Embattled Sun Pharma's Dilip Shanghvi, with Rs 1 salary, ranks among lowest-paid pharma CEOs

Indian rupees
Sun Pharma Managing Director Dilip Shanghvi's 2018 pay took a 99% blow in the wake of management misstep allegations. (Pixabay)

The helmsman of Indian’s largest drugmaker just landed among the poorest-paid of his peers—and significantly behind his firm’s median-paid employee.

Sun Pharma’s managing director, Dilip Shanghvi, took a huge 99% pay cut for the fiscal year ended March, despite the firm’s sales and net profit gains. The plunge came as Sun’s leadership was recently embroiled in allegations of dubious corporate governance practices.

Shanghvi wasn't the only Indian drug chief to suffer a pay cut; Lupin and Cipla's top execs saw their pay decline, too. But Aurobindo and Dr. Reddy's chief executives scored pay increases—as did Murali Divi, chairman and managing director of Divi's Laboratories, whose 48% hike to about $8.2 million made him the highest-paid exec in India's pharma industry.

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During the fiscal year, Sun's Shanghvi collected a symbolic salary of Rs 1, worth less than 1.5 U.S. cents, Sun Pharma’s annual report (PDF) shows. Other than Rs 262,800 ($3,690) in perks—including travel and medical expenses—he collected nothing. He and his executive team won zero equity grants or extra commissions, a practice that’s not uncommon among Indian firms.

His entire pay package marked a 99% decline and was only about half that of the median compensation Sun paid its employees. But it’d be wrong to think Shanghvi worked a year for almost nothing. At the end of the fiscal year, Shanghvi owned 230.3 million of Sun shares, or 9.6% of the company. Therefore, he’s entitled to Rs 63.3 crore ($8.9 million) in dividends, pending shareholder approval of the board’s Rs. 2.75 per share dividend payment plan.

Besides the top- and bottom-line increases, Sun made some operational progress—even if it did lose ground again this year. In June 2018, Sun finally won FDA clearance for its long-troubled Halol facility that supplies the key U.S. market. That same plant was recently hit with a new Form 483, though.

RELATED: Sun Pharma answers complaints with revamp that cuts ties with director's firm

And it expanded its focus, too. Amid continuous generics pricing pressure in the U.S., Sun has joined its Indian peers in shifting to developing innovative products. To that end, it won an FDA nod for IL-23 inhibitor Ilumya, a direct competitor to Johnson & Johnson’s Tremfya, and launched it in October. The Halol plant also helped Sun win approval for intraocular pressure drug Xelpros.

But all those positives couldn't offset whistleblower complaints of alleged financial misconduct, which sent Sun’s stock to a six-year low in January.

Shanghvi’s brother-in-law and then-full-time director Sudhir Valia, a protagonist in the brouhaha, also saw his 2018-19 remuneration decrease by 99.7% to merely Rs 79,201. Valia stepped out of the full-time role to non-executive director in late May.

At the same time, Sun Pharma’s board decided to set up a corporate governance and ethics committee to address the allegations.

Now that Shanghvi is out of the highest-paid Indian pharma CEO race, who took the spot? That title now belongs to Murali Divi, chairman and managing director of Divi’s Laboratories, according to local news agency PTI.

RELATED: 'Old guard' generics players yield U.S. lead to Indian up-and-comers: analyst

In the fiscal year that ended in March, Divi’s total pay package swelled 46%—the same growth rate his firm’s EBIDTA posted—and reached Rs 58.8 crore ($8.2 million), mainly thanks to Rs 57.6 crore in commission. That pushed up Divi’s CEO-to-median employee pay ratio to an astronomical 1,462:1. The Indian company’s total revenue grew 28% in the previous fiscal year, to Rs 5,036 crore ($706 million), after a decline prior to that.

Umang Vohra, managing director and CEO of generics maker Cipla, collected 20% less in the previous fiscal year compared to the prior year. Of his Rs 15.0 crore package, Rs 6.3 crore came from salary and nearly Rs 3.0 crore from stock options.

Aurobindo’s managing director, N. Govindarajan, racked up Rs 14.6 crore in pay, the company’s annual report (PDF) shows. During the fiscal year, Aurobindo inked a deal to buy Novartis Sandoz’s U.S. dermatology business and a portfolio of generics for $1 billion.

RELATED: Another day, another Form 483 for a Dr. Reddy's plant

G V Prasad, Dr. Reddy’s Laboratories' mastermind, took home Rs 12.4 crore in FY 2018-19, up from Rs 7.8 crore, despite repeated manufacturing violations the FDA had uncovered. He handed the CEO title to former chief operating officer Erez Israeli on Aug.1 but is keeping the co-chairman and managing director hats.

Lupin’s brother-sister top managers, Nilesh Gupta (managing director) and Vinita Gupta (CEO) also suffered sharp declines in their pay numbers. Nilesh’s pay plunged to Rs 1.8 crore from Rs 9.1 crore the previous fiscal, and Vinita’s slumped to Rs 1.5 crore from Rs 17.2 crore.

According to Lupin’s annual report (PDF), the pair opted out of receiving any remuneration for 12 months starting from Aug. 8, 2018. And both of them handed back some performance-based incentives that were given to them in FY 2017-18. Specifically, Lupin clawed back Rs 3.4 crore from Vinita and Rs 1.3 crore from Nilesh.

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