Nestle India board approves hike in royalty payment to parent company

The Nestle India Board of Directors has approved a staggered hike of 0.15 per cent per annum in royalty payment to its parent company.

“The Board of Directors, on the recommendation of the audit committee, approved the payment of general licence fees (royalty) by the company to Societe des Produits Nestle S.A. (licensor), being a related party as per Regulation 2(1)(zb) of the Listing Regulations, at the rate not exceeding 5.25 per cent, net of taxes, of the net sales of the products sold by the company as per the terms and conditions of the existing general licence agreements," Nestle India said in a statement.

The fees are payable in a staggered manner over five years by making an increase of 0.15 per cent per annum over the current licence fees of 4.5 per cent per annum effective from July 1, 2024, the company added.

Emkay Global Financial Services, meanwhile, said in a research report that Nestle India is among the prime beneficiaries of heightened consumer adoption of packaged foods.

The current capex cycle of Rs 64 billion for CY20-25 is likely to support the company in addressing the segment demand more effectively. Nestle's thrust on penetration-led volume growth is also helping it outperform the sector volume growth, while strong pricing power is an added advantage and a likely factor for faster margin recoup, it said.