Nestle India Shareholders Approve Continuation Of 4.5% Royalty Fee To Swiss Parent
Nestle India conducted its 65th annual general meeting on Monday.
The shareholders of Nestle India Ltd. have approved the continuation of the current rate of 4.5% as royalty payment to its Swiss parent in the company's annual general meeting held on Monday.
The board cleared the plan on June 12 and sought shareholders' nod by way of an ordinary resolution at its 65th AGM, after members turned down the company's proposal to raise the payout in May.
Shareholders also approved borrowing plans, provided that the total amount borrowed and outstanding at any point of time do not exceed Rs 2,000 crore over and above the aggregate of the paid-up equity share capital, free reserves and securities premium.
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.
