Nestle India shares trade steady after board’s nod to hike royalty payment to parent

Nestle India share price: Shares of the FMCG major Nestle India ended wiith a cut of 1.6 per cent at Rs 2497.85 upon the company’s board approval to hike royalty payments to parent company Nestlé S.A. 

After the decision, now the Maggi-maker will pay royalty at the rate of 5.25 per cent as opposed to the rate of 4.5 per cent earlier. The hike has been implemented after a gap of nearly ten years. In 2019, the FMCG company said that every five years the company will take shareholders' nod for the payment of royalty. In the next five years, the royalty fee will be hiked at the rate of 0.15 per cent per year. Furthermore, as per the company's filing, the new royalty rate shall come into effect from 2024.  

Furthermore, for the recent hike, the company will seek shareholders' approval by postal ballot.

As per Zee Business research desk, EBITDA and EPS of the company are seen to take a hit by 0.7-0.8 per cent and 1 per cent, respectively.

Nestle India is a largecap stock with a m-cap of Rs 2.41 lakh crore. The stock over the last one year has underperformed the headline Nifty index delivering just 26 per cent return to its investor.