result for shareholders, showing that the company has improved in recent years. It’s nice to see a little revenue growth, as this is consistent with healthy business conditions. Although we don’t have analyst forecasts shareholders might want to examine this detailed historical graph of earnings, revenue and cash flow.
Has Power Finance Corporation Limited Been A Good Investment?
With a three year total loss of 32%, Power Finance Corporation Limited would certainly have some dissatisfied shareholders. So shareholders would probably think the company shouldn’t be too generous with CEO compensation.
Power Finance Corporation Limited is currently paying its CEO below what is normal for companies of its size.
Since the business is growing, many would argue this suggests the pay is modest. Few would deny that the total shareholder return over the last three years could have been a lot better. We’re not critical of the remuneration Rajeev Sharma receives, but it would be good to see improved returns to shareholders before the remuneration grows too much. In this case we may want to look deeper into the company. There are some real positives and we could see improved returns in the longer term. Taking a breather from CEO compensation, we’ve spotted 3 warning signs for Power Finance (of which 1 is a bit concerning!) you should know about in order to have a holistic understanding of the stock.
Important note: Power Finance 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.
Love or hate this article? Concerned about the content? Get in touch with us directly. Alternatively, email firstname.lastname@example.org.
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. Thank you for reading.