Summary: The number of startups in India continues to swell with each passing day. And so do that of the unicorns. Till May this year, India had 100 unicorns with a total valuation of $332.7 billion. On Sunday, Prime Minister Narendra Modi said that Indian startup unicorns’ average annual growth rate was higher than in the United States, the UK and other countries. Modi said that the startups continue to create value despite the pandemic-led slowdown. Meanwhile on Thursday, Union Minister Jitendra Singh said startups will determine India’s economy and that of the world too. Last week, logistics player Delhivery became the twelfth start-up to list on the bourses since 2019. Even as foreign investors are tightening their purse strings and asking the startups to brace up for tough days ahead, a Business Standard analysis found that their key management made a killing as they took the start-ups towards IPO filings. Of the 12 start-ups analysed by Business Standard, employee benefits -- which includes salaries, bonuses, wages and gratuity-- increased 21.4 per cent in the year of filing of the red-herring prospectus. The year before, the average increase in employee benefits was just 8.8 per cent. However, the key management personnel and their relatives earned considerably more. The average remuneration for KMPs jumped 114.9 per cent in the year of RHP filing -- up from 70.3 per cent a year earlier. The remuneration, in this case, does not include data on rents and other benefits accrued to the top management during this period. However, it does include short-term and long-term benefits and ESOP expenses. A look at the larger sample of 93 companies, which filed their red-herring prospectus for IPOs in the last year and a half, also shows stark differences in compensation. The average employee salary was up 10.9 percent across the board. While average key managerial personnel remuneration was 39.2 per cent higher in the year of RHP filing. The gap in start-ups is thus higher than other companies. One reason for this is that start-ups tend to hire more personnel as they move closer to the IPO. Also, there is a more of a need in these companies to align themselves with market-linked salaries and retain top talent. An earlier analysis of a sample of 76 companies from the Nifty 100 index by Business Standard had indicated that the gap between the compensation of top executives and the median employee was 184-times. Among sectors, the gap between CEO salary and median employee salary is distinct among pharmaceutical companies at 340 times in FY21, followed by automotive at 308 times and telecommunications at over 257 times. In contrast, banks have the least inequality, with a median CEO compensation at 91 times the median employee salary. Other sectors with low CEO-to-median employee salary include insurance and cement at 105 times, and industrial at 150 times in FY21. There has been a similar increase in income gap between the top management and regular corporate employees in other countries as well. The average US CEO salary was 351 times a typical worker’s salary in 2020, according to an August 2021 report from US-based think tank Economic Policy Institute. And it was closer to 307 times in 2019, according to authors Lawrence Mishel and Jori Kandra in their report titled ‘CEO pay has skyrocketed 1,322 per cent since 1978’. Watch video
