Why Godrej Industries' (NSE:GODREJIND) CEO Pay Matters

Nadir Godrej is the CEO of Godrej Industries Limited (NSE:GODREJIND), and in this article, we analyze the executive's compensation package with respect to the overall performance of the company. This analysis will also assess whether Godrej Industries pays its CEO appropriately, considering recent earnings growth and total shareholder returns.

View our latest analysis for Godrej Industries

Comparing Godrej Industries Limited's CEO Compensation With the industry

According to our data, Godrej Industries Limited has a market capitalization of ₹144b, and paid its CEO total annual compensation worth ₹74m over the year to March 2020. That's a notable increase of 24% on last year. We note that the salary portion, which stands at ₹68.3m constitutes the majority of total compensation received by the CEO.

On examining similar-sized companies in the industry with market capitalizations between ₹74b and ₹236b, we discovered that the median CEO total compensation of that group was ₹70m. So it looks like Godrej Industries compensates Nadir Godrej in line with the median for the industry. Moreover, Nadir Godrej also holds ₹5.7b worth of Godrej Industries 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 77% of total compensation represents salary, while the remainder of 23% is other remuneration. According to our research, Godrej Industries has allocated a higher percentage of pay to salary in comparison to the wider industry. If total compensation veers towards salary, it suggests that the variable portion - which is generally tied to performance, is lower.

Godrej Industries Limited's Growth

Godrej Industries Limited has seen its earnings per share (EPS) increase by 11% a year over the past three years. It saw its revenue drop 6.7% over the last year.

Overall this is a positive result for shareholders, showing that the company has improved in recent years. The lack of revenue growth isn't ideal, but it is the bottom line that counts most in business. While we don't have analyst forecasts for the company, shareholders might want to examine this detailed historical graph of earnings, revenue and cash flow.

Has Godrej Industries Limited Been A Good Investment?

Since shareholders would have lost about 27% over three years, some Godrej Industries Limited investors would surely be feeling negative emotions. Therefore, it might be upsetting for shareholders if the CEO were paid generously.

In Summary...

As we touched on above, Godrej Industries Limited is currently paying a compensation that's close to the median pay for CEOs of companies belonging to the same industry and with similar market capitalizations. Meanwhile, shareholder returns paint a sorry picture for the company, finishing in the red over the last three years. But EPS growth is moving in a favorable direction, certainly a positive sign. Considering positive EPS growth, we'd say compensation is fair, but shareholders may be wary of a bump in pay before the company logs positive returns.

CEO pay is simply one of the many factors that need to be considered while examining business performance. We identified 3 warning signs for Godrej Industries (1 doesn't sit too well with us!) that you should be aware of before investing here.

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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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