Nestle India gains 3% as majority shareholders vote against royalty fee hike to parent

Shares of the MNC company Nestle India gained traction during Saturday’s special trading session as the Street cheered shareholders' disapproval of the royalty fee hike to the company’s Swiss parent Nestle. 

At day's high shares of the company scaled to Rs 2518.75 per share on the NSE, gaining 3 per cent over the previous close. 

The resolution considered for voting was for the royalty paid to its parent to climb to 5.25 per cent of net sales, net of taxes, in contrast to the current 4.5 per cent. The increase was proposed at a rate of 0.15% per annum.

57 per cent of the company’s shareholders voted against raising royalty fee, said the company in its exchange filing on Friday. Furthermore, the filing showed that about 70.8 per cent of public shareholders (public institutions) voted against the increase.

“Under Indian regulations, the potential change would be classified as a related party transaction, which means that controlling shareholders were not allowed to vote,” said the Reuters report.

What was the royalty fee hike proposal?

On April 5, the company approved the increase in royalty payment to the parent company-Nestlé S.A. at the rate not exceeding 5.25 per cent, net of taxes, of the net sales, payable in a staggered manner over the period of five years by making an increase of 0.15% per annum over the current license fees of 4.5% per annum. The new royalty fee will be effective from July 1, 2024.

Nestle India January-March quarter results

For the reporting quarter, the consumer products company posted a nearly 27 per cent on-year increase in consolidated net profit at Rs 934.2 crore.