Nestle India Ltd’s board has given the green light to boost royalty payments to its parent firm, Societe des Produits Nestle SA. The decision entails a gradual increase of 0.15 per cent annually for the next five years, culminating in a total of 5.25 per cent of net sales.
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Royalty Increase Details
Nestle India disclosed that its board, upon recommendation from the Audit Committee, has sanctioned the payment of general license fees (royalty) to its licensor, Societe des Produits Nestle SA. This payment is capped at 5.25 per cent of the net sales of the products sold by Nestle India. The increase will adhere to the terms and conditions of the existing general license agreements.
Staggered Implementation
The increment in royalty payment will be executed gradually over the span of five years. Starting from July 1, 2024, the increment will be 0.15 per cent annually. This gradual adjustment aims to manage the impact effectively while ensuring compliance with the current license fee of 4.5 per cent per annum.Shareholder Approval Required
The board’s decision to enhance royalty payments is subject to approval by the shareholders of Nestle India. The approval process will be carried out through a postal ballot, ensuring transparency and compliance with regulatory requirements.
Financial Performance and Additional Board Appointment
Strong Revenue Growth
Nestle India’s revenue from product sales witnessed a robust increase in 2023, reaching Rs 19,021.05 crore, reflecting a notable growth of 13.3 per cent compared to the previous year. This growth underscores the company’s resilience and market positioning amidst evolving consumer preferences and market dynamics.
Board Appointment
In another development, Nestle India announced the appointment of Suneeta Reddy, Managing Director of Apollo Hospitals Enterprise Ltd, as an Additional Independent non-executive Director.
Effective from April 5, 2024, Reddy’s appointment is set for a term of five consecutive years, subject to shareholders’ approval. This strategic addition to the board reflects Nestle India’s commitment to bolstering its governance framework and leveraging diverse expertise to drive sustainable growth.
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Nestle India’s decision to increase royalty payments underscores its commitment to fostering a strong partnership with its parent company while ensuring alignment with regulatory and governance standards.
Additionally, the company’s robust financial performance and strategic board appointment signal its readiness to navigate the evolving business landscape and capitalize on emerging opportunities.
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