Here's Why Shareholders Will Not Be Complaining About Ajanta Pharma Limited's (NSE:AJANTPHARM) CEO Pay Packet

The performance at Ajanta Pharma Limited (NSE:AJANTPHARM) has been quite strong recently and CEO Yogesh Agrawal has played a role in it. The pleasing results would be something shareholders would keep in mind at the upcoming AGM on 14 July 2021. This would also be a chance for them to hear the board review the financial results, discuss future company strategy and vote on any resolutions such as executive remuneration. In light of the great performance, we discuss the case why we think CEO compensation is not excessive.

See our latest analysis for Ajanta Pharma

Comparing Ajanta Pharma Limited's CEO Compensation With the industry

At the time of writing, our data shows that Ajanta Pharma Limited has a market capitalization of ₹187b, and reported total annual CEO compensation of ₹128m for the year to March 2021. Notably, that's an increase of 20% over the year before. In particular, the salary of ₹75.2m, makes up a fairly large portion of the total compensation being paid to the CEO.

For comparison, other companies in the same industry with market capitalizations ranging between ₹149b and ₹478b had a median total CEO compensation of ₹115m. So it looks like Ajanta Pharma compensates Yogesh Agrawal in line with the median for the industry. Furthermore, Yogesh Agrawal directly owns ₹27b worth of shares in the company, implying that they are deeply invested in the company's success.

Component	2021	2020	Proportion (2021)
Salary	₹75m	₹66m	59%
Other	₹53m	₹41m	41%
Total Compensation	₹128m	₹107m	100%

Speaking on an industry level, nearly 98% of total compensation represents salary, while the remainder of 2% is other remuneration. In Ajanta Pharma's case, non-salary compensation represents a greater slice of total remuneration, in comparison to the broader industry. If total compensation veers towards salary, it suggests that the variable portion - which is generally tied to performance, is lower.

Ajanta Pharma Limited's Growth

Ajanta Pharma Limited has seen its earnings per share (EPS) increase by 12% a year over the past three years. In the last year, its revenue is up 12%.

Shareholders would be glad to know that the company has improved itself over the last few years. It's a real positive to see this sort of revenue growth in a single year. That suggests a healthy and growing business. 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 Ajanta Pharma Limited Been A Good Investment?

Most shareholders would probably be pleased with Ajanta Pharma Limited for providing a total return of 114% 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.

To Conclude...

The company's solid performance might have made most shareholders happy, possibly making CEO remuneration the least of the matters to be discussed in the AGM. In fact, strategic decisions that could impact the future of the business might be a far more interesting topic for investors as it would help them set their longer-term expectations.

CEO compensation can have a massive impact on performance, but it's just one element. We've identified 2 warning signs for Ajanta Pharma that investors should be aware of in a dynamic business environment.

Switching gears from Ajanta Pharma, if you're hunting for a pristine balance sheet and premium returns, this free list of high return, low debt companies is a great place to look.

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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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