Shanghvi’s salary was around Rs 3 crore in FY18
Dilip Shanghvi, promoter and Managing Director of Sun Pharmaceutical Industries (Sun Pharma), forewent 99 percent of his FY19 salary as India’s largest drug maker optimised operational costs due to pricing pressure and moderating growth in US.
Shanghvi took home Re 1 as salary in FY19 from around Rs 3 crore in FY18. His brother-in-law and co-promoter Sudhir Valia too didn’t take any salary in FY19. He too drew more or less a similar salary as Shanghvi in FY18.
Valia has stepped down from the position of Whole-time Director of the company in May. However, he will continue to remain as a non-promoter, non-executive and non-independent director in the company.
While the salaries of employees other than the managerial personnel in the financial year ending March 31 rose around 9.77 percent, remuneration of managerial personnel dropped a steep 66.44 percent.
A spokesperson for Sun Pharma declined to comment on this story.
After a steep year-on-year slide in FY18 revenue, Sun Pharma is back to the growth trajectory, with revenue growing 10 percent to Rs 28,700 crore in FY19. Operational performance in its largest market -- US -- increased 22 percent to Rs 10,700 crore and accounted for 37 percent of FY19 revenue.
Sun Pharma has a provision to offer 10 percent of its net profit, up to a maximum cap of Rs 50 crore, as commission to Shanghvi and Valia, but the duo haven’t exercised the same.
The pharma major's net profit grew 27 percent YoY to Rs 2,665.4 crore in FY19, but that same came against a low base. After consistent YoY growth from FY11 to FY15, its financial performance has been wobbly in the last four years. Pricing pressure in the US market, regulatory problems at its Halol facility, rising R&D spends due to its bet on specialty drugs and issues related to company’s certain governance practices have taken some sheen away from the world’s fifth largest generic pharmaceutical company, which is known for delivering market beating results year after year.
With regulatory issues resolved at Halol, specialty drugs coming on board and pricing pressure easing to some extent, Shanghvi said in the company’s latest annual report that he expects a better FY20.
“We expect our consolidated revenues to grow by low-to-mid teens, while R&D investments are estimated at 8-9 percent of sales,” Shanghvi said.Other promoter executivesBut it’s not Sun Pharma alone, earlier Moneycontrol had reported about Lupin’s Managing Director Nilesh Gupta and his sister and CEO Vinita Gupta's taking over 80 percent in salary cuts.
In Lupin's case too, the remuneration of key managerial personnel including its MD, whole time directors and independent directors declined 43 percent.
The salary of Samir Mehta, Executive Chairman of Torrent Pharmaceuticals, remained unchanged at Rs 15 crore.
Bucking the trend was Cipla’s Executive Vice-Chairperson Samina Vaziralli, whose pay surged 12.5 percent in FY19 to Rs 6.41 crore.
On the contrary, GV Prasad, Co-chairman & CEO, and Satish Reddy, Chairman of Dr Reddy’s Laboratories took a hike of 59 percent and 48 percent in FY19, respectively, ending the pay cuts they took in previous years. Prasad earned Rs 12.4 crore and Reddy Rs 8.6 crore in FY19, respectively.
It must be noted that promoter-executives receive dividends as they too are shareholders in the company. But analysts call this leading by example, when things aren't going great for the sector.
"That is leaders being financially prudent and conscientious keeping in mind the current situation in the sector," Rituparna Chakraborty, co-founder and Executive Vice- President, TeamLease Services, said."However, one needs to check if the variable component in the compensation has gone up or not. If they are taking no hike, this is a signal that there are leading from the front," Chakraborty added.Get access to India's fastest growing financial subscriptions service Moneycontrol Pro for as little as Rs 599 for first year. Use the code "GETPRO". Moneycontrol Pro offers you all the information you need for wealth creation including actionable investment ideas, independent research and insights & analysis For more information, check out the Moneycontrol website or mobile app.