Nestle India share price gains over 3% after shareholders vote against increase in royalty to Swiss parent
- Nestle India's motion called for the payment of general licence fees (royalty) to Societe des Produits Nestle S.A. to be increased to 5.25% of net sales, net of taxes, compared to the current level of 4.5%.
Nestle India share price rallied over 3% on Saturday after the company’s shareholders rejected a proposal to increase the royalty payments to its Swiss parent. Nestle India share price gained as much as 3.01% to ₹2,518.95 apiece on the BSE.
According to a stock exchange filing, about 70.8% of public shareholders of Nestle India voted against the company’s proposal to increase royalty payments to its Swiss parent Nestle.
The motion called for the payment of general licence fees (royalty) by the company to Societe des Produits Nestle S.A. to be increased to 5.25% of net sales, net of taxes, compared to the current level of 4.5%. The increase was proposed at a rate of 0.15% per annum effective from 1st July 2024.
Under Indian regulations, the potential change would be classified as a related party transaction, which means that controlling shareholders were not allowed to vote.
Analysts said the move is largely positive for Nestle India.
“This is a short term positive as there could potentially be cost savings due to no royalty hike. We would monitor if there is any revised proposal from the Board later, but for now this is a positive,” said Abneesh Roy, executive director, Nuvama Institutional Equities.
“We don’t expect Nestle Global to cut down on R&D support and innovations to India business given India is easily one of the most important consumer markets for any company and anyway it is getting 4.5% royalty. Also, Nestle has a local R&D unit in India,” he added.
Meanwhile, Nestlé India reported a 26.8% year-on-year (YoY) jump in net profit for the quarter ended March 2024, beating street estimates, helped by softer milk prices. The company posted a net profit of ₹934 crore in Q4FY24 as against ₹737 crore a year earlier.
The FMCG major’s revenue from operations rose 9.05% to ₹5,268 crore in Q4FY24 from ₹4,831 crore, YoY.
Nestlé India’s EBITDA margin expanded by 2.41 percentage points to 25.4% in the final quarter of FY24.
The company had warned of “unprecedented headwinds" in prices of key commodities such as coffee and cocoa, with all-time-high prices and an ongoing price rally.
At 11:15 am, Nestle India shares were trading 2.43% higher at ₹2,504.60 apiece on the BSE.
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