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

Kanuri Prasad became the CEO of Lakshmi Finance & Industrial Corporation Limited (NSE:LFIC) in 1985, 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.

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 ₹232m, 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 ₹810k. Accordingly, our analysis reveals that Lakshmi Finance & Industrial Corporation Limited pays Kanuri Prasad north of the industry median. What's more, Kanuri Prasad holds ₹7.0m worth of shares in the company in their own name, indicating that they have a lot of skin in the game.

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.

Lakshmi Finance & Industrial Corporation Limited's Growth

Over the last three years, Lakshmi Finance & Industrial Corporation Limited has shrunk its earnings per share by 6.6% per year. In the last year, its revenue is up 315%.

The reduction in EPS, over three years, is arguably concerning. But in contrast the revenue growth is strong, suggesting future potential for EPS growth. 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?

Since shareholders would have lost about 24% over three years, some Lakshmi Finance & Industrial Corporation Limited investors would surely be feeling negative emotions. This suggests it would be unwise for the company to pay the CEO too 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. At the same time, looking at EPS and total shareholder returns, it's tough to say Lakshmi Finance & Industrial is in a sound position, considering both metrics are down. 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!

It is always advisable to analyse CEO pay, along with performing a thorough analysis of the company's key performance areas. We did our research and identified 7 warning signs (and 2 which are potentially serious) in Lakshmi Finance & Industrial we think you should know about.

Of course, you might find a fantastic investment by looking at a different set of stocks. So take a peek at this free list of interesting companies.

If you’re looking to trade Lakshmi Finance & Industrial, open an account with the lowest-cost* platform trusted by professionals, Interactive Brokers. Their clients from over 200 countries and territories trade stocks, options, futures, forex, bonds and funds worldwide from a single integrated account. Promoted

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.
^*Interactive Brokers Rated Lowest Cost Broker by StockBrokers.com Annual Online Review 2020

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.