Here's Why Shareholders May Want To Be Cautious With Increasing Lumax Industries Limited's (NSE:LUMAXIND) CEO Pay Packet

The underwhelming share price performance of Lumax Industries Limited (NSE:LUMAXIND) in the past three years would have disappointed many shareholders. Per share earnings growth is also poor, despite revenues growing. The AGM coming up on 31 August 2021 will be an opportunity for shareholders to have their concerns addressed by the board and for them to exercise their influence on management through voting on resolutions such as executive remuneration. We think shareholders may be cautious of approving a pay rise for the CEO at the moment, based on our analysis below.

See our latest analysis for Lumax Industries

How Does Total Compensation For Vineet Sahni Compare With Other Companies In The Industry?

Our data indicates that Lumax Industries Limited has a market capitalization of ₹13b, and total annual CEO compensation was reported as ₹25m for the year to March 2021. Notably, that's a decrease of 35% over the year before. While this analysis focuses on total compensation, it's worth acknowledging that the salary portion is lower, valued at ₹8.3m.

On comparing similar companies from the same industry with market caps ranging from ₹7.4b to ₹30b, we found that the median CEO total compensation was ₹22m. So it looks like Lumax Industries compensates Vineet Sahni in line with the median for the industry. Moreover, Vineet Sahni also holds ₹3.0m worth of Lumax Industries stock directly under their own name, which reveals to us that they have a significant personal stake in the company.

Component	2021	2020	Proportion (2021)
Salary	₹8.3m	₹10m	34%
Other	₹16m	₹27m	66%
Total Compensation	₹25m	₹38m	100%

On an industry level, roughly 76% of total compensation represents salary and 24% is other remuneration. It's interesting to note that Lumax Industries allocates a smaller portion of compensation to salary in comparison to the broader industry. If non-salary compensation dominates total pay, it's an indicator that the executive's salary is tied to company performance.

Lumax Industries Limited's Growth

Over the last three years, Lumax Industries Limited has shrunk its earnings per share by 19% per year. Its revenue is up 30% over the last year.

The decrease in EPS could be a concern for some investors. But in contrast the revenue growth is strong, suggesting future potential for EPS growth. These two metrics are moving in different directions, so while it's hard to be confident judging performance, we think the stock is worth watching. Moving away from current form for a second, it could be important to check this free visual depiction of what analysts expect for the future.

Has Lumax Industries Limited Been A Good Investment?

Given the total shareholder loss of 25% 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...

The company's earnings haven't grown and possibly because of that, the stock has performed poorly, resulting in a loss for the company's shareholders. In the upcoming AGM, shareholders will get the opportunity to discuss any issues with the board, including those related to CEO remuneration and assess if the board's plan is in line with their expectations.

CEO compensation is a crucial aspect to keep your eyes on but investors also need to keep their eyes open for other issues related to business performance. That's why we did some digging and identified 2 warning signs for Lumax Industries that you should be aware of before investing.

Important note: Lumax 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. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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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