Nestle India Ltd. will continue at the current rate of 4.5% as royalty payment to its Swiss parent after shareholders turned down the company's proposal to raise the payout last month.
The board approved the plan on Wednesday and recommended the same for a nod from shareholders by way of an ordinary resolution at its upcoming annual general meeting, the company said in an exchange filing.
The date for the 65th AGM has been revised to July 8, and the record date for determining eligibility for the final dividend is now July 16.
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 a 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 a 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.
Nestle India had earlier in April announced its plans to increase the general license 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.
For 2023, the packaged food company reported total sales of Rs 16,790 crore, with a net profit of Rs 2,390 crore.
Shares of Nestle closed 0.4% lower at Rs 2,532.95 apiece ahead of the announcement, as compared with a 0.2% gain in
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