We Discuss Why Damodar Industries Limited's (NSE:DAMODARIND) CEO Compensation May Be Closely Reviewed

The results at Damodar Industries Limited (NSE:DAMODARIND) have been quite disappointing recently and CEO Ajay Biyani bears some responsibility for this. Shareholders will be interested in what the board will have to say about turning performance around at the next AGM on 14 September 2021. It would also be an opportunity for shareholders to influence management through voting on company resolutions such as executive remuneration, which could impact the firm significantly. We present the case why we think CEO compensation is out of sync with company performance.

See our latest analysis for Damodar Industries

How Does Total Compensation For Ajay Biyani Compare With Other Companies In The Industry?

Our data indicates that Damodar Industries Limited has a market capitalization of ₹1.0b, and total annual CEO compensation was reported as ₹6.7m for the year to March 2021. This was the same amount the CEO received in the prior year. Notably, the salary of ₹6.7m is the entirety of the CEO compensation.

For comparison, other companies in the industry with market capitalizations below ₹15b, reported a median total CEO compensation of ₹3.5m. Accordingly, our analysis reveals that Damodar Industries Limited pays Ajay Biyani north of the industry median. What's more, Ajay Biyani holds ₹154m worth of shares in the company in their own name, indicating that they have a lot of skin in the game.

Component	2021	2020	Proportion (2021)
Salary	₹6.7m	₹6.7m	100%
Other	-	-	-
Total Compensation	₹6.7m	₹6.7m	100%

On an industry level, it's fascinating to see that all of total compensation represents salary and non-salary benefits do not factor into the equation at all. On a company level, Damodar Industries prefers to reward its CEO through a salary, opting not to pay Ajay Biyani through non-salary benefits. If salary is the major component in total compensation, it suggests that the CEO receives a higher fixed proportion of the total compensation, regardless of performance.

Damodar Industries Limited's Growth

Damodar Industries Limited has reduced its earnings per share by 23% a year over the last three years. It achieved revenue growth of 13% over the last year.

The decline in EPS is a bit concerning. There's no doubt that the silver lining is that revenue is up. But it isn't sufficiently fast growth to overlook the fact that EPS has gone backwards over three years. It's hard to argue the company is firing on all cylinders, so shareholders might be averse to high CEO remuneration. We don't have analyst forecasts, but you could get a better understanding of its growth by checking out this more detailed historical graph of earnings, revenue and cash flow.

Has Damodar Industries Limited Been A Good Investment?

Since shareholders would have lost about 14% over three years, some Damodar Industries Limited investors would surely be feeling negative emotions. Therefore, it might be upsetting for shareholders if the CEO were paid generously.

To Conclude...

Damodar Industries pays CEO compensation exclusively through a salary, with non-salary compensation completely ignored. Along with the business performing poorly, shareholders have suffered with poor share price returns on their investments, suggesting that there's little to no chance of them being in favor of a CEO pay raise. At the upcoming AGM, they can question the management's plans and strategies to turn performance around and reassess their investment thesis in regards to the company.

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. We identified 4 warning signs for Damodar Industries (2 are potentially serious!) that you should be aware of before investing here.

Important note: Damodar Industries is an exciting stock, but we understand investors may be looking for an unencumbered balance sheet and blockbuster returns. You might find something better in this list of interesting companies with high ROE and low debt.

If you’re looking to trade Damodar Industries, open an account with the lowest-cost* platform trusted by professionals, Interactive Brokers. Their clients from over 200 countries and territories trade stocks, options, futures, forex, bonds and funds worldwide from a single integrated account. Promoted

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.
^*Interactive Brokers Rated Lowest Cost Broker by StockBrokers.com Annual Online Review 2020

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.