Nestle board approves hike in royalty payment to parent firm

 

FMCG major Nestle India today said its board has approved an increase in royalty payment by 0.20 per cent per year for the next five years to its parent firm, thereby enhancing it to 4.5 per cent of the sales.

The Board of Directors of Nestle India negotiated and Nestle SA accepted the increase in royalty from 3.5 per cent to 4.5 per cent of sales in a staggered manner by making an increase of 0.20 per cent per annum over the next five years effective January 1, 2014, Nestle India said in a statement.

"This will ensure ongoing access to the entire capabilities of Nestle...And will enable Nestle India to continue to deliver long-term sustainable profitable growth and Create Shared Value for society and its shareholders," Nestle India Chairman and Managing Director A Helio Waszyk said.

Nestle SA had asked two years ago for a review of the two decades old royalty rates.

Nestle India has a General Licence Agreement (GLA) that allows it access to Nestle Group's intellectual property rights including global portfolio of brands, proprietary science and technology including over 1,300 patents, extensive research and development capabilities.

The GLA includes access to over 6,000 brands such as Nestle, Maggi and Nescafe and technologies developed by the global network of 32 research and development centres, including the one recently inaugurated at Manesar, Haryana.

Nestle India's recent capacity investments of around Rs 3,000 crore have benefited from this, the company said.

It said Amarchand and Mangaldas and Suresh A Shroff & Co, a law firm advised on the governance process on the review.

Shares of Nestle India today closed at Rs 4,730.10 apiece on the BSE, down 0.49 per cent from its previous close.