Ajit Jhunjhunwala became the CEO of La Opala RG Limited (NSE:LAOPALA) in 2018, 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 La Opala RG.
Check out our latest analysis for La Opala RG
Comparing La Opala RG Limited's CEO Compensation With the industry
At the time of writing, our data shows that La Opala RG Limited has a market capitalization of ₹23b, and reported total annual CEO compensation of ₹25m for the year to March 2020. Notably, that's a decrease of 28% over the year before. Notably, the salary which is ₹19.3m, represents most of the total compensation being paid.
On comparing similar companies from the same industry with market caps ranging from ₹15b to ₹59b, we found that the median CEO total compensation was ₹24m. So it looks like La Opala RG compensates Ajit Jhunjhunwala in line with the median for the industry. Moreover, Ajit Jhunjhunwala also holds ₹2.1b worth of La Opala RG stock directly under their own name, which reveals to us that they have a significant personal stake in the company.
| Component | 2020 | 2019 | Proportion (2020) |
| Salary | ₹19m | ₹17m | 76% |
| Other | ₹6.0m | ₹18m | 24% |
| Total Compensation | ₹25m | ₹35m | 100% |
On an industry level, roughly 84% of total compensation represents salary and 16% is other remuneration. Although there is a difference in how total compensation is set, La Opala RG more or less reflects the market in terms of setting the salary. If salary dominates total compensation, it suggests that CEO compensation is leaning less towards the variable component, which is usually linked with performance.
La Opala RG Limited's Growth
Over the last three years, La Opala RG Limited has shrunk its earnings per share by 10% per year. In the last year, its revenue is down 29%.
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. 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 La Opala RG Limited Been A Good Investment?
Given the total shareholder loss of 31% over three years, many shareholders in La Opala RG Limited are probably rather dissatisfied, to say the least. This suggests it would be unwise for the company to pay the CEO too generously.
In Summary...
As we noted earlier, La Opala RG 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.
While CEO pay is an important factor to be aware of, there are other areas that investors should be mindful of as well. That's why we did some digging and identified 2 warning signs for La Opala RG that investors should think about before committing capital to this stock.
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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About NSEI:LAOPALA
La Opala RG
Manufactures and markets glass and glassware products in India and internationally.
6 star dividend payer with excellent balance sheet.
