Majority shareholders reject Nestle India's royalty hike proposal to Swiss parent

Majority of the shareholders of Nestle India Ltd turned down the company's proposal to raise the royalty payout to its Swiss parent. The resolution was voted against by 57.18 percent of the shareholders, the Maggi noodles maker said in a stock exchange filing on May 17.

In April, Nestle India announced its plans to increase the general license fees, or royalty, from 4.5 percent to 5.25 percent to its Swiss-based parent company. 

In 2019, the company said that it would seek approval from its shareholders every five years for royalty payments to the parent company after receiving investor and proxy firm's feedback on the issue.

The ordinary resolution stated that the royalty payment rate would start at 4.5 percent of the net sales, and would increase by 0.15 percent each year. The company had sought shareholder approval for the next five-year period beginning July 1, 2024.

The FMCG major reported a net profit of Rs 934 crore for the three months ended March 31, 2024 (Q4 FY24), a jump of 26.73 percent from Rs 737 crore a year earlier. For the Indian arm of Swiss food giant Nestle, revenue from operations climbed to Rs 5,268 crore in Q4FY24, up 9.05 percent from Rs 4,831 crore in the year-ago period.

Nestlé India’s EBITDA margin expanded by 2.41 percentage points to 25.4 percent in the final quarter of FY24.

The company's board of directors recommended a final dividend for the fifteen months (FY24) of Rs 8.50 per equity share (face value of Re 1 each) amounting to Rs 819.53 crore.

Separately, Nestle India entered into an agreement with Dr Reddy’s Laboratories to bring nutritional solutions.

"The joint venture company would be formed with Dr Reddy's holding 51 percent and Nestlé India's holding 49 percent. Nestle India will have a call option to increase shareholding up to 60 percent after six years at a fair market value. Dr Reddy's shall continue to hold at least 40 percent of the shareholding after the company exercises its call option," it mentioned.

At 11:15 am, Nestle India shares were trading 2.43 percent higher at Rs 2,504.60 apiece on the BSE.