Shareholders Will Probably Hold Off On Increasing N R Agarwal Industries Limited's (NSE:NRAIL) CEO Compensation For The Time Being

Key Insights

• N R Agarwal Industries' Annual General Meeting to take place on 28th of September
• Total pay for CEO Rajendra Agarwal includes ₹24.0m salary
• Total compensation is 992% above industry average
• N R Agarwal Industries' total shareholder return over the past three years was 99% while its EPS was down 0.5% over the past three years

N R Agarwal Industries Limited (NSE:NRAIL) has exhibited strong share price growth in the past few years. However, its earnings growth has not kept up, suggesting that there may be something amiss. The upcoming AGM on 28th of September may be an opportunity for shareholders to bring up any concerns they may have for the board’s attention. They will be able to influence managerial decisions through the exercise of their voting power on resolutions, such as CEO remuneration and other matters, which may influence future company prospects. From the data that we gathered, we think that shareholders should hold off on a raise on CEO compensation until performance starts to show some improvement.

Check out our latest analysis for N R Agarwal Industries

Comparing N R Agarwal Industries Limited's CEO Compensation With The Industry

According to our data, N R Agarwal Industries Limited has a market capitalization of ₹6.2b, and paid its CEO total annual compensation worth ₹39m over the year to March 2023. We note that's an increase of 8.7% above last year. Notably, the salary which is ₹24.0m, represents most of the total compensation being paid.

In comparison with other companies in the Indian Packaging industry with market capitalizations under ₹17b, the reported median total CEO compensation was ₹3.6m. Accordingly, our analysis reveals that N R Agarwal Industries Limited pays Rajendra Agarwal north of the industry median. What's more, Rajendra Agarwal holds ₹2.9b worth of shares in the company in their own name, indicating that they have a lot of skin in the game.

Component	2023	2022	Proportion (2023)
Salary	₹24m	₹24m	61%
Other	₹15m	₹12m	39%
Total Compensation	₹39m	₹36m	100%

On an industry level, around 77% of total compensation represents salary and 23% is other remuneration. It's interesting to note that N R Agarwal Industries allocates a smaller portion of compensation to salary 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.

N R Agarwal Industries Limited's Growth

Earnings per share at N R Agarwal Industries Limited are much the same as they were three years ago, albeit slightly lower. In the last year, its revenue is down 4.7%.

Its a bit disappointing to see that the company has failed to grow its EPS. This is compounded by the fact revenue is actually down on last year. It's hard to argue the company is firing on all cylinders, so shareholders might be averse to high CEO remuneration. 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 N R Agarwal Industries Limited Been A Good Investment?

We think that the total shareholder return of 99%, over three years, would leave most N R Agarwal Industries Limited shareholders smiling. This strong performance might mean some shareholders don't mind if the CEO were to be paid more than is normal for a company of its size.

To Conclude...

While the return to shareholders does look promising, it's hard to ignore the lack of earnings growth and this makes us question whether these strong returns will continue. Shareholders should make the most of the coming opportunity to question the board on key concerns they may have and revisit their investment thesis with regards to the company.

CEO pay is simply one of the many factors that need to be considered while examining business performance. We did our research and identified 2 warning signs (and 1 which doesn't sit too well with us) in N R Agarwal Industries 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.

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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.