INDIA – In a significant decision, shareholders in Nestle India have rejected a proposal to increase royalty payments to its Swiss parent company, Nestle.  

The proposal aimed to raise the royalty rate from the current 4.5 percent of net sales, net of taxes, to 5.25 percent, with an incremental annual increase of 0.15 percent.  

However, 70 percent of the company’s public shareholders and 57 percent of total shareholders voted against the increase. 

Nestle India had committed in 2019 to seek shareholder approval every five years for royalty payments under the General Licence Agreement (GLA).  

This agreement grants Nestle India access to the Nestle Group’s extensive intellectual property, including well-known brands like Maggi and Nescafe, proprietary technology, and over 1,300 patents. 

Following the shareholders’ decision, Nestle India’s shares rose by 2.33 percent, closing at Rs 2,502.30 (US$30.04)per share, as investors reacted positively to the news.  

As of 31 March 2024, Public shareholders held a 37.24% stake in the company. The remaining 62.76 percent stake is held by the Promoter & Promoter Group, viz, Nestle S.A (34.28% stake) and Maggi Enterprises Limited (2.48% stake). 

During the quarter ending March 2024, Nestle India reported a robust financial performance, with a 26.8 percent year-on-year increase in net profit to Rs 934 crore (USS$112.13M), surpassing market expectations.  

Revenue from operations also saw a 9.05 percent rise to Rs5,268 crore (US$632.4M) from the previous year’s Rs4,831 crore (US$579.96M). 

The company’s EBITDA margin improved by 2.41 percentage points, reaching 25.4 percent in the final quarter of FY24.  

Despite facing challenges due to high prices of key commodities like coffee and cocoa, Nestle India delivered strong financial results. 

Concurrently, Nestle India has entered into a definitive agreement with Dr Reddy’s Laboratories to form a joint venture aimed at launching nutraceutical brands under Nestle Health Science.  

Dr Reddy’s will hold a 51 percent stake in the joint venture, while Nestle India will hold 49 percent, with an option to increase its shareholding to 60 percent after six years at fair market value. 

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