INDIA – The board of Nestlé India, a leading FMCG company, has approved a 0.15 percent annual increase in royalty payments to its parent company, Nestlé S.A. 

The decision comes amidst a surge in sales and profits reported by the company in the recent quarter. 

The approved increase in royalty payment entails an annual increment of 0.15 percent over the next five years, bringing the rate up to 5.25 percent of net sales from the current 4.5 percent. 

This staggered payment scheme will be effective from July 2024 and is subject to the approval of the company’s members through a postal ballot. 

Nestlé India’s decision to seek shareholders’ approval for royalty payments every five years was initiated in 2019 after feedback from investors and proxy advisory firms. The move reflects the company’s commitment to transparency and accountability in its financial operations. 

The recent financial results of Nestlé India for the March quarter have been impressive, with total sales surging by 21.3 percent to Rs 4,808 crore (US$577.23M) and profits rising by 25 percent to Rs 737 crore (US$84.48M). This robust performance underscores the company’s strong market position and consumer demand for its products. 

In addition to the royalty payment approval, the board has appointed Suneeta Reddy as an additional director and independent non-executive director for a term of five years. 

Reddy, with over 40 years of experience in the healthcare industry, brings valuable expertise in strategy, hospital operations, and corporate services to the board. 

Despite the positive developments, the company shares have underperformed the benchmark index so far this year, falling by 7.24 percent on a year-to-date basis.  

However, analysts remain optimistic about the future prospects of FMCG companies like Nestle India, citing a favorable risk-reward ratio and potential upside in the range of 5-10 percent. 

Sanjiv Bhasin, Director at IIFL Securities, expressed confidence in Nestle India’s outlook, highlighting the company’s recent accolade in the Maggi noodles segment as a positive factor.  

Meanwhile, Nespresso is set to invest US$20 million in Congo to revive special coffee by 2026. This investment will cover coffee purchases, price premiums, technical assistance, community projects as well as support to help coffee farmers access global markets.   

This initiative is part of the Nespresso Reviving Origins program, created 10 years ago, that aims to restore coffee production in regions where it is under threat. Nespresso’s ambition is also to help raise an additional US$20 million to support coffee-growing communities in Kivu in the DRC. 

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