Havells India shareholders seek clarification over remuneration to CEO Anil Rai Gupta

In another case of growing shareholder activism in India, many shareholders of Havells India Ltd have raised concerns over the proposed remuneration paid to the company’s chairman and managing director Anil Rai Gupta.

Certain shareholders of the electrical equipment company flagged an AGM resolution that proposes Gupta’s estimated remuneration at Rs 28.82 crore in FY24.

Shareholders observed that the payout is high in absolute terms and higher than the peers.

While a large portion of Gupta’s remuneration is variable and linked to company profitability, there is no absolute cap on the remuneration. As profitability increases, remuneration may be much higher during Gupta’s tenure, shareholders have stated while seeking clarification over the resolution of the notice of the upcoming AGM on June 27.

Total promoter’s remuneration was Rs 38.59 crore and Rs 36.92 crore in FY22 and FY23 respectively, which is high in absolute terms.

The company, however, has defended the remuneration formula and payouts to the CMD.

In a clarification, Havells India stated that there has been no change in the percentage of commission in the proposed resolution vis-a-vis the existing remuneration structure and it has been the same for the past 10 years.

Overall remuneration for FY23 of Anil Rai Gupta is 1.8 per cent of the Profit before Tax (PBT), which is commensurate with the size and nature of the business.
Also FY23 remuneration of Anil Rai Gupta is 1.8 per cent of net profit (last four years average of 1.8 per cent) which is well within the limit of 5 per cent as prescribed in the Section 197 of the Companies Act, 2013, Havells India stated.

Recent cases of shareholder activism India

As shareholders have become more informed and there has been a rise in the number of institutional investors along with changes in company laws, shareholder activism has picked up momentum in India in recent years. Institutional investors in recent times have stood up against the company management and opposed certain proposals that they thought were not in the best interest of the company.

In another case of shareholder activism, institutional investors in realty developer Sobha Ltd rejected special resolutions for payment of remuneration to non-executive directors and the chairman of the company at 5 per cent of the company's net profit during the AGM in April.

They also voted down a proposal that sought remuneration to non-executive director and chairman Ravi Menon in excess of 50 percent of total payout payable to all non-executive directors for FY 2024.

Earlier in 2021, minority shareholders of Eicher Motors had opposed re-appointment of Managing Director Siddhartha Lal for five years from May 1, 2021.

They had also opposed the proposal to hike Lal's salary by 10 per cent in FY21.