Stock Analysis

Shareholders May Be Wary Of Increasing Mahindra & Mahindra Financial Services Limited's (NSE:M&MFIN) CEO Compensation Package

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Mahindra & Mahindra Financial Services Limited (NSE:M&MFIN) has not performed well recently and CEO Ramesh Iyer will probably need to up their game. At the upcoming AGM on 26 July 2021, shareholders can hear from the board including their plans for turning around performance. They will also get a chance to influence managerial decision-making through voting on resolutions such as executive remuneration, which may impact firm value in the future. We present the case why we think CEO compensation is out of sync with company performance.

See our latest analysis for Mahindra & Mahindra Financial Services

How Does Total Compensation For Ramesh Iyer Compare With Other Companies In The Industry?

Our data indicates that Mahindra & Mahindra Financial Services Limited has a market capitalization of ₹193b, and total annual CEO compensation was reported as ₹72m for the year to March 2021. That's a modest increase of 7.1% on the prior year. In particular, the salary of ₹46.3m, makes up a huge portion of the total compensation being paid to the CEO.

For comparison, other companies in the same industry with market capitalizations ranging between ₹149b and ₹478b had a median total CEO compensation of ₹9.7m. This suggests that Ramesh Iyer is paid more than the median for the industry. Furthermore, Ramesh Iyer directly owns ₹276m worth of shares in the company, implying that they are deeply invested in the company's success.

Component20212020Proportion (2021)
Salary ₹46m ₹46m 64%
Other ₹26m ₹21m 36%
Total Compensation₹72m ₹67m100%

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. Mahindra & Mahindra Financial Services pays a modest slice of remuneration through salary, as compared to the broader industry. If salary is the major component in total compensation, it suggests that the CEO receives a higher fixed proportion of the total compensation, regardless of performance.

NSEI:M&MFIN CEO Compensation July 20th 2021

A Look at Mahindra & Mahindra Financial Services Limited's Growth Numbers

Mahindra & Mahindra Financial Services Limited has reduced its earnings per share by 30% a year over the last three years. In the last year, its revenue is up 8.9%.

Overall this is not a very positive result for shareholders. The modest increase in revenue in the last year isn't enough to make us overlook the disappointing change in EPS. These factors suggest that the business performance wouldn't really justify a high pay packet for the CEO. Historical performance can sometimes be a good indicator on what's coming up next but if you want to peer into the company's future you might be interested in this free visualization of analyst forecasts.

Has Mahindra & Mahindra Financial Services Limited Been A Good Investment?

Few Mahindra & Mahindra Financial Services Limited shareholders would feel satisfied with the return of -44% over three years. This suggests it would be unwise for the company to pay the CEO too generously.

To Conclude...

Along with the business performing poorly, shareholders have suffered with poor share price returns on their investments, suggesting that there's little to no chance of them being in favor of a CEO pay raise. At the upcoming AGM, they can question the management's plans and strategies to turn performance around and reassess their investment thesis in 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. That's why we did our research, and identified 6 warning signs for Mahindra & Mahindra Financial Services (of which 2 don't sit too well with us!) that you should know about in order to have a holistic understanding of the stock.

Switching gears from Mahindra & Mahindra Financial Services, if you're hunting for a pristine balance sheet and premium returns, this free list of high return, low debt companies is a great place to look.

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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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