Shareholders May Not Be So Generous With Shilpa Medicare Limited's (NSE:SHILPAMED) CEO Compensation And Here's Why

Despite Shilpa Medicare Limited's (NSE:SHILPAMED) share price growing positively in the past few years, the per-share earnings growth has not grown to investors' expectations, suggesting that there could be other factors at play driving the share price. Some of these issues will occupy shareholders' minds as the AGM rolls around on 28 September 2021. They will be able to influence managerial decisions through the exercise of their voting power on resolutions, such as CEO remuneration and other matters, which may influence future company prospects. 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.

Check out our latest analysis for Shilpa Medicare

How Does Total Compensation For Vishnukanth Bhutada Compare With Other Companies In The Industry?

According to our data, Shilpa Medicare Limited has a market capitalization of ₹45b, and paid its CEO total annual compensation worth ₹97m over the year to March 2021. That's mostly flat as compared to the prior year's compensation. While this analysis focuses on total compensation, it's worth acknowledging that the salary portion is lower, valued at ₹16m.

For comparison, other companies in the same industry with market capitalizations ranging between ₹29b and ₹118b had a median total CEO compensation of ₹35m. Hence, we can conclude that Vishnukanth Bhutada is remunerated higher than the industry median. Furthermore, Vishnukanth Bhutada directly owns ₹4.3b worth of shares in the company, implying that they are deeply invested in the company's success.

Component	2021	2020	Proportion (2021)
Salary	₹16m	₹9.9m	16%
Other	₹81m	₹89m	84%
Total Compensation	₹97m	₹99m	100%

Speaking on an industry level, nearly 95% of total compensation represents salary, while the remainder of 5% is other remuneration. It's interesting to note that Shilpa Medicare allocates a smaller portion of compensation to salary 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.

Shilpa Medicare Limited's Growth

Shilpa Medicare Limited has reduced its earnings per share by 19% a year over the last three years. In the last year, its revenue is down 5.6%.

Few shareholders would be pleased to read that EPS have declined. And the fact that revenue is down year on year arguably paints an ugly picture. These factors suggest that the business performance wouldn't really justify a high pay packet 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 Shilpa Medicare Limited Been A Good Investment?

Shilpa Medicare Limited has generated a total shareholder return of 24% over three years, so most shareholders would be reasonably content. But they probably wouldn't be so happy as to think the CEO should be paid more than is normal, for companies around this size.

In Summary...

While it's true that shareholders have owned decent returns, it's hard to overlook the lack of earnings growth and this makes us question whether these returns will continue. 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.

It is always advisable to analyse CEO pay, along with performing a thorough analysis of the company's key performance areas. We did our research and identified 2 warning signs (and 1 which shouldn't be ignored) in Shilpa Medicare we think you should know about.

Important note: Shilpa Medicare 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.

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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.
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