This Is The Reason Why We Think Sun Pharmaceutical Industries Limited's (NSE:SUNPHARMA) CEO Might Be Underpaid

Key Insights

• Sun Pharmaceutical Industries' Annual General Meeting to take place on 5th of August
• CEO Dilip Shanghvi's total compensation includes salary of ₹45.7m
• The overall pay is 67% below the industry average
• Sun Pharmaceutical Industries' EPS grew by 49% over the past three years while total shareholder return over the past three years was 130%

Shareholders will be pleased by the impressive results for Sun Pharmaceutical Industries Limited (NSE:SUNPHARMA) recently and CEO Dilip Shanghvi has played a key role. At the upcoming AGM on 5th of August, they will get a chance to hear the board review the company results, discuss future strategy and cast their vote on any resolutions such as executive remuneration. Here we will show why we think CEO compensation is appropriate and discuss the case for a pay rise.

Check out our latest analysis for Sun Pharmaceutical Industries

How Does Total Compensation For Dilip Shanghvi Compare With Other Companies In The Industry?

Our data indicates that Sun Pharmaceutical Industries Limited has a market capitalization of ₹4.1t, and total annual CEO compensation was reported as ₹61m for the year to March 2024. We note that's an increase of 11% above last year. Notably, the salary which is ₹45.7m, represents most of the total compensation being paid.

For comparison, other companies in the Indian Pharmaceuticals industry with market capitalizations above ₹670b, reported a median total CEO compensation of ₹186m. This suggests that Dilip Shanghvi is paid below the industry median. Furthermore, Dilip Shanghvi directly owns ₹397b worth of shares in the company, implying that they are deeply invested in the company's success.

Component	2024	2023	Proportion (2024)
Salary	₹46m	₹41m	76%
Other	₹15m	₹14m	24%
Total Compensation	₹61m	₹55m	100%

Speaking on an industry level, nearly 98% of total compensation represents salary, while the remainder of 2% is other remuneration. Sun Pharmaceutical Industries pays a modest slice of remuneration through salary, as compared to the broader industry. If salary dominates total compensation, it suggests that CEO compensation is leaning less towards the variable component, which is usually linked with performance.

Sun Pharmaceutical Industries Limited's Growth

Sun Pharmaceutical Industries Limited has seen its earnings per share (EPS) increase by 49% a year over the past three years. In the last year, its revenue is up 11%.

This demonstrates that the company has been improving recently and is good news for the shareholders. It's a real positive to see this sort of revenue growth in a single year. That suggests a healthy and growing business. 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 Sun Pharmaceutical Industries Limited Been A Good Investment?

Boasting a total shareholder return of 130% over three years, Sun Pharmaceutical Industries Limited has done well by shareholders. As a result, some may believe the CEO should be paid more than is normal for companies of similar size.

In Summary...

The company's solid performance might have made most shareholders happy, possibly making CEO remuneration the least of the matters to be discussed in the AGM. Instead, investors might be more interested in discussions that would help manage their longer-term growth expectations such as company business strategies and future growth potential.

CEO compensation can have a massive impact on performance, but it's just one element. That's why we did some digging and identified 1 warning sign for Sun Pharmaceutical Industries that you should be aware of before investing.

Important note: Sun Pharmaceutical Industries 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.

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.

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