Why Hindustan Oil Exploration's (NSE:HINDOILEXP) CEO Pay Matters

Pandarinathan Elango became the CEO of Hindustan Oil Exploration Company Limited (NSE:HINDOILEXP) in 2015, 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 look to assess whether the CEO is appropriately paid, considering recent earnings growth and investor returns for Hindustan Oil Exploration.

View our latest analysis for Hindustan Oil Exploration

Comparing Hindustan Oil Exploration Company Limited's CEO Compensation With the industry

At the time of writing, our data shows that Hindustan Oil Exploration Company Limited has a market capitalization of ₹11b, and reported total annual CEO compensation of ₹35m for the year to March 2020. That's a notable increase of 73% on last year. We think total compensation is more important but our data shows that the CEO salary is lower, at ₹6.3m.

In comparison with other companies in the industry with market capitalizations ranging from ₹7.3b to ₹29b, the reported median CEO total compensation was ₹12m. This suggests that Pandarinathan Elango is paid more than the median for the industry. Moreover, Pandarinathan Elango also holds ₹419m worth of Hindustan Oil Exploration stock directly under their own name, which reveals to us that they have a significant personal stake in the company.

On an industry level, roughly 65% of total compensation represents salary and 35% is other remuneration. In Hindustan Oil Exploration's case, non-salary compensation represents a greater slice of total remuneration, in comparison to the broader industry. If non-salary compensation dominates total pay, it's an indicator that the executive's salary is tied to company performance.

A Look at Hindustan Oil Exploration Company Limited's Growth Numbers

Over the past three years, Hindustan Oil Exploration Company Limited has seen its earnings per share (EPS) grow by 5.0% per year. It saw its revenue drop 52% over the last year.

We would prefer it if there was revenue growth, but the modest improvement in EPS is good. 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. We don't have analyst forecasts, but you could get a better understanding of its growth by checking out this more detailed historical graph of earnings, revenue and cash flow.

Has Hindustan Oil Exploration Company Limited Been A Good Investment?

With a three year total loss of 31% for the shareholders, Hindustan Oil Exploration Company Limited would certainly have some dissatisfied shareholders. So shareholders would probably want the company to be lessto generous with CEO compensation.

In Summary...

As previously discussed, Pandarinathan is compensated more than what is normal for CEOs of companies of similar size, and which belong to the same industry. The growth in the business has been uninspiring, but the shareholder returns for Hindustan Oil Exploration have arguably been worse, over the last three years. This doesn't look good when you see that Pandarinathan is earning more than the industry median. Taking all this into account, it could be hard to get shareholder support for giving Pandarinathan a raise.

While it is important to pay attention to CEO remuneration, investors should also consider other elements of the business. We did our research and spotted 2 warning signs for Hindustan Oil Exploration that investors should look into moving forward.

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. 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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