We Think Shareholders Are Less Likely To Approve A Large Pay Rise For Lux Industries Limited's (NSE:LUXIND) CEO For Now

Key Insights

• Lux Industries to hold its Annual General Meeting on 29th of September
• Total pay for CEO Pradip Todi includes ₹45.0m salary
• Total compensation is 66% above industry average
• Over the past three years, Lux Industries' EPS fell by 12% and over the past three years, the total shareholder return was 5.3%

Despite Lux Industries Limited's (NSE:LUXIND) share price growing positively in the past few years, the per-share earnings growth has not grown to investors' expectations, suggesting that there could be other factors at play driving the share price. The upcoming AGM on 29th of September may be an opportunity for shareholders to bring up any concerns they may have for the board’s attention. It would also be an opportunity for them to influence management through exercising their voting power on company resolutions, including CEO and executive remuneration, which could impact on firm performance in the future. From the data that we gathered, we think that shareholders should hold off on a raise on CEO compensation until performance starts to show some improvement.

View our latest analysis for Lux Industries

Comparing Lux Industries Limited's CEO Compensation With The Industry

According to our data, Lux Industries Limited has a market capitalization of ₹44b, and paid its CEO total annual compensation worth ₹45m over the year to March 2023. That's just a smallish increase of 5.1% on last year. Notably, the salary of ₹45m is the entirety of the CEO compensation.

For comparison, other companies in the Indian Luxury industry with market capitalizations ranging between ₹17b and ₹66b had a median total CEO compensation of ₹27m. Accordingly, our analysis reveals that Lux Industries Limited pays Pradip Todi north of the industry median. What's more, Pradip Todi holds ₹11b worth of shares in the company in their own name, indicating that they have a lot of skin in the game.

Component	2023	2022	Proportion (2023)
Salary	₹45m	₹43m	100%
Other	-	-	-
Total Compensation	₹45m	₹43m	100%

Talking in terms of the industry, salary represents all of total compensation among the companies we analyzed, while other remuneration is, interestingly, completely ignored. At the company level, Lux Industries pays Pradip Todi solely through a salary, preferring to go down a conventional route. If salary dominates total compensation, it suggests that CEO compensation is leaning less towards the variable component, which is usually linked with performance.

A Look at Lux Industries Limited's Growth Numbers

Over the last three years, Lux Industries Limited has shrunk its earnings per share by 12% per year. It saw its revenue drop 4.8% over the last year.

The decline in EPS is a bit concerning. This is compounded by the fact revenue is actually down on last year. So given this relatively weak performance, shareholders would probably not want to see high compensation for the CEO. Moving away from current form for a second, it could be important to check this free visual depiction of what analysts expect for the future.

Has Lux Industries Limited Been A Good Investment?

Lux Industries Limited has generated a total shareholder return of 5.3% over three years, so most shareholders wouldn't be too disappointed. Although, there's always room to improve. As a result, investors in the company might be reluctant about agreeing to increase CEO pay in the future, before seeing an improvement on their returns.

In Summary...

Lux Industries pays CEO compensation exclusively through a salary, with non-salary compensation completely ignored. Despite the positive returns on shareholders' investments, the fact that earnings have failed to grow makes us skeptical about whether these returns will continue. Shareholders should make the most of the coming opportunity to question the board on key concerns they may have and revisit their investment thesis with regards to the company.

CEO compensation is a crucial aspect to keep your eyes on but investors also need to keep their eyes open for other issues related to business performance. That's why we did some digging and identified 2 warning signs for Lux Industries that investors should think about before committing capital to this stock.

Important note: Lux 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.

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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.