Nestle India approves royalty fee of up to 5.25% of net sales to parent company
Royalty payments have been a contentious issue in India Inc's debating circles ever since another FMCG giant HUL decided to increase its fee to parent Unilever.
The board of FMCG major approved paying a royalty fee to its parent company . The payment will be made at a rate of up to 5.25% of net sales and it is payable in a staggered manner over five years."The Board, on the recommendation of the audit committee, approved the payment of general licence fees (royalty) by the company to Nestlé S.A. at the rate not exceeding 5.25%, net of taxes, of the net sales of the products sold by the company," Nestle said in a filing.
The staggered payment will be done by making an increase of 0.15% per annum over the current licence fee of 4.5% per annum effective from July 2024.
The company has recommended the same for approval of the members of the company by means of a postal ballot.
Nestle India's March quarter total sales jumped 21.3% to Rs 4,808 crore in the recent first quarter, while profit rose 25% to Rs 737 crore.
Royalty payments have been a contentious issue in India Inc's debating circles ever since another FMCG giant had decided to increase its fee to parent Unilever.
Nestle India's board has also approved the appointment of Suneeta Reddy as an additional director and independent non-executive director of the company for a term of five years.
Suneeta Reddy has over 40 years’ experience in the healthcare industry and the company hopes her expertise in specific functional areas such as strategy, hospital operations, and corporate services will help.
So far this year, shares of Nestle India underperformed the benchmark index falling 7.24% on a year-to-date basis.
Analysts said the risk-reward is pretty good for FMCG names and there is an upside of 5-10% and the downside is restricted.
"Nestle has been our top pick. They've bagged an award on the Maggi noodles side, which will be another positive," said Sanjiv Bhasin, Director, IIFL Securities.
Source: Stocks-Markets-Economic Times
