Nestle India shares rise after board gives nod to royalty payment to parent at current rate-should you buy or wait?
Nestle India royalty news: Shares of FMCG major Nestle India hogged the limelight on Thursday, June 13, a day after the company, which houses over 2,000 brands, including names such as Maggi, Nescafe, and KitKat on Wednesday said it will continue to pay a royalty to its parent firm at the existing rate of 4.5 per cent of net sales after its proposal to hike it was rejected by shareholders.
Nestle India share price today, Nestle India share price target, Nestle India royalty news: Shares of FMCG major Nestle India hogged the limelight on Thursday, June 13, a day after the company, which houses over 2,000 brands, including names such as Maggi, Nescafe, and KitKat on Wednesday said it will continue to pay royalty to its parent firm at the existing rate of 4.5 per cent of net sales after its proposal to hike it was rejected by shareholders. Nestle India shares gained 3 per cent to the day's high of Rs 2,614.45 on NSE in the early morning deal, halting the 2-day falling trend. Nestle India shares closed at Rs 2,548, up 0.42 per cent on NSE.
The company's board at its meeting approved the continuation of payment of general licence fees (royalty) at the existing rate of 4.5 per cent to Société des Produits Nestlé S.A. (licensor) and recommended to the members of the company for their approval, consumer products company said in a statement.
In April this year, Nestle India's board had approved increasing royalty payment to its parent firm by 0.15 per cent per year for the next five years, thereby enhancing it to 5.25 per cent of net sales.
Nestle India share price target: CLSA upgrades stock; here's how CLSA views consumer product space
CLSA has upgraded Nestle India to outperform from reduce as the brokerage increased its medium-term growth assumptions. The brokerage has raised the target to Rs 2,798 per share from Rs 2,719 per share earlier.
According to the brokerage with higher expected growth than other staple companies, the risk-reward is now favourable for Nestle India. In addition, the brokerage has maintained a buy on Varun Beverages and outperform ratings on ITC and Britannia.
"Food and beverage segment is the best way to play a rural boost. Hygiene and personal care segment faces greater urban challenges, the brokerage said in its report. According to analysts at the brokerage, high competitive intensity in hygiene and personal care makes it unattractive.
Besides, the board approved appointment of Sidharth Kumar Birla as an Independent Non-Executive Director of the company. Birla's appointment is with effect from June 12, 2024 for a term of five years.
(With PTI inputs)
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