We Think Hikal Limited's (NSE:HIKAL) CEO Compensation Package Needs To Be Put Under A Microscope

Key Insights

• Hikal's Annual General Meeting to take place on 17th of September
• Salary of ₹44.9m is part of CEO Sameer Hiremath's total remuneration
• The overall pay is 64% above the industry average
• Over the past three years, Hikal's EPS fell by 26% and over the past three years, the total loss to shareholders 42%

Shareholders will probably not be too impressed with the underwhelming results at Hikal Limited (NSE:HIKAL) recently. At the upcoming AGM on 17th of September, shareholders can hear from the board including their plans for turning around performance. It would also be an opportunity for shareholders to influence management through voting on company resolutions such as executive remuneration, which could impact the firm significantly. We present the case why we think CEO compensation is out of sync with company performance.

See our latest analysis for Hikal

Comparing Hikal Limited's CEO Compensation With The Industry

According to our data, Hikal Limited has a market capitalization of ₹46b, and paid its CEO total annual compensation worth ₹48m over the year to March 2024. We note that's an increase of 14% above last year. We note that the salary portion, which stands at ₹44.9m constitutes the majority of total compensation received by the CEO.

For comparison, other companies in the Indian Pharmaceuticals industry with market capitalizations ranging between ₹17b and ₹67b had a median total CEO compensation of ₹29m. Accordingly, our analysis reveals that Hikal Limited pays Sameer Hiremath north of the industry median. What's more, Sameer Hiremath holds ₹216m worth of shares in the company in their own name, indicating that they have a lot of skin in the game.

Component	2024	2023	Proportion (2024)
Salary	₹45m	₹42m	94%
Other	₹3.0m	-	6%
Total Compensation	₹48m	₹42m	100%

Talking in terms of the industry, salary represented approximately 98% of total compensation out of all the companies we analyzed, while other remuneration made up 2% of the pie. Hikal is largely mirroring the industry average when it comes to the share a salary enjoys in overall compensation. If total compensation veers towards salary, it suggests that the variable portion - which is generally tied to performance, is lower.

Hikal Limited's Growth

Hikal Limited has reduced its earnings per share by 26% a year over the last three years. Its revenue is down 11% over the previous year.

The decline in EPS is a bit concerning. And the impression is worse when you consider revenue is down year-on-year. 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 Hikal Limited Been A Good Investment?

With a total shareholder return of -42% over three years, Hikal Limited shareholders would by and large be disappointed. 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 pay is simply one of the many factors that need to be considered while examining business performance. We identified 2 warning signs for Hikal (1 is concerning!) that you should be aware of before investing here.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.