Here's Why Zydus Wellness Limited's (NSE:ZYDUSWELL) CEO Compensation Is The Least Of Shareholders Concerns

By
Simply Wall St
Published
July 23, 2021
NSEI:ZYDUSWELL
Source: Shutterstock

Shareholders may be wondering what CEO Tarun Arora plans to do to improve the less than great performance at Zydus Wellness Limited (NSE:ZYDUSWELL) recently. At the next AGM coming up on 30 July 2021, they can influence managerial decision making through voting on resolutions, including executive remuneration. It has been shown that setting appropriate executive remuneration incentivises the management to act in the interests of shareholders. We think CEO compensation looks appropriate given the data we have put together.

See our latest analysis for Zydus Wellness

How Does Total Compensation For Tarun Arora Compare With Other Companies In The Industry?

According to our data, Zydus Wellness Limited has a market capitalization of ₹141b, and paid its CEO total annual compensation worth ₹13m over the year to March 2021. That's a notable increase of 16% on last year. It is worth noting that the CEO compensation consists entirely of the salary, worth ₹13m.

For comparison, other companies in the same industry with market capitalizations ranging between ₹74b and ₹238b had a median total CEO compensation of ₹32m. In other words, Zydus Wellness pays its CEO lower than the industry median. What's more, Tarun Arora holds ₹2.2m worth of shares in the company in their own name, indicating that they have a lot of skin in the game.

Component20212020Proportion (2021)
Salary ₹13m ₹11m 100%
Other - - -
Total Compensation₹13m ₹11m100%

Talking in terms of the industry, salary represents all of total compensation among the companies we analyzed, while other remuneration is, interestingly, completely ignored. At the company level, Zydus Wellness pays Tarun Arora solely through a salary, preferring to go down a conventional route. If total compensation veers towards salary, it suggests that the variable portion - which is generally tied to performance, is lower.

ceo-compensation
NSEI:ZYDUSWELL CEO Compensation July 24th 2021

A Look at Zydus Wellness Limited's Growth Numbers

Over the last three years, Zydus Wellness Limited has shrunk its earnings per share by 17% per year. It achieved revenue growth of 5.7% over the last year.

Few shareholders would be pleased to read that EPS have declined. And the modest revenue growth over 12 months isn't much comfort against the reduced EPS. It's hard to argue the company is firing on all cylinders, so shareholders might be averse to high CEO remuneration. Moving away from current form for a second, it could be important to check this free visual depiction of what analysts expect for the future.

Has Zydus Wellness Limited Been A Good Investment?

Most shareholders would probably be pleased with Zydus Wellness Limited for providing a total return of 53% 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...

Zydus Wellness 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. These concerns could be addressed to the board and shareholders should revisit their investment thesis to see if it still makes sense.

CEO compensation can have a massive impact on performance, but it's just one element. We've identified 2 warning signs for Zydus Wellness 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. 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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