Menon Bearings Limited's (NSE:MENONBE) CEO Compensation Is Looking A Bit Stretched At The Moment

Simply Wall St
July 23, 2021
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The anaemic share price growth at Menon Bearings Limited (NSE:MENONBE) over the past few years has probably not impressed shareholders and may be due to earnings not growing over that period. These concerns will be at the front of shareholders' minds as they go into the AGM coming up on 30 July 2021. They will be able to influence managerial decisions through the exercise of their voting power on resolutions, such as CEO remuneration and other matters, which may influence future company prospects. In our analysis below, we show why shareholders may consider holding off a raise for the CEO's compensation until company performance improves.

Check out our latest analysis for Menon Bearings

How Does Total Compensation For Nitin Menon Compare With Other Companies In The Industry?

Our data indicates that Menon Bearings Limited has a market capitalization of ₹4.7b, and total annual CEO compensation was reported as ₹13m for the year to March 2021. That's a notable increase of 25% on last year. In particular, the salary of ₹12.3m, makes up a huge portion of the total compensation being paid to the CEO.

On comparing similar-sized companies in the industry with market capitalizations below ₹15b, we found that the median total CEO compensation was ₹8.9m. This suggests that Nitin Menon is paid more than the median for the industry. What's more, Nitin Menon holds ₹1.7b worth of shares in the company in their own name, indicating that they have a lot of skin in the game.

Component20212020Proportion (2021)
Salary ₹12m ₹10m 97%
Other ₹401k - 3%
Total Compensation₹13m ₹10m100%

Speaking on an industry level, nearly 79% of total compensation represents salary, while the remainder of 21% is other remuneration. Investors will find it interesting that Menon Bearings pays the bulk of its rewards through a traditional salary, instead of non-salary benefits. If salary is the major component in total compensation, it suggests that the CEO receives a higher fixed proportion of the total compensation, regardless of performance.

NSEI:MENONBE CEO Compensation July 24th 2021

A Look at Menon Bearings Limited's Growth Numbers

Over the last three years, Menon Bearings Limited has shrunk its earnings per share by 3.8% per year. In the last year, its revenue is up 8.9%.

The decline in EPS is a bit concerning. The fairly low revenue growth fails to impress given that the EPS is down. So given this relatively weak performance, shareholders would probably not want to see high compensation for the CEO. Although we don't have analyst forecasts, you might want to assess this data-rich visualization of earnings, revenue and cash flow.

Has Menon Bearings Limited Been A Good Investment?

Menon Bearings Limited has generated a total shareholder return of 0.08% over three years, so most shareholders wouldn't be too disappointed. Although, there's always room to improve. As a result, investors in the company might be reluctant about agreeing to increase CEO pay in the future, before seeing an improvement on their returns.

In Summary...

Nitin receives almost all of their compensation through a salary. The lacklustre share price returns along with the lack of earnings growth makes us think that a strong rebound in the share price may be difficult. Shareholders should make the most of the coming opportunity to question the board on key concerns they may have and revisit their investment thesis with regards to the company.

It is always advisable to analyse CEO pay, along with performing a thorough analysis of the company's key performance areas. That's why we did our research, and identified 4 warning signs for Menon Bearings (of which 1 is potentially serious!) that you should know about in order to have a holistic understanding of the stock.

Important note: Menon Bearings 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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