How Should Investors React To Jain Irrigation Systems' (NSE:JISLJALEQS) CEO Pay?

By
Simply Wall St
Published
December 11, 2020
NSEI:JISLJALEQS

Anil Jain became the CEO of Jain Irrigation Systems Limited (NSE:JISLJALEQS) in 1992, 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 look to assess whether the CEO is appropriately paid, considering recent earnings growth and investor returns for Jain Irrigation Systems.

See our latest analysis for Jain Irrigation Systems

How Does Total Compensation For Anil Jain Compare With Other Companies In The Industry?

According to our data, Jain Irrigation Systems Limited has a market capitalization of ₹9.4b, and paid its CEO total annual compensation worth ₹35m over the year to March 2020. We note that's a decrease of 50% compared to last year. While this analysis focuses on total compensation, it's worth acknowledging that the salary portion is lower, valued at ₹16m.

For comparison, other companies in the industry with market capitalizations below ₹15b, reported a median total CEO compensation of ₹5.7m. Accordingly, our analysis reveals that Jain Irrigation Systems Limited pays Anil Jain north of the industry median. Furthermore, Anil Jain directly owns ₹16m worth of shares in the company, implying that they are deeply invested in the company's success.

Component20202019Proportion (2020)
Salary ₹16m ₹40m 45%
Other ₹19m ₹31m 55%
Total Compensation₹35m ₹71m100%

Speaking on an industry level, nearly 90% of total compensation represents salary, while the remainder of 10.0% is other remuneration. It's interesting to note that Jain Irrigation Systems allocates a smaller portion of compensation to salary 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.

ceo-compensation
NSEI:JISLJALEQS CEO Compensation December 12th 2020

Jain Irrigation Systems Limited's Growth

Jain Irrigation Systems Limited has reduced its earnings per share by 110% a year over the last three years. In the last year, its revenue is down 29%.

The decline in EPS is a bit concerning. This is compounded by the fact revenue is actually down on last year. These factors suggest that the business performance wouldn't really justify a high pay packet for the CEO. 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 Jain Irrigation Systems Limited Been A Good Investment?

Since shareholders would have lost about 83% over three years, some Jain Irrigation Systems Limited investors would surely be feeling negative emotions. This suggests it would be unwise for the company to pay the CEO too generously.

In Summary...

As we noted earlier, Jain Irrigation Systems pays its CEO higher than the norm for similar-sized companies belonging to the same industry. This doesn't look good against shareholder returns, which have been negative for the past three years. To make matters worse, EPS growth has also been negative during this period. Overall, with such poor performance, shareholder's would probably have questions if the company decided to give the CEO a raise.

CEO pay is simply one of the many factors that need to be considered while examining business performance. We did our research and identified 4 warning signs (and 2 which can't be ignored) in Jain Irrigation Systems we think you should know about.

Switching gears from Jain Irrigation Systems, if you're hunting for a pristine balance sheet and premium returns, this free list of high return, low debt companies is a great place to look.

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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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