How Should Investors Feel About Lokesh Machines' (NSE:LOKESHMACH) CEO Remuneration?

Mullapudi Rao is the CEO of Lokesh Machines Limited (NSE:LOKESHMACH), and in this article, we analyze the executive's compensation package with respect to the overall performance of the company. This analysis will also evaluate the appropriateness of CEO compensation when taking into account the earnings and shareholder returns of the company.

Check out our latest analysis for Lokesh Machines

How Does Total Compensation For Mullapudi Rao Compare With Other Companies In The Industry?

At the time of writing, our data shows that Lokesh Machines Limited has a market capitalization of ₹712m, and reported total annual CEO compensation of ₹6.0m for the year to March 2020. That is, the compensation was roughly the same as last year. It is worth noting that the CEO compensation consists entirely of the salary, worth ₹6.0m.

For comparison, other companies in the industry with market capitalizations below ₹15b, reported a median total CEO compensation of ₹4.8m. From this we gather that Mullapudi Rao is paid around the median for CEOs in the industry. Furthermore, Mullapudi Rao directly owns ₹19m worth of shares in the company, implying that they are deeply invested in the company's success.

On an industry level, roughly 93% of total compensation represents salary and 7.3% is other remuneration. On a company level, Lokesh Machines prefers to reward its CEO through a salary, opting not to pay Mullapudi Rao through non-salary benefits. If total compensation veers towards salary, it suggests that the variable portion - which is generally tied to performance, is lower.

A Look at Lokesh Machines Limited's Growth Numbers

Lokesh Machines Limited has reduced its earnings per share by 62% a year over the last three years. Its revenue is down 34% over the previous year.

Overall this is not a very positive result for shareholders. And the fact that revenue is down year on year arguably paints an ugly picture. 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 Lokesh Machines Limited Been A Good Investment?

With a three year total loss of 45% for the shareholders, Lokesh Machines Limited would certainly have some dissatisfied shareholders. Therefore, it might be upsetting for shareholders if the CEO were paid generously.

In Summary...

Lokesh Machines rewards its CEO solely through a salary, ignoring non-salary benefits completely. As we noted earlier, Lokesh Machines pays its CEO in line with similar-sized companies belonging to the same industry. Meanwhile, EPS growth and shareholder returns have been in the red for the last three years. Considering overall performance, shareholders will likely hold off support for a raise until results improve.

It is always advisable to analyse CEO pay, along with performing a thorough analysis of the company's key performance areas. We did our research and identified 4 warning signs (and 3 which are potentially serious) in Lokesh Machines we think you should know about.

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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