Nestle India announced on Wednesday that it will continue to pay royalty to its parent company, Société des Produits Nestlé, at the current rate of 4.5%. This decision follows a significant shareholder vote last month, where over 57% rejected a proposal to increase the royalty rate to 5.25% over the next five years.
The proposal faced opposition not only from shareholders but also from proxy advisory firm IiAS, which recommended voting against the hike. Nestle India’s decision to maintain the current rate reflects the company’s commitment to respecting the board members’ decision and feedback from other stakeholders.
Had the proposal to increase the royalty rate been approved, Nestle’s royalty payments would have been among the highest in the Indian fast-moving consumer goods (FMCG) sector. Currently, industry peers such as Colgate-Palmolive India, Procter & Gamble Hygiene and Healthcare, and Hindustan Unilever (HUL) pay royalties of 4.5%, 5%, and 3.45% of their turnover, respectively.
Nestle India emphasized that it will seek board approval for royalty payments every five years to ensure compliance with regulations. This decision aligns with the company’s strategy to balance shareholder interests and regulatory adherence.
In addition to the royalty announcement, Nestle India revealed the appointment of veteran finance professional Sidharth Kumar Birla as an additional director and independent non-executive director for a term of five years. Birla’s extensive experience in finance is expected to contribute significantly to the company’s governance and strategic planning.
Furthermore, the board has rescheduled the company’s 65th Annual General Meeting to July 8, 2024. During this meeting, shareholders will decide on the final dividend, which, if declared, will be distributed on August 6, 2024.
Nestle India continues to navigate the complexities of corporate governance and stakeholder engagement while maintaining its commitment to transparency and regulatory compliance. The company’s actions reflect its focus on sustainable growth and long-term value creation for its shareholders.
