What Can We Make Of Emmbi Industries' (NSE:EMMBI) CEO Compensation?

This article will reflect on the compensation paid to Makrand Appalwar who has served as CEO of Emmbi Industries Limited (NSE:EMMBI) since 2004. This analysis will also look to assess whether the CEO is appropriately paid, considering recent earnings growth and investor returns for Emmbi Industries.

View our latest analysis for Emmbi Industries

How Does Total Compensation For Makrand Appalwar Compare With Other Companies In The Industry?

Our data indicates that Emmbi Industries Limited has a market capitalization of ₹1.4b, and total annual CEO compensation was reported as ₹7.8m for the year to March 2020. That is, the compensation was roughly the same as last year. Notably, the salary of ₹7.8m is the entirety of the CEO compensation.

In comparison with other companies in the industry with market capitalizations under ₹15b, the reported median total CEO compensation was ₹3.2m. Accordingly, our analysis reveals that Emmbi Industries Limited pays Makrand Appalwar north of the industry median. What's more, Makrand Appalwar holds ₹394m worth of shares in the company in their own name, indicating that they have a lot of skin in the game.

Speaking on an industry level, all of total compensation represents salary, while non-salary remuneration is completely ignored. On a company level, Emmbi Industries prefers to reward its CEO through a salary, opting not to pay Makrand Appalwar through 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.

Emmbi Industries Limited's Growth

Over the last three years, Emmbi Industries Limited has shrunk its earnings per share by 2.8% per year. Its revenue is down 1.0% over the previous year.

The lack of EPS growth is certainly unimpressive. And the fact that revenue is down year on year arguably paints an ugly picture. So given this relatively weak performance, shareholders would probably not want to see high compensation for the CEO. We don't have analyst forecasts, but you could get a better understanding of its growth by checking out this more detailed historical graph of earnings, revenue and cash flow.

Has Emmbi Industries Limited Been A Good Investment?

Since shareholders would have lost about 62% over three years, some Emmbi Industries 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...

Emmbi Industries pays CEO compensation exclusively through a salary, with non-salary compensation completely ignored. As we noted earlier, Emmbi Industries pays its CEO higher than the norm for similar-sized companies belonging to the same industry. Unfortunately, this doesn't look great when you see shareholder returns have been negative over the last three years. Add to that declining EPS growth, and you have the perfect recipe for shareholder irritation. Overall, with such poor performance, shareholder's would probably have questions if the company decided to give the CEO a raise.

We can learn a lot about a company by studying its CEO compensation trends, along with looking at other aspects of the business. We identified 2 warning signs for Emmbi Industries (1 is significant!) that you should be aware of before investing here.

Important note: Emmbi Industries 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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