This article will reflect on the compensation paid to Varinder Gupta who has served as CEO of IOL Chemicals and Pharmaceuticals Limited (NSE:IOLCP) since 2007. This analysis will also assess whether IOL Chemicals and Pharmaceuticals pays its CEO appropriately, considering recent earnings growth and total shareholder returns.
Comparing IOL Chemicals and Pharmaceuticals Limited's CEO Compensation With the industry
At the time of writing, our data shows that IOL Chemicals and Pharmaceuticals Limited has a market capitalization of ₹43b, and reported total annual CEO compensation of ₹50m for the year to March 2020. Notably, that's an increase of 35% over the year before. While this analysis focuses on total compensation, it's worth acknowledging that the salary portion is lower, valued at ₹19m.
On examining similar-sized companies in the industry with market capitalizations between ₹15b and ₹58b, we discovered that the median CEO total compensation of that group was ₹20m. Hence, we can conclude that Varinder Gupta is remunerated higher than the industry median. Furthermore, Varinder Gupta directly owns ₹860m worth of shares in the company, implying that they are deeply invested in the company's success.
On an industry level, roughly 99% of total compensation represents salary and 1.2% is other remuneration. IOL Chemicals and Pharmaceuticals sets aside a smaller share of compensation for salary, in comparison to the overall industry. If total compensation is slanted towards non-salary benefits, it indicates that CEO pay is linked to company performance.
A Look at IOL Chemicals and Pharmaceuticals Limited's Growth Numbers
IOL Chemicals and Pharmaceuticals Limited has seen its earnings per share (EPS) increase by 252% a year over the past three years. It achieved revenue growth of 5.6% over the last year.
Overall this is a positive result for shareholders, showing that the company has improved in recent years. It's good to see a bit of revenue growth, as this suggests the business is able to grow sustainably. While we don't have analyst forecasts for the company, shareholders might want to examine this detailed historical graph of earnings, revenue and cash flow.
Has IOL Chemicals and Pharmaceuticals Limited Been A Good Investment?
Boasting a total shareholder return of 797% over three years, IOL Chemicals and Pharmaceuticals 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.
As we noted earlier, IOL Chemicals and Pharmaceuticals pays its CEO higher than the norm for similar-sized companies belonging to the same industry. But EPS growth and shareholder returns have been top-notch for the past three years. So, in acknowledgment of the overall excellent performance, we believe CEO compensation is appropriate. And given most shareholders are probably very happy with recent returns, they might even think that Varinder deserves a raise!
CEO pay is simply one of the many factors that need to be considered while examining business performance. We did our research and identified 3 warning signs (and 1 which makes us a bit uncomfortable) in IOL Chemicals and Pharmaceuticals we think you should know about.
Important note: IOL Chemicals and Pharmaceuticals is an exciting stock, but we understand investors may be looking for an unencumbered balance sheet and blockbuster returns. You might find something better in this list of interesting companies with high ROE and low debt.
If you decide to trade IOL Chemicals and Pharmaceuticals, use the lowest-cost* platform that is rated #1 Overall by Barron’s, Interactive Brokers. Trade stocks, options, futures, forex, bonds and funds on 135 markets, all from a single integrated account.
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.
*Interactive Brokers Rated Lowest Cost Broker by StockBrokers.com Annual Online Review 2020
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.