Sudhir Kumar Munjal became the CEO of Munjal Auto Industries Limited (NSE:MUNJALAU) in 1993, and we think it's a good time to look at the executive's compensation against the backdrop of overall company performance. This analysis will also evaluate the appropriateness of CEO compensation when taking into account the earnings and shareholder returns of the company.
How Does Total Compensation For Sudhir Kumar Munjal Compare With Other Companies In The Industry?
At the time of writing, our data shows that Munjal Auto Industries Limited has a market capitalization of ₹5.4b, and reported total annual CEO compensation of ₹34m for the year to March 2020. Notably, that's an increase of 42% over the year before. We think total compensation is more important but our data shows that the CEO salary is lower, at ₹15m.
For comparison, other companies in the industry with market capitalizations below ₹15b, reported a median total CEO compensation of ₹11m. Accordingly, our analysis reveals that Munjal Auto Industries Limited pays Sudhir Kumar Munjal north of the industry median.
Talking in terms of the industry, salary represented approximately 77% of total compensation out of all the companies we analyzed, while other remuneration made up 23% of the pie. In Munjal Auto Industries' case, non-salary compensation represents a greater slice of total remuneration, 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.
Munjal Auto Industries Limited's Growth
Over the last three years, Munjal Auto Industries Limited has shrunk its earnings per share by 44% per year. In the last year, its revenue is down 5.4%.
The decline in EPS is a bit concerning. 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. Although we don't have analyst forecasts, you might want to assess this data-rich visualization of earnings, revenue and cash flow.
Has Munjal Auto Industries Limited Been A Good Investment?
Since shareholders would have lost about 38% over three years, some Munjal Auto Industries Limited investors would surely be feeling negative emotions. This suggests it would be unwise for the company to pay the CEO too generously.
As we touched on above, Munjal Auto Industries Limited is currently paying its CEO higher than the median pay for CEOs of companies belonging to the same industry and with similar market capitalizations. This doesn't look good against shareholder returns, which have been negative for the past 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. That's why we did our research, and identified 3 warning signs for Munjal Auto Industries (of which 1 makes us a bit uncomfortable!) 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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