Should Shareholders Reconsider SMS Lifesciences India Limited's (NSE:SMSLIFE) CEO Compensation Package?

Key Insights

• SMS Lifesciences India to hold its Annual General Meeting on 29th of September
• CEO Talluri Veera Venkata Murthy's total compensation includes salary of ₹19.8m
• The overall pay is 298% above the industry average
• SMS Lifesciences India's EPS declined by 5.7% over the past three years while total shareholder loss over the past three years was 18%

The results at SMS Lifesciences India Limited (NSE:SMSLIFE) have been quite disappointing recently and CEO Talluri Veera Venkata Murthy bears some responsibility for this. At the upcoming AGM on 29th of September, shareholders can hear from the board including their plans for turning around performance. They will also get a chance to influence managerial decision-making through voting on resolutions such as executive remuneration, which may impact firm value in the future. From our analysis, we think CEO compensation may need a review in light of the recent performance.

Check out our latest analysis for SMS Lifesciences India

How Does Total Compensation For Talluri Veera Venkata Murthy Compare With Other Companies In The Industry?

At the time of writing, our data shows that SMS Lifesciences India Limited has a market capitalization of ₹1.5b, and reported total annual CEO compensation of ₹20m for the year to March 2023. That's mostly flat as compared to the prior year's compensation. In particular, the salary of ₹19.8m, makes up a huge portion of the total compensation being paid to the CEO.

On comparing similar-sized companies in the Indian Pharmaceuticals industry with market capitalizations below ₹17b, we found that the median total CEO compensation was ₹5.1m. This suggests that Talluri Veera Venkata Murthy is paid more than the median for the industry. What's more, Talluri Veera Venkata Murthy holds ₹369m worth of shares in the company in their own name, indicating that they have a lot of skin in the game.

Component	2023	2022	Proportion (2023)
Salary	₹20m	₹18m	98%
Other	₹458k	₹2.1m	2%
Total Compensation	₹20m	₹20m	100%

Talking in terms of the industry, salary represented approximately 96% of total compensation out of all the companies we analyzed, while other remuneration made up 4% of the pie. SMS Lifesciences India pays a high salary, concentrating more on this aspect of compensation in comparison to non-salary pay. If salary dominates total compensation, it suggests that CEO compensation is leaning less towards the variable component, which is usually linked with performance.

A Look at SMS Lifesciences India Limited's Growth Numbers

Over the last three years, SMS Lifesciences India Limited has shrunk its earnings per share by 5.7% per year. In the last year, its revenue is down 13%.

Few shareholders would be pleased to read that EPS have declined. This is compounded by the fact revenue is actually down on last year. It's hard to argue the company is firing on all cylinders, so shareholders might be averse to high CEO remuneration. We don't have analyst forecasts, but you could get a better understanding of its growth by checking out this more detailed historical graph of earnings, revenue and cash flow.

Has SMS Lifesciences India Limited Been A Good Investment?

Given the total shareholder loss of 18% over three years, many shareholders in SMS Lifesciences India Limited are probably rather dissatisfied, to say the least. Therefore, it might be upsetting for shareholders if the CEO were paid generously.

To Conclude...

SMS Lifesciences India pays its CEO a majority of compensation through a salary. Given that shareholders haven't seen any positive returns on their investment, not to mention the lack of earnings growth, this may suggest that few of them would be willing to award the CEO with a pay rise. At the upcoming AGM, management will get a chance to explain how they plan to get the business back on track and address the concerns from investors.

We can learn a lot about a company by studying its CEO compensation trends, along with looking at other aspects of the business. In our study, we found 4 warning signs for SMS Lifesciences India you should be aware of, and 1 of them makes us a bit uncomfortable.

Switching gears from SMS Lifesciences India, if you're hunting for a pristine balance sheet and premium returns, this free list of high return, low debt companies is a great place to look.

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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.