Nestle India Shareholders Approve Continuation Of 4.5% Royalty Fee To Swiss Parent

Nestle India had earlier in April announced its plans to increase the general licence fees, or royalty, from 4.5% to 5.25% of turnover over a period of five years. The new fee, which was to take effect on July 1, was decided to be paid in a staggered manner by making an increase of 0.15% per annum.

The revised royalty rate was derived based on a McKinsey & Co. study evaluating the value brought in by the parent company, Nestlé SA. Nestle India sought a fair opinion from Bansi S. Mehta and Co. and KPMG Assurance and Consulting Services LLP for the McKinsey study.

The resolution to raise the royalty payment failed to pass in May, with 57% of shareholders voting against the proposal.

About 71% of public shareholders, who collectively hold 37.24% stake in Nestle India, voted against the resolution, according to voting records. Of these, institutional investors hold 21%, while the remaining 16.24% is held by the general public and other non-institutional investors.

The promoters—Nestlé SA and Maggi Enterprises—hold 62.76% stake in Nestle India. But the controlling shareholders are ineligible to vote, as the potential change would be classified as a related-party transaction.

Shares of Nestle closed 1.14% lower at Rs 2,603.3 apiece, ahead of the announcement, as compared with a flat benchmark BSE Sensex.