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Even as beleaguered Indian drug maker Ranbaxy Laboratories Ltd struggles to avoid being categorised as a sick company under prevailing Indian laws, it has sought shareholder approval to raise the limit for chief executive Arun Sawhney’s remunerations to be paid in the 2015 and 2016 fiscals.
The proposal has come under criticism from the likes of proxy advisory firm Institutional Investor Advisory Services (IIAS).
Sawhney got a 40% pay hike in fiscal 2014 and his salary for the 15-month period ended March 31 stood at Rs 13.14 crore.
IIAS pegs Sawhney’s proposed pay at up to Rs 14 crore for the current fiscal, assuming that the quantum of provident fund and superannuation benefits would remain at the same level as in fiscal 2014.
“Ranbaxy’s financial performance has been weak in the past three years. It reported a consolidated net loss for the financial year ended December 31, 2011-March 31, 2014,” the IIAS report dated July 14 said. “The company’s net worth has deteriorated by over 50% in the past four financial years on account of several operational issues... (Sawhney’s) remuneration is not in line with the performance of the company and is higher than peers in industry.” Ranbaxy declined to comment.
The proxy advisory firm compared Sawhney’s pay package to those of pharmaceutical industry leaders like GV Prasad, chairman and chief executive of Dr Reddy’s Laboratories
(Rs 10.95 crore) and Nilesh Gupta, managing director of Lupin (Rs 6.07 crore).
The company is currently in the process of being acquired by Sun Pharmaceutical Industries. It reported a net loss of Rs 1,085 crore for the 15-month period ended March 31. Ranbaxy changed its accounting year from January-December to April-March fiscal.
The company’s accumulated net loss is more than 50% of the highest net worth it has managed to achieve in the last four financial years, according to Ranbaxy’s FY14 annual report. This qualifies Ranbaxy to be classified as a potential sick company under the provisions of the Sick Industrial Companies (Special Provisions) Act of 1985.
Ranbaxy recorded a turnover of Rs 13,040 crore for the 15-month period ended March 31, 6% higher than the 12-month period ended December 31, 2012. The accumulated losses of the company stood at Rs 1,070 crore as on March 31, due to multiple exceptional charges on its profit and loss account, to the tune of Rs 860 crore, over the last three years.
These exceptional items that adversely impacted the company