How Much Is Aditya Birla Capital Limited (NSE:ABCAPITAL) Paying Its CEO?

Ajay Srinivasan became the CEO of Aditya Birla Capital Limited (NSE:ABCAPITAL) in 2007, 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 evaluate the appropriateness of CEO compensation when taking into account the earnings and shareholder returns of the company.

Check out our latest analysis for Aditya Birla Capital

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

Our data indicates that Aditya Birla Capital Limited has a market capitalization of ₹213b, and total annual CEO compensation was reported as ₹282m for the year to March 2020. Notably, that's a decrease of 20% over the year before. Notably, the salary which is ₹273.0m, represents most of the total compensation being paid.

On examining similar-sized companies in the industry with market capitalizations between ₹148b and ₹474b, we discovered that the median CEO total compensation of that group was ₹95m. Hence, we can conclude that Ajay Srinivasan is remunerated higher than the industry median. Furthermore, Ajay Srinivasan directly owns ₹38m worth of shares in the company, implying that they are deeply invested in the company's success.

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. Aditya Birla Capital has gone down a largely traditional route, paying Ajay Srinivasan a high salary, giving it preference over non-salary benefits. If salary dominates total compensation, it suggests that CEO compensation is leaning less towards the variable component, which is usually linked with performance.

Aditya Birla Capital Limited's Growth

Aditya Birla Capital Limited has reduced its earnings per share by 12% a year over the last three years. In the last year, its revenue is up 17%.

Investors would be a bit wary of companies that have lower EPS But on the other hand, revenue growth is strong, suggesting a brighter future. These two metrics are moving in different directions, so while it's hard to be confident judging performance, we think the stock is worth watching. 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 Aditya Birla Capital Limited Been A Good Investment?

Given the total shareholder loss of 53% over three years, many shareholders in Aditya Birla Capital 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...

Aditya Birla Capital pays its CEO a majority of compensation through a salary. As we touched on above, Aditya Birla Capital Limited is currently paying its CEO higher than the median pay for CEOs of companies belonging to the same industry and with similar market capitalizations. It concerns us that EPS growth for the company is negative, while share price gains did not materialize over the last three years. On the bright side, at lease revenue growth seems to be marching northward. Suffice it to say, we don't think the CEO is underpaid!

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 Aditya Birla Capital (1 is concerning!) that you should be aware of before investing here.

Important note: Aditya Birla Capital 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. 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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