Increases to CEO Compensation Might Be Put On Hold For Now at Hikal Limited (NSE:HIKAL)

The share price of Hikal Limited (NSE:HIKAL) has increased significantly over the past few years. However, the earnings growth has not kept up with the share price momentum, suggesting that some other factors may be driving the price direction. These concerns will be at the front of shareholders' minds as they go into the AGM coming up on 22 September 2022. One way that shareholders can influence managerial decisions is through voting on CEO and executive remuneration packages, which studies show could impact company performance. 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.

See our latest analysis for Hikal

How Does Total Compensation For Sameer Hiremath Compare With Other Companies In The Industry?

At the time of writing, our data shows that Hikal Limited has a market capitalization of ₹46b, and reported total annual CEO compensation of ₹59m for the year to March 2022. We note that's an increase of 29% above last year. Notably, the salary which is ₹36.0m, represents most of the total compensation being paid.

For comparison, other companies in the same industry with market capitalizations ranging between ₹16b and ₹64b had a median total CEO compensation of ₹31m. Hence, we can conclude that Sameer Hiremath is remunerated higher than the industry median. Furthermore, Sameer Hiremath directly owns ₹216m worth of shares in the company, implying that they are deeply invested in the company's success.

Component	2022	2021	Proportion (2022)
Salary	₹36m	₹25m	61%
Other	₹23m	₹21m	39%
Total Compensation	₹59m	₹46m	100%

Talking in terms of the industry, salary represented approximately 97% of total compensation out of all the companies we analyzed, while other remuneration made up 3% of the pie. Hikal pays a modest slice of remuneration through salary, as compared to the broader industry. If total compensation veers towards salary, it suggests that the variable portion - which is generally tied to performance, is lower.

A Look at Hikal Limited's Growth Numbers

Hikal Limited has reduced its earnings per share by 3.5% a year over the last three years. It achieved revenue growth of 2.2% over the last year.

The decline in EPS is a bit concerning. The fairly low revenue growth fails to impress given that the EPS is down. 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 Hikal Limited Been A Good Investment?

Boasting a total shareholder return of 152% over three years, Hikal Limited has done well by shareholders. 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...

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. In the upcoming AGM, shareholders will get the opportunity to discuss any concerns with the board, including those related to CEO remuneration and assess if the board's plan will likely improve performance in the future.

While it is important to pay attention to CEO remuneration, investors should also consider other elements of the business. We've identified 3 warning signs for Hikal 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.