Is Dr. Reddy's Laboratories Limited's (NSE:DRREDDY) CEO Overpaid Relative To Its Peers?
Gunupati Prasad became the CEO of Dr. Reddy's Laboratories Limited (NSE:DRREDDY) in 2001. This report will, first, examine the CEO compensation levels in comparison to CEO compensation at companies of similar size. Then we'll look at a snap shot of the business growth. Third, we'll reflect on the total return to shareholders over three years, as a second measure of business performance. The aim of all this is to consider the appropriateness of CEO pay levels.
See our latest analysis for Dr. Reddy's Laboratories
How Does Gunupati Prasad's Compensation Compare With Similar Sized Companies?
Our data indicates that Dr. Reddy's Laboratories Limited is worth ₹469b, and total annual CEO compensation is ₹77m. (This number is for the twelve months until March 2018). While we always look at total compensation first, we note that the salary component is less, at ₹19m. When we examined a selection of companies with market caps ranging from ₹278b to ₹833b, we found the median CEO total compensation was ₹63m.
So Gunupati Prasad receives a similar amount to the median CEO pay, amongst the companies we looked at. Although this fact alone doesn't tell us a great deal, it becomes more relevant when considered against the business performance.
You can see, below, how CEO compensation at Dr. Reddy's Laboratories has changed over time.
Is Dr. Reddy's Laboratories Limited Growing?
Over the last three years Dr. Reddy's Laboratories Limited has shrunk its earnings per share by an average of 9.7% per year (measured with a line of best fit). In the last year, its revenue is up 5.1%.
Sadly for shareholders, earnings per share are actually down, over three years. The fairly low revenue growth fails to impress given that the earnings per share is down. So given this relatively weak performance, shareholders would probably not want to see high compensation for the CEO. You might want to check this free visual report on analyst forecasts for future earnings.
Has Dr. Reddy's Laboratories Limited Been A Good Investment?
Since shareholders would have lost about 8.6% over three years, some Dr. Reddy's Laboratories Limited shareholders would surely be feeling negative emotions. It therefore might be upsetting for shareholders if the CEO were paid generously.
In Summary...
Gunupati Prasad is paid around what is normal the leaders of comparable size companies.
The company isn't growing EPS, and shareholder returns have been disappointing. Most would consider it prudent for the company to hold off any CEO pay rise until performance improves. Whatever your view on compensation, you might want to check if insiders are buying or selling Dr. Reddy's Laboratories shares (free trial).
Important note: Dr. Reddy's Laboratories may not be the best stock to buy. You might find something better in this list of interesting companies with high ROE and low debt.
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If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.
