As majority shareholders vote against raising the parent company’s royalty fees, Nestle India earns 3%.

The leading FMCG giant Nestle India’s shares fell to Rs 2518.75 per share at the peak of the day after shareholders decided against an increase in royalty fees.

During Saturday’s special trading session, shares of the multinational corporation Nestle India rose as the Street applauded shareholders’ opposition to the increase in royalty fees paid to the company’s Swiss parent Nestle.

At the peak of the day, the company’s shares on the NSE surged to Rs 2518.75 per, up 3% from the previous closing.

The resolution up for vote called for increasing the royalty to 5.25 percent of net sales, net of taxes, from the present level of 4.5 percent-wise. An annual rise of 0.15% was suggested for the increase.

According to the company’s market statement on Friday, 57% of shareholders voted against an increase in the royalty fee. Additionally, according to the filing, around 70.8% of public shareholders—that is, public institutions—voted against the hike.

The Reuters story stated that “the proposed change would be classified as a related party transaction under Indian regulations, which means that controlling shareholders were not allowed to vote.”

What was the proposed increase in royalty fees?

The firm authorized on April 5th, a rise in royalties to be paid to Nestlé S.A., the parent company, at a rate not to exceed 5.25 percent, net of taxes, of the net sales, due in installments over the by raising the license costs by 0.15% annually over the current 4.5% annual rate for a five-year term. The revised royalty rate will go into effect on July 1st, 2024.

Results for Nestle India’s January–March quarter

The consumer products company reported a combined net profit of Rs 934.2 crore for the reporting quarter, up roughly 27% year over year.

Account opning link:

1. Groww Account- https://app.groww.in/v3cO/kyrp1zph
2. Kotak neo Account https://kotaksecurities.ref-r.com/c/i/32531/109103906