Shareholders Will Probably Not Have Any Issues With Orient Abrasives Limited's (NSE:ORIENTABRA) CEO Compensation

Despite strong share price growth of 72% for Orient Abrasives Limited (NSE:ORIENTABRA) over the last few years, earnings growth has been disappointing, which suggests something is amiss. The upcoming AGM on 26 September 2022 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. In our analysis below, we show why shareholders may consider holding off a raise for the CEO's compensation until company performance improves.

See our latest analysis for Orient Abrasives

How Does Total Compensation For Manubhai Rathod Compare With Other Companies In The Industry?

According to our data, Orient Abrasives Limited has a market capitalization of ₹3.7b, and paid its CEO total annual compensation worth ₹4.4m over the year to March 2022. That's mostly flat as compared to the prior year's compensation. It is worth noting that the CEO compensation consists entirely of the salary, worth ₹4.4m.

On comparing similar-sized companies in the industry with market capitalizations below ₹16b, we found that the median total CEO compensation was ₹3.9m. From this we gather that Manubhai Rathod is paid around the median for CEOs in the industry. Moreover, Manubhai Rathod also holds ₹924k worth of Orient Abrasives stock directly under their own name, which reveals to us that they have a significant personal stake in the company.

Component	2022	2021	Proportion (2022)
Salary	₹4.4m	₹4.5m	100%
Other	-	-	-
Total Compensation	₹4.4m	₹4.5m	100%

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. On a company level, Orient Abrasives prefers to reward its CEO through a salary, opting not to pay Manubhai Rathod through non-salary benefits. 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.

Orient Abrasives Limited's Growth

Over the last three years, Orient Abrasives Limited has shrunk its earnings per share by 22% per year. Its revenue is down 9.2% over the previous year.

The decline in EPS is a bit concerning. And the impression is worse when you consider revenue is down year-on-year. It's hard to argue the company is firing on all cylinders, so shareholders might be averse to high CEO remuneration. 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 Orient Abrasives Limited Been A Good Investment?

Boasting a total shareholder return of 72% over three years, Orient Abrasives Limited has done well by shareholders. 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.

In Summary...

Orient Abrasives rewards its CEO solely through a salary, ignoring non-salary benefits completely. Despite the strong returns on shareholders' investments, the fact that earnings have failed to grow makes us skeptical about the stock keeping up its current momentum. 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 compensation is an important area to keep your eyes on, but we've also need to pay attention to other attributes of the company. We identified 3 warning signs for Orient Abrasives (1 is a bit concerning!) that you should be aware of before investing here.

Important note: Orient Abrasives 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.