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Nestle India Board Approves Increase in Royalty Payment to Parent Company

Nestle India Board Approves Increase in Royalty Payment to Parent Company

6 April 2024 – Nestle India, a leading FMCG player, has announced a hike in royalty payments to its parent firm, Nestlé SA. The company’s board approved an increase of 0.15% per year for the next five years, raising the royalty rate to 5.25% of sales from the existing 4.5%.

The decision, approved by Nestle India’s board based on the recommendation of the audit committee, will elevate the company’s royalty rate to one of the highest in the domestic FMCG industry. Notably, this move aligns Nestle India’s royalty rate with global standards and reflects its commitment to operational excellence and growth.

In the financial year 2022, Nestle India disbursed a royalty of Rs 750 crore on a turnover of Rs 16,790 crore. Comparatively, other industry giants like Hindustan Unilever (HUL), Colgate-Palmolive India, and Procter & Gamble Hygiene and Healthcare pay royalties ranging from 3.45% to 5% of their turnover.

The recommendation for the royalty increase will now undergo approval by the company’s members through a postal ballot. While royalty payments have historically sparked debate in India Inc, Nestle India’s management has defended the practice, citing the invaluable operational support and technological advancements provided by Nestlé SA.

Last year, Nestle India’s CMD Suresh Narayanan clarified that royalty payments facilitate access to Nestlé SA’s extensive portfolio of 2,000 brands, along with vital scientific and technological resources that drive Nestle India’s growth and innovation.

Shares of Nestle India closed marginally lower on the BSE post-announcement. The increase in royalty payment underscores the company’s commitment to leveraging global expertise for sustained growth and value creation.

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