Increases to CEO Compensation Might Be Put On Hold For Now at Vardhman Acrylics Limited (NSE:VARDHACRLC)

Key Insights

• Vardhman Acrylics to hold its Annual General Meeting on 30th of September
• Total pay for CEO Bal Choudhary includes ₹8.58m salary
• The total compensation is 239% higher than the average for the industry
• Over the past three years, Vardhman Acrylics' EPS fell by 9.9% and over the past three years, the total shareholder return was 170%

Despite strong share price growth of 170% for Vardhman Acrylics Limited (NSE:VARDHACRLC) over the last few years, earnings growth has been disappointing, which suggests something is amiss. Some of these issues will occupy shareholders' minds as the AGM rolls around on 30th of September. They will be able to influence managerial decisions through the exercise of their voting power on resolutions, such as CEO remuneration and other matters, which may influence future company prospects. From what we gathered, we think shareholders should be wary of raising CEO compensation until the company shows some marked improvement.

Check out our latest analysis for Vardhman Acrylics

How Does Total Compensation For Bal Choudhary Compare With Other Companies In The Industry?

At the time of writing, our data shows that Vardhman Acrylics Limited has a market capitalization of ₹4.3b, and reported total annual CEO compensation of ₹13m for the year to March 2023. That's a notable increase of 27% on last year. Notably, the salary which is ₹8.58m, represents most of the total compensation being paid.

In comparison with other companies in the Indian Luxury industry with market capitalizations under ₹17b, the reported median total CEO compensation was ₹3.9m. Accordingly, our analysis reveals that Vardhman Acrylics Limited pays Bal Choudhary north of the industry median.

Component	2023	2022	Proportion (2023)
Salary	₹8.6m	₹8.3m	65%
Other	₹4.6m	₹2.1m	35%
Total Compensation	₹13m	₹10m	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. It's interesting to note that Vardhman Acrylics allocates a smaller portion of compensation to salary in comparison to the broader industry. If total compensation veers towards salary, it suggests that the variable portion - which is generally tied to performance, is lower.

Vardhman Acrylics Limited's Growth

Over the last three years, Vardhman Acrylics Limited has shrunk its earnings per share by 9.9% per year. It achieved revenue growth of 2.1% over the last year.

Few shareholders would be pleased to read that EPS have declined. The modest increase in revenue in the last year isn't enough to make us overlook the disappointing change in EPS. So given this relatively weak performance, shareholders would probably not want to see high compensation for the CEO. Although we don't have analyst forecasts, you might want to assess this data-rich visualization of earnings, revenue and cash flow.

Has Vardhman Acrylics Limited Been A Good Investment?

Boasting a total shareholder return of 170% over three years, Vardhman Acrylics Limited has done well by shareholders. So they may not be at all concerned if the CEO were to be paid more than is normal for companies around the same size.

In Summary...

Although shareholders would be quite happy with the returns they have earned on their initial investment, earnings have failed to grow and this could mean returns may be hard to keep up. 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.

It is always advisable to analyse CEO pay, along with performing a thorough analysis of the company's key performance areas. We identified 3 warning signs for Vardhman Acrylics (1 is a bit concerning!) that you should be aware of before investing here.

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. 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.