Here's Why Shareholders May Want To Be Cautious With Increasing Aurobindo Pharma Limited's (NSE:AUROPHARMA) CEO Pay Packet

By
Simply Wall St
Published
August 19, 2021
NSEI:AUROPHARMA
Source: Shutterstock

CEO Narayanan Govindarajan has done a decent job of delivering relatively good performance at Aurobindo Pharma Limited (NSE:AUROPHARMA) recently. As shareholders go into the upcoming AGM on 26 August 2021, CEO compensation will probably not be their focus, but rather the steps management will take to continue the growth momentum. However, some shareholders will still be cautious of paying the CEO excessively.

See our latest analysis for Aurobindo Pharma

Comparing Aurobindo Pharma Limited's CEO Compensation With the industry

At the time of writing, our data shows that Aurobindo Pharma Limited has a market capitalization of ₹423b, and reported total annual CEO compensation of ₹194m for the year to March 2021. We note that's an increase of 15% above last year. While this analysis focuses on total compensation, it's worth acknowledging that the salary portion is lower, valued at ₹55m.

For comparison, other companies in the same industry with market capitalizations ranging between ₹297b and ₹891b had a median total CEO compensation of ₹128m. Hence, we can conclude that Narayanan Govindarajan is remunerated higher than the industry median.

Component20212020Proportion (2021)
Salary ₹55m ₹55m 28%
Other ₹139m ₹114m 72%
Total Compensation₹194m ₹169m100%

Speaking on an industry level, nearly 97% of total compensation represents salary, while the remainder of 3% is other remuneration. In Aurobindo Pharma's case, non-salary compensation represents a greater slice of total remuneration, 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.

ceo-compensation
NSEI:AUROPHARMA CEO Compensation August 20th 2021

A Look at Aurobindo Pharma Limited's Growth Numbers

Over the past three years, Aurobindo Pharma Limited has seen its earnings per share (EPS) grow by 31% per year. It achieved revenue growth of 4.1% over the last year.

This demonstrates that the company has been improving recently and is good news for the shareholders. It's good to see a bit of revenue growth, as this suggests the business is able to grow sustainably. Historical performance can sometimes be a good indicator on what's coming up next but if you want to peer into the company's future you might be interested in this free visualization of analyst forecasts.

Has Aurobindo Pharma Limited Been A Good Investment?

Aurobindo Pharma Limited has not done too badly by shareholders, with a total return of 7.2%, over three years. It would be nice to see that metric improve in the future. As a result, investors in the company might be reluctant about agreeing to increase CEO pay in the future, before seeing an improvement on their returns.

To Conclude...

The company's decent performance might have made most shareholders happy, possibly making CEO remuneration the least of the concerns to be discussed in the upcoming AGM. However, any decision to raise CEO pay might be met with some objections from the shareholders given that the CEO is already paid higher than the industry average.

While CEO pay is an important factor to be aware of, there are other areas that investors should be mindful of as well. We did our research and spotted 4 warning signs for Aurobindo Pharma that investors should look into moving forward.

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.

If you’re looking to trade Aurobindo Pharma, open an account with the lowest-cost* platform trusted by professionals, Interactive Brokers. Their clients from over 200 countries and territories trade stocks, options, futures, forex, bonds and funds worldwide from a single integrated account. Promoted


Discounted cash flow calculation for every stock

Simply Wall St does a detailed discounted cash flow calculation every 6 hours for every stock on the market, so if you want to find the intrinsic value of any company just search here. It’s FREE.

Make Confident Investment Decisions

Simply Wall St's Editorial Team provides unbiased, factual reporting on global stocks using in-depth fundamental analysis.
Find out more about our editorial guidelines and team.