Nestle India to pay royalty to parent company

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Nestle India to pay royalty to parent company

Nestle India has aggreed to pay royalty to its parent Nestle SA, said the company in its exchange filing dated April 5.

The royalty fee will be a maximum of 5.25 percent of the sales revenue from the products sold by Nestle India. This payment will be made gradually over five years and each year, the fee will increase slightly by 0.15 percent over the previous year’s fee, which is 4.25 percent. The new royalty will start from July 1, 2024.

Two days back, the National Consumer Dispute Redressal Commission dismissed the government’s 2015 plea against the sale of Maggi noodles in favour of Nestle India.

Maggi was banned in June 2015 for six months across the country following allegations it contained chemicals beyond prescribed limits. The company had to recall and destroy 38,000 tonnes of Maggi noodles from millions of retail shelves. The ban was relaxed in November 2015.

Yes, that’s correct. Nestle India recently announced a board-approved decision to increase royalty payments to its parent company, Société des Produits Nestlé S.A., based in Switzerland. Here’s a breakdown of the key points:

TVR INSTITUTE

Royalty Increase: Nestle India will be incrementally increasing the royalty paid to its parent company by 0.15% per year for the next five years.
Effective Date: This increase will be effective from July 1, 2024.
Current Rate vs. New Rate: Currently, Nestle India pays a 4.5% royalty on net sales. After the increase, the royalty will reach 5.25% of net sales by the end of the five-year period.
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Here are some additional details you might find interesting:

Reasoning Behind Increase: The specific reason behind the royalty hike hasn’t been publicly disclosed by Nestle India.
Impact on Nestle India: The royalty increase will affect Nestle India’s profitability to some extent, as it represents a higher expense for the company.
Approval Process: The board of directors approved the royalty increase, and it will be subject to shareholder approval through a postal ballot.

It’s important to note that this news might be of interest to different groups for different reasons:

Investors: They might be interested in how this will affect Nestle India’s profitability and future earnings.
Consumers: They might be concerned about whether this will lead to higher prices for Nestle products in India.

Overall, Nestle India’s decision to increase royalty payments to its parent company is a business decision with potential financial implications.