In a notable development, the majority of Nestle India‘s shareholders have voted against the proposed increase in royalty payout to its Swiss parent company, Nestle S.A. The decision was revealed in an exchange filing and led to a positive reaction in the market, with the company’s shares rising during a special trading session on Saturday.
According to the filing, 57.18 percent of shareholders voted against the resolution. This outcome follows nearly a month after Nestle India’s board had approved the hike in royalty payout, pending shareholder approval. The proposed motion sought to increase the royalty payment to Nestle S.A. from 4.5 percent to 5.25 percent of net sales over the next five years. The planned increment would have seen the royalty rate start at 4.5 percent and rise by 0.15 percent annually.
Nestle India had previously stated in 2019 that it would seek shareholder approval for royalty payments every five years, in response to feedback from investors and proxy advisory firms.
In light of the shareholders’ decision, Nestle India’s stock saw a 1.25 percent increase, trading at Rs 2499.1 on the National Stock Exchange at 10:16 AM during the special trading session.
Financially, Nestle India has shown robust performance. The company reported a standalone net profit of Rs 934 crore for the quarter ending March, marking a 27 percent increase from Rs 737 crore in the same period last year. Additionally, its revenue rose by 9 percent year-on-year, reaching Rs 5,268 crore.
The rejection of the royalty hike proposal highlights the growing assertiveness of shareholders in influencing key financial decisions. It also reflects concerns about the impact of increased royalty payments on the company’s profitability and overall financial health.
Nestle India’s future steps regarding the royalty payment structure remain to be seen, but the shareholder vote underscores the importance of maintaining a balance between rewarding the parent company and ensuring sustainable growth and returns for local investors.
