Onkar Singh Kanwar and his son Neeraj Kanwar, promoters of India’s second-largest tyre company, Apollo Tyres Ltd, have drawn higher salaries in the four years since FY14 even as profitability and revenue declined in some years, data from the company’s annual reports show.

In the year ended 31 March 2018, Neeraj Kanwar, managing director and vice-chairman at Apollo Tyres, saw a 42% increase in his remuneration to 42.75 crore even as net profit fell 34% to nearly 724 crore. To be sure, Apollo posted its highest revenue in four years in FY18 at 14,674 crore.

Apollo Tyres’ chairman Onkar Kanwar had a marginal 0.16% rise in salary last fiscal to nearly 45 crore.

“The increase in remuneration of Mr. Neeraj Kanwar was approved considering the key initiatives taken by him in enhancing the competitiveness of the company’s operations," Apollo said in its annual report for the last fiscal year.

Commercial operations at Apollo’s Hungary plant started during this time, in addition to a 50% increase in capacity at its Chennai plant.

A greenfield investment of 3,800 crore was also set aside to start a factory in Andhra Pradesh.

The promoters took a pay cut in FY17 even as revenue and profitability were in the positive territory but with net profit inching up only marginally, there was a more than 25% jump in their remuneration in FY15 and FY16.

In FY15, when revenue fell 4.4% and net profit fell 2.7%, Onkar Kanwar took home 41.7 crore, an increase of 37%, while Neeraj Kanwar’s pay nearly doubled to 27.3 crore. For the next fiscal, the chairman’s pay rose about 26% while the managing director took home a 27% increase in salary.

Neeraj Kanwar’s compensation has come under scrutiny since Apollo’s annual general meeting on 12 September, when minority shareholders rejected his re-appointment as managing director amid claims of high compensation and moderating financial performance.

Analysts said an executive-promoter’s salary should be as high as a professional’s compensation in a similar role.

However, other large tyre companies in India are run by promoters as well.

Compensation of the promoters of Apollo are the highest in the industry. K. M. Mammen and Arun Mammen of MRF Ltd, India’s largest tyre company, took home 26.19 crore and 21.13 crore respectively in the last fiscal year.

Remuneration of Raghupati Singhania, chairman and managing director, at JK Tyres Ltd was 5.83 crore for the period, while managing director Anant Vardhan Goenka of CEAT Ltd took home 3.97 crore in the last fiscal year. Apollo justifies higher salaries because of its vast international operations.

To be sure, Apollo’s employee remuneration and dividend have not declined over the years.

Median employee remuneration grew between 8% and 17%, while dividend rose to 3 per share from 0.75. And analysts said Apollo has performed well over the past four years and has managed the risks of a volatile market.

“The board of directors, in its meeting held on October 1, 2018 has reiterated its unanimous approval on Neeraj Kanwar’s leadership. The board has full confidence in Neeraj Kanwar to continue Apollo’s sustainable development and expansion," said a company spokesperson in an e-mailed response to Mint queries.

“The board will now seek shareholder guidance and independent counsel, on a compensation level commensurate with the position. Once this process is complete, it will re-nominate Neeraj Kanwar to be re-appointed as Managing Director, effective May 28, 2019", the spokesperson added.

“Compared to their competitors, Apollo has done well over the past five-six years. They diversified into the South African and European regions at the right time and managed the risks of a volatile market efficiently," said Mohammad Shaukat Ali, an analyst with Quantum Securities Ltd.

Terming the firm “professional" and “proactive", Shaukat said the company has performed better under Neeraj Kanwar as Apollo has managed its international expansion well, without compromising on Indian operations.

“In the domestic market, market share has risen as Apollo diversified into manufacturing radials and two-wheeler tyres to offset dumping of low-cost tyres in other sectors", he added.

Shriram Subramanian, founder and managing director of proxy advisory firm InGovern Research Services Pvt. Ltd, believes promoters should be compensated in terms of dividends to ensure equity among all shareholders.

“The stand is clear, Apollo’s minority shareholders are unhappy. This shows that promoters should take compensation which is equivalent to that of the highest professional compensation in a similar role," he said, adding promoters should share wealth equally with all shareholders as they are equal shareholders as well.

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