Increases to M M Forgings Limited's (NSE:MMFL) CEO Compensation Might Cool off for now

CEO Venkatramanan Krishnan has done a decent job of delivering relatively good performance at M M Forgings Limited (NSE:MMFL) recently. In light of this performance, CEO compensation will probably not be the main focus for shareholders as they go into the AGM on 13 September 2021. However, some shareholders will still be cautious of paying the CEO excessively.

See our latest analysis for M M Forgings

How Does Total Compensation For Venkatramanan Krishnan Compare With Other Companies In The Industry?

At the time of writing, our data shows that M M Forgings Limited has a market capitalization of ₹19b, and reported total annual CEO compensation of ₹30m for the year to March 2021. That's a slight decrease of 3.5% on the prior year. In particular, the salary of ₹20.5m, makes up a huge portion of the total compensation being paid to the CEO.

On examining similar-sized companies in the industry with market capitalizations between ₹7.3b and ₹29b, we discovered that the median CEO total compensation of that group was ₹16m. This suggests that Venkatramanan Krishnan is paid more than the median for the industry. Moreover, Venkatramanan Krishnan also holds ₹2.1b worth of M M Forgings 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 100% of total compensation represents salary and 0.1916% is other remuneration. In M M Forgings' case, non-salary compensation represents a greater slice of total remuneration, in comparison 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.

A Look at M M Forgings Limited's Growth Numbers

M M Forgings Limited has seen its earnings per share (EPS) increase by 4.9% a year over the past three years. It achieved revenue growth of 46% over the last year.

It's hard to interpret the strong revenue growth as anything other than a positive. And in that context, the modest EPS improvement certainly isn't shabby. We'd stop short of saying the business performance is amazing, but there are enough positives to justify further research, or even adding the stock to your watch-list. While we don't have analyst forecasts for the company, shareholders might want to examine this detailed historical graph of earnings, revenue and cash flow.

Has M M Forgings Limited Been A Good Investment?

We think that the total shareholder return of 36%, over three years, would leave most M M Forgings Limited shareholders smiling. As a result, some may believe the CEO should be paid more than is normal for companies of similar size.

To Conclude...

Given that the company's overall performance has been reasonable, the CEO remuneration policy might not be shareholders' central point of focus in the upcoming AGM. However, any decision to raise CEO pay might be met with some objections from the shareholders given that the CEO is already paid higher than the industry average.

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 4 warning signs (and 2 which are a bit unpleasant) in M M Forgings we think you should know about.

Important note: M M Forgings 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. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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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