Does Lumax Industries' (NSE:LUMAXIND) CEO Salary Compare Well With The Performance Of The Company?

This article will reflect on the compensation paid to Vineet Sahni who has served as CEO of Lumax Industries Limited (NSE:LUMAXIND) since 2018. This analysis will also assess whether Lumax Industries pays its CEO appropriately, considering recent earnings growth and total shareholder returns.

View our latest analysis for Lumax Industries

Comparing Lumax Industries Limited's CEO Compensation With the industry

Our data indicates that Lumax Industries Limited has a market capitalization of ₹12b, and total annual CEO compensation was reported as ₹38m for the year to March 2020. That's a modest increase of 5.6% on the prior year. While we always look at total compensation first, our analysis shows that the salary component is less, at ₹10m.

In comparison with other companies in the industry with market capitalizations ranging from ₹7.3b to ₹29b, the reported median CEO total compensation was ₹22m. This suggests that Vineet Sahni is paid more than the median for the industry. What's more, Vineet Sahni holds ₹2.8m worth of shares in the company in their own name, indicating that they have a lot of skin in the game.

Talking in terms of the industry, salary represented approximately 79% of total compensation out of all the companies we analyzed, while other remuneration made up 21% of the pie. It's interesting to note that Lumax Industries allocates a smaller portion of compensation to salary in comparison to the broader industry. It's important to note that a slant towards non-salary compensation suggests that total pay is tied to the company's performance.

A Look at Lumax Industries Limited's Growth Numbers

Lumax Industries Limited has reduced its earnings per share by 44% a year over the last three years. In the last year, its revenue is down 27%.

Overall this is not a very positive result for shareholders. And the impression is worse when you consider revenue is down year-on-year. These factors suggest that the business performance wouldn't really justify a high pay packet for the CEO. Historical performance can sometimes be a good indicator on what's coming up next but if you want to peer into the company's future you might be interested in this free visualization of analyst forecasts.

Has Lumax Industries Limited Been A Good Investment?

Given the total shareholder loss of 26% over three years, many shareholders in Lumax Industries Limited are probably rather dissatisfied, to say the least. Therefore, it might be upsetting for shareholders if the CEO were paid generously.

In Summary...

As previously discussed, Vineet is compensated more than what is normal for CEOs of companies of similar size, and which belong to the same industry. Unfortunately, this doesn't look great when you see shareholder returns have been negative over the last three years. To make matters worse, EPS growth has also been negative during this period. Understandably, the company's shareholders might have some questions about the CEO's remuneration, given the disappointing performance.

CEO pay is simply one of the many factors that need to be considered while examining business performance. That's why we did our research, and identified 3 warning signs for Lumax Industries (of which 1 is concerning!) that you should know about in order to have a holistic understanding of the stock.

Arguably, business quality is much more important than CEO compensation levels. So check out this free list of interesting companies that have HIGH return on equity 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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