What Can We Conclude About Lakshmi Finance & Industrial's (NSE:LFIC) CEO Pay?

Kanuri Prasad has been the CEO of Lakshmi Finance & Industrial Corporation Limited (NSE:LFIC) since 1985, and this article will examine the executive's compensation with respect to the overall performance of the company. This analysis will also assess whether Lakshmi Finance & Industrial pays its CEO appropriately, considering recent earnings growth and total shareholder returns.

View our latest analysis for Lakshmi Finance & Industrial

Comparing Lakshmi Finance & Industrial Corporation Limited's CEO Compensation With the industry

According to our data, Lakshmi Finance & Industrial Corporation Limited has a market capitalization of ₹183m, and paid its CEO total annual compensation worth ₹8.4m over the year to March 2020. Notably, that's an increase of 9.5% over the year before. We note that the salary portion, which stands at ₹6.60m constitutes the majority of total compensation received by the CEO.

On comparing similar-sized companies in the industry with market capitalizations below ₹15b, we found that the median total CEO compensation was ₹900k. Hence, we can conclude that Kanuri Prasad is remunerated higher than the industry median. Furthermore, Kanuri Prasad directly owns ₹5.5m worth of shares in the company, implying that they are deeply invested in the company's success.

Speaking on an industry level, all of total compensation represents salary, while non-salary remuneration is completely ignored. It's interesting to note that Lakshmi Finance & Industrial allocates a smaller portion of compensation to salary in comparison to the broader industry. 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 Lakshmi Finance & Industrial Corporation Limited's Growth Numbers

Over the last three years, Lakshmi Finance & Industrial Corporation Limited has shrunk its earnings per share by 87% per year. It achieved revenue growth of 171% over the last year.

The reduction in EPS, over three years, is arguably concerning. On the other hand, the strong revenue growth suggests the business is growing. It's hard to reach a conclusion about business performance right now. This may be one to watch. Although we don't have analyst forecasts, you might want to assess this data-rich visualization of earnings, revenue and cash flow.

Has Lakshmi Finance & Industrial Corporation Limited Been A Good Investment?

Given the total shareholder loss of 20% over three years, many shareholders in Lakshmi Finance & Industrial Corporation Limited are probably rather dissatisfied, to say the least. Therefore, it might be upsetting for shareholders if the CEO were paid generously.

In Summary...

As previously discussed, Kanuri is compensated more than what is normal for CEOs of companies of similar size, and which belong to the same industry. It concerns us that EPS growth for the company is negative, while share price gains did not materialize over the last three years. In contrast, revenue growth for the company has been showing a positive trend. Suffice it to say, we don't think the CEO is underpaid!

CEO pay is simply one of the many factors that need to be considered while examining business performance. We did our research and identified 4 warning signs (and 2 which are a bit concerning) in Lakshmi Finance & Industrial we think you should know about.

Important note: Lakshmi Finance & Industrial 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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