What Can We Conclude About Elgi Rubber's (NSE:ELGIRUBCO) CEO Pay?

Sudarsan Varadaraj is the CEO of Elgi Rubber Company Limited (NSE:ELGIRUBCO), and in this article, we analyze the executive's compensation package with respect to the overall performance of the company. This analysis will also look to assess whether the CEO is appropriately paid, considering recent earnings growth and investor returns for Elgi Rubber.

View our latest analysis for Elgi Rubber

Comparing Elgi Rubber Company Limited's CEO Compensation With the industry

According to our data, Elgi Rubber Company Limited has a market capitalization of ₹1.5b, and paid its CEO total annual compensation worth ₹6.7m over the year to March 2020. This means that the compensation hasn't changed much from last year. It is worth noting that the CEO compensation consists entirely of the salary, worth ₹6.7m.

For comparison, other companies in the industry with market capitalizations below ₹15b, reported a median total CEO compensation of ₹5.1m. Hence, we can conclude that Sudarsan Varadaraj is remunerated higher than the industry median. Moreover, Sudarsan Varadaraj also holds ₹698m worth of Elgi Rubber stock directly under their own name, which reveals to us that they have a significant personal stake in the company.

Speaking on an industry level, nearly 92% of total compensation represents salary, while the remainder of 8.2% is other remuneration. On a company level, Elgi Rubber prefers to reward its CEO through a salary, opting not to pay Sudarsan Varadaraj 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.

Elgi Rubber Company Limited's Growth

Over the last three years, Elgi Rubber Company Limited has shrunk its earnings per share by 47% per year. It saw its revenue drop 18% over the last year.

The decline in EPS is a bit concerning. And the impression is worse when you consider revenue is down year-on-year. It's hard to argue the company is firing on all cylinders, so shareholders might be averse to high CEO remuneration. Although we don't have analyst forecasts, you might want to assess this data-rich visualization of earnings, revenue and cash flow.

Has Elgi Rubber Company Limited Been A Good Investment?

Given the total shareholder loss of 36% over three years, many shareholders in Elgi Rubber Company Limited are probably rather dissatisfied, to say the least. Therefore, it might be upsetting for shareholders if the CEO were paid generously.

To Conclude...

Elgi Rubber rewards its CEO solely through a salary, ignoring non-salary benefits completely. As we touched on above, Elgi Rubber Company 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. What's equally worrying is that the company isn't growing by our analysis. Considering such poor performance, we think shareholders might be concerned if the CEO's compensation were to grow.

CEO compensation is an important area to keep your eyes on, but we've also need to pay attention to other attributes of the company. In our study, we found 4 warning signs for Elgi Rubber you should be aware of, and 1 of them is potentially serious.

Of course, you might find a fantastic investment by looking at a different set of stocks. So take a peek at this free list of interesting companies.

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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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