Most Shareholders Will Probably Find That The CEO Compensation For HFCL Limited (NSE:HFCL) Is Reasonable

HFCL Limited (NSE:HFCL) 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 30 September 2022 may be an opportunity for shareholders to bring up any concerns they may have for the board’s attention. It would also be an opportunity for them to influence management through exercising their voting power on company resolutions, including CEO and executive remuneration, which could impact on firm performance in the future. 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 HFCL

Comparing HFCL Limited's CEO Compensation With The Industry

Our data indicates that HFCL Limited has a market capitalization of ₹100b, and total annual CEO compensation was reported as ₹70m for the year to March 2022. Notably, that's an increase of 22% over the year before. We note that the salary portion, which stands at ₹50.0m constitutes the majority of total compensation received by the CEO.

For comparison, other companies in the same industry with market capitalizations ranging between ₹81b and ₹259b had a median total CEO compensation of ₹85m. So it looks like HFCL compensates Mahendra Nahata in line with the median for the industry. Moreover, Mahendra Nahata also holds ₹254m worth of HFCL 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	₹50m	₹43m	71%
Other	₹20m	₹15m	29%
Total Compensation	₹70m	₹58m	100%

On an industry level, around 55% of total compensation represents salary and 45% is other remuneration. According to our research, HFCL has allocated a higher percentage of pay to salary in comparison to the wider industry. If salary dominates total compensation, it suggests that CEO compensation is leaning less towards the variable component, which is usually linked with performance.

HFCL Limited's Growth

Over the last three years, HFCL Limited has shrunk its earnings per share by 4.0% per year. In the last year, its revenue is down 7.3%.

Few shareholders would be pleased to read that EPS have declined. This is compounded by the fact revenue is actually down on last year. So given this relatively weak performance, shareholders would probably not want to see high compensation for the CEO. 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 HFCL Limited Been A Good Investment?

Most shareholders would probably be pleased with HFCL Limited for providing a total return of 290% over three years. So they may not be at all concerned if the CEO were to be paid more than is normal for companies around the same size.

In Summary...

Although shareholders would be quite happy with the returns they have earned on their initial investment, earnings have failed to grow and this could mean returns may be hard to keep up. 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.

While it is important to pay attention to CEO remuneration, investors should also consider other elements of the business. We've identified 1 warning sign for HFCL that investors should be aware of in a dynamic business environment.

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. 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.