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Business News/ Companies / News/  Executives’ salaries rise even as profits dip

Executives’ salaries rise even as profits dip

In 2012-13, average salaries rose 25.28% while average net profit fell 1.6%, according to annual reports

In 2012-13, the average salary of the directors was Rs65.6 lakh, an increase of 25.28% from Rs52.4 lakh in the previous year. Photo: Pradeep Gaur/Mint (Pradeep Gaur/Mint)Premium
In 2012-13, the average salary of the directors was Rs65.6 lakh, an increase of 25.28% from Rs52.4 lakh in the previous year. Photo: Pradeep Gaur/Mint
(Pradeep Gaur/Mint)

Mumbai: In 2012-13, the average debt of a truncated universe of BSE 500 companies rose 16.75%, and their net profits declined 1.6%, but the average salary of their directors, including top executives, increased by more than a fourth for a year in which the Indian economy went into a deep downturn.

The list of the top 500 companies by market capitalization excludes banks, financial institutions and 33 firms that are yet to publish their annual reports.

In 2012-13, the average salary of the directors of the universe of companies considered for this study—which is representative of Indian industry (the BSE 500 accounts for almost 94% of the total market capitalization of BSE)—was 65.6 lakh, an increase of 25.28% from 52.4 lakh in the previous year.

In the same period, these companies’ average net profit fell 1.6% to 681.28 crore.

The average debt on the books of these companies rose 16.75% year-on-year to 5,357 crore; average cash in hand rose 4.34% to 1,248 crore; and average revenue stood at 11,554 crore, up 10.95%.

The highest-paid Indian executive in fiscal 2013 was Sun TV Network Ltd chairman Kalanithi Maran, who took home a remuneration of 56.25 crore. His wife and Sun TV’s executive director Kavery Kalanithi was the second highest-paid director in the country with a salary of 56.24 crore. Both took a minor pay cut from their fiscal 2012 salaries.

Naveen Jindal, chairman of Jindal Steel and Power Ltd, who was the highest-paid director among Indian companies in the last fiscal year, was third on the list with a salary of 55 crore, a 25% cut from the previous year.

Among the executives who got the biggest pay hikes were Onkar S. Kanwar, chairman and managing director of Apollo Tyres Ltd, whose remuneration increased 73.11% year-on-year to 24.17 crore.

A.M. Naik, chairman of India’s top engineering company Larsen and Toubro Ltd (L&T), saw a 687% jump in his salary last fiscal to 21.06 crore. K. Venkataramanan, chief executive and managing director at L&T, saw his salary increase 799% year-on-year to 14.28 crore.

Apart from Jindal, the other executive to take a big pay cut was B.G. Raghupathy, the late chairman of BGR Energy Systems Ltd, who was paid 13.19 crore, half of what he earned in fiscal 2012.

Reliance Industries Ltd (RIL), Bharti Airtel Ltd and NTPC Ltd were the top three companies in the country in terms of the gross debt on their books; Coal India Ltd (CIL), RIL and Infosys Ltd had the highest amount of cash on their hands; and Oil and Natural Gas Corp. Ltd, RIL and CIL were the most profitable organizations in fiscal 2013.

“It appears that most of the money with the companies has gone towards repaying bank debt and paying higher salaries to executives while the performance of companies has suffered," said Arun Kejriwal, director at Kejriwal Research and Investment Services. “Many companies don’t realize the risk that they carry with the high amount of debt on their books, especially since a lot of it is denominated in dollars that has appreciated against the rupee."

Shishir Bajpai, senior vice-president at IIFL Private Wealth Management Ltd, said that the higher salaries paid to executives is a phenomenon likely restricted to some big companies within the BSE 500 and was not across the board.

“We manage the wealth of a lot of these companies and the stress is visible. Barring the pharma, IT (information technology) and FMCG (fast-moving consumer goods) sectors that are relatively better off, cyclical businesses are in a bad shape," Bajpai said. “It is a situation similar to what we had seen between 1999 and 2002-03. Until the capital expenditure cycle picks up, it will be difficult to bring down debt levels and post growth in profitability."

Kejriwal pointed out that the net profit figures of companies would have been worse but for the treasury income many of them have earned from the cash sitting idle on their books, since not too many firms have capital expenditure plans at the moment.

“Profit margins have suffered quite badly and revenues only look better because costs have gone up and companies have passed it on to consumers," he added.

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Published: 18 Sep 2013, 12:01 AM IST
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