SMS Pharmaceuticals Limited's (NSE:SMSPHARMA) CEO Compensation Is Looking A Bit Stretched At The Moment

Key Insights

• SMS Pharmaceuticals will host its Annual General Meeting on 30th of September
• Total pay for CEO Ramesh Potluri includes ₹30.0m salary
• Total compensation is 502% above industry average
• Over the past three years, SMS Pharmaceuticals' EPS fell by 21% and over the past three years, the total shareholder return was 40%

Under the guidance of CEO Ramesh Potluri, SMS Pharmaceuticals Limited (NSE:SMSPHARMA) has performed reasonably well recently. As shareholders go into the upcoming AGM on 30th of September, CEO compensation will probably not be their focus, but rather the steps management will take to continue the growth momentum. However, some shareholders may still be hesitant of being overly generous with CEO compensation.

View our latest analysis for SMS Pharmaceuticals

Comparing SMS Pharmaceuticals Limited's CEO Compensation With The Industry

At the time of writing, our data shows that SMS Pharmaceuticals Limited has a market capitalization of ₹10b, and reported total annual CEO compensation of ₹31m for the year to March 2023. Notably, that's a decrease of 19% over the year before. In particular, the salary of ₹30.0m, 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 Ramesh Potluri is paid more than the median for the industry. Furthermore, Ramesh Potluri directly owns ₹3.7b worth of shares in the company, implying that they are deeply invested in the company's success.

Component	2023	2022	Proportion (2023)
Salary	₹30m	₹26m	98%
Other	₹745k	₹12m	2%
Total Compensation	₹31m	₹38m	100%

On an industry level, around 96% of total compensation represents salary and 4% is other remuneration. SMS Pharmaceuticals pays a high salary, concentrating more on this aspect of compensation in comparison to non-salary pay. If total compensation veers towards salary, it suggests that the variable portion - which is generally tied to performance, is lower.

SMS Pharmaceuticals Limited's Growth

Over the last three years, SMS Pharmaceuticals Limited has shrunk its earnings per share by 21% per year. Its revenue is up 39% over the last year.

The decrease in EPS could be a concern for some investors. But in contrast the revenue growth is strong, suggesting future potential for EPS growth. These two metrics are moving in different directions, so while it's hard to be confident judging performance, we think the stock is worth watching. Although we don't have analyst forecasts, you might want to assess this data-rich visualization of earnings, revenue and cash flow.

Has SMS Pharmaceuticals Limited Been A Good Investment?

Boasting a total shareholder return of 40% over three years, SMS 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.

In Summary...

Ramesh receives almost all of their compensation through a salary. Although the company has performed relatively well, we still think there are some areas that could be improved. We still think that some shareholders will be hesitant of increasing CEO pay until EPS growth improves, since they are already paid higher than the industry.

CEO compensation is an important area to keep your eyes on, but we've also need to pay attention to other attributes of the company. We did our research and identified 3 warning signs (and 2 which are concerning) in SMS Pharmaceuticals we think you should know about.

Switching gears from SMS Pharmaceuticals, 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.