We Discuss Why Aarti Drugs Limited's (NSE:AARTIDRUGS) CEO Will Find It Hard To Get A Pay Rise From Shareholders This Year

Key Insights

• Aarti Drugs' Annual General Meeting to take place on 26th of September
• Salary of ₹10.5m is part of CEO Prakash Patil's total remuneration
• Total compensation is 38% below industry average
• Over the past three years, Aarti Drugs' EPS fell by 3.8% and over the past three years, the total loss to shareholders 18%

The disappointing performance at Aarti Drugs Limited (NSE:AARTIDRUGS) will make some shareholders rather disheartened. At the upcoming AGM on 26th of September, shareholders may have the opportunity to influence management to turn the performance around by voting on resolutions such as executive remuneration and other matters. We think most shareholders will probably pass the CEO compensation, based on what we gathered.

Check out our latest analysis for Aarti Drugs

How Does Total Compensation For Prakash Patil Compare With Other Companies In The Industry?

Our data indicates that Aarti Drugs Limited has a market capitalization of ₹55b, and total annual CEO compensation was reported as ₹28m for the year to March 2023. Notably, that's a decrease of 11% over the year before. While we always look at total compensation first, our analysis shows that the salary component is less, at ₹11m.

On examining similar-sized companies in the Indian Pharmaceuticals industry with market capitalizations between ₹33b and ₹133b, we discovered that the median CEO total compensation of that group was ₹44m. That is to say, Prakash Patil is paid under the industry median. Moreover, Prakash Patil also holds ₹5.3b worth of Aarti Drugs stock directly under their own name, which reveals to us that they have a significant personal stake in the company.

Component	2023	2022	Proportion (2023)
Salary	₹11m	₹9.6m	38%
Other	₹17m	₹21m	62%
Total Compensation	₹28m	₹31m	100%

On an industry level, around 92% of total compensation represents salary and 8% is other remuneration. It's interesting to note that Aarti Drugs allocates a smaller portion of compensation to salary in comparison to the broader industry. If total compensation is slanted towards non-salary benefits, it indicates that CEO pay is linked to company performance.

A Look at Aarti Drugs Limited's Growth Numbers

Over the last three years, Aarti Drugs Limited has shrunk its earnings per share by 3.8% per year. It achieved revenue growth of 8.9% 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. So given this relatively weak performance, shareholders would probably not want to see high compensation for the CEO. 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 Aarti Drugs Limited Been A Good Investment?

With a three year total loss of 18% for the shareholders, Aarti Drugs Limited would certainly have some dissatisfied shareholders. Therefore, it might be upsetting for shareholders if the CEO were paid generously.

To Conclude...

Not only have shareholders not seen a favorable return on their investment, but the business hasn't performed well either. Few shareholders would be willing to award the CEO with a pay raise. At the upcoming AGM, the board will get the chance to explain the steps it plans to take to improve business performance.

CEO compensation is a crucial aspect to keep your eyes on but investors also need to keep their eyes open for other issues related to business performance. That's why we did some digging and identified 1 warning sign for Aarti Drugs that investors should think about before committing capital to this stock.

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.