Divi's Lab's Murali Divi was the highest earning pharma promoter-executive in FY19

Murali Divi, the low profile CMD of Divis Labs, has once again emerged as the highest paid executive of the Indian pharmaceutical industry in FY19.

Murali Divi, the promoter-executive, gave himself a generous hike of 46.3 percent, taking his remuneration to Rs 58.8 crore, according to company's FY19 annual report.

Divi earned close to Rs 57.6 crore through commissions. Divis has a liberal commission policy for its executive directors, where they will be eligible for 10 percent of company’s net profit, capped at Rs. 192.05 crore.

Divi’s son Kiran Divi, whole-time director, also got a handsome 44 percent hike in remuneration to Rs 20 crore.

Both father and son duo, being promoters, are also eligible to dividend payouts. Murali Divi’s family own a 52 percent stake in the company. Divi's paid Rs 512 crore as dividends in FY19.

Murali Divi is the 53rd richest Indian with networth of $2.76 billion.

The non-promoter executive director NV Ramana too saw his remuneration jump by 45 percent to Rs 29.9 crore, making him the highest paid professional executive of the pharma industry.

However, the increase in the median remuneration of Divis' employees in the financial year was 3.96 percent.

The average percentile increase in the salaries of employees other than the managerial personnel in the financial year was 18 percent, whereas the increase in the managerial remuneration was 44 percent.

As on 31 March 2019, Divi’s has 4407 permanent employees on the company's payroll.

On profitable road

While the promoter-executives of many Indian pharmaceutical companies have been foregoing salaries and taking heft pay cuts, to lead from the front, as their companies are on a major cost-cutting drives themselves faced with pricing pressure and slowing growth in key markets. On other hand, Divis is a standout.

The Hyderabad-based drug maker is engaged in the manufacture of generic active pharmaceutical ingredients or the key raw materials that go into the manufacture of formulation drugs, and custom synthesis of active ingredients for innovator companies.

Divis revenues grew 28 percent YoY to Rs 5036.24 crore in FY19, while the profit after tax rose Rs 1332.7 crore for the same period. The operating profit margin jumped 15 percent YoY to 39.82 percent.

The company has negligible debt on its balance sheet, with debt equity ratio of 0.015 percent.

Around 73 percent of its revenue comes from Europe and US. The company, known for its conservative business practices, for keeping a tight leash on capex investments, and the ability to rely on fewer products that have a greater market share for its revenues.

All this has shown results as Divi’s is one of the most profitable drug companies of India and a cash accumulator. The company has total reserves and surplus Rs 6896.23 crore as on end of March, 2019.

“With strong business moats, including a robust IP adherence policy, low-cost manufacturing base in India, judicious product selection strategy and a fungible manufacturing base, Divi’s has been a key beneficiary of increased outsourcing trends and has witnessed a strong EPS CAGR of 16 percent over FY10-19. We expect this to continue and forecast an EPS CAGR of 18 percent over FY19-21 with strong visibility even beyond,” said Emkay Research in its report.

With USFDA compliance issues behind, Divi’s is investing around Rs 1,700 crore on expansion.

The company is currently spending Rs6 crore for setting up a brownfield SEZ unit at Vizag, Rs 600 crore brownfield investment in a SEZ project (Unit-I) in Hyderabad, Rs 300 crore on debottlenecking projects in Unit-I and Unit-II, and Rs190 crore on expansion and modernization of the EOU plant.