How Much Did Centum Electronics' (NSE:CENTUM) CEO Pocket Last Year?

Rao Mallavarapu has been the CEO of Centum Electronics Limited (NSE:CENTUM) since 1993, and this article will examine the executive's compensation with respect to the overall performance of the company. This analysis will also evaluate the appropriateness of CEO compensation when taking into account the earnings and shareholder returns of the company.

See our latest analysis for Centum Electronics

How Does Total Compensation For Rao Mallavarapu Compare With Other Companies In The Industry?

At the time of writing, our data shows that Centum Electronics Limited has a market capitalization of ₹3.8b, and reported total annual CEO compensation of ₹18m for the year to March 2020. That's a modest increase of 6.2% on the prior year. We note that the salary portion, which stands at ₹9.27m constitutes the majority of total compensation received by the CEO.

For comparison, other companies in the industry with market capitalizations below ₹15b, reported a median total CEO compensation of ₹3.1m. Accordingly, our analysis reveals that Centum Electronics Limited pays Rao Mallavarapu north of the industry median. Furthermore, Rao Mallavarapu directly owns ₹2.0b worth of shares in the company, implying that they are deeply invested in the company's success.

On an industry level, around 99% of total compensation represents salary and 0.7% is other remuneration. Centum Electronics pays a modest slice of remuneration through salary, as compared to the broader industry. If total compensation veers towards salary, it suggests that the variable portion - which is generally tied to performance, is lower.

Centum Electronics Limited's Growth

Centum Electronics Limited has reduced its earnings per share by 17% a year over the last three years. Its revenue is down 12% over the previous year.

Overall this is not a very positive result for shareholders. 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 Centum Electronics Limited Been A Good Investment?

Given the total shareholder loss of 51% over three years, many shareholders in Centum Electronics Limited are probably rather dissatisfied, to say the least. So shareholders would probably want the company to be lessto generous with CEO compensation.

To Conclude...

As previously discussed, Rao is compensated more than what is normal for CEOs of companies of similar size, and which belong to the same industry. This doesn't look good against shareholder returns, which have been negative for the past three years. What's equally worrying is that the company isn't growing by our analysis. Understandably, the company's shareholders might have some questions about the CEO's remuneration, given the disappointing performance.

It is always advisable to analyse CEO pay, along with performing a thorough analysis of the company's key performance areas. We identified 7 warning signs for Centum Electronics (1 makes us a bit uncomfortable!) that you should be aware of before investing here.

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. 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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