Nestle India slips 2% on profit-booking; trades 1:10 ex-stock split

The stock had rallied 19 per cent since October 19, 2023, after the company announced a stock split.

Shares of Nestle India slipped 2 per cent to Rs 2,644 on the BSE in Friday's intra-day trade in otherwise firm market on profit booking. The stock of packaged foods company turned ex-date for stock split in the ratio of 1:10, wherein 1 equity share of face value of Rs 10 were divided into 10 equity shares of face value of Rs 1 each.

Nestle India had fixed January 5, 2024 as the record date for determining entitlement of equity shareholders for the purpose of sub-division/ split of its equity shares.

Since October 19, 2023, the stock price of Nestle India outperformed the market and surged 19 per cent after the company announced a stock split. The stock hit a record high of Rs 2,770.75 (adjusted to split) on January 1, 2024.

With a view to enhance the liquidity of the company's equity shares and to encourage participation of retail investors by making equity shares of the company more affordable, the company decided for a stock split, Nestle India had said.

A stock split is a corporate action in which a company issues additional shares to shareholders, increasing the total shares by the specified ratio based on the shares they held previously.

Companies often choose to split their stock to lower its trading price to a more comfortable range for most investors and to increase the liquidity of trading in its shares.

Meanwhile, Nestle India has seen one of the higher growth rates among fast moving consumer goods (FMCG) companies as it continues to benefit from distribution expansion, especially in rural India. The revenue growth is broad-based across segments and geographies.

Further sustainability of growth is expected from innovation, higher capex plans coming on stream over the next couple of years, continued thrust on RURBAN (rural and urban) strategy and higher media investments. Nestle India has also reported strong margin performance in the quarter, and will continue to focus on profitability along with topline growth. Premiumization will also be an important driver of growth and profitability improvement, analysts at KRChoksey Shares & Securities said in the September quarter (Q3CY23) results update.

Nestle India's strong portfolio of brands and well-spread distribution network will improve product penetration and continue to support performance. Consistent demand for packaged foods and increased focus on consumer engagement initiatives are expected to support performance in the long term. However, uncertain and deficit rain remains a key negative for the stock, said analysts at Geojit Financial Services said in the result update.

On commodity outlook, Nestle India while announcing Q3 results on October 19, had said that uneven rain and rain deficit is expected to impact production of maize, sugar, oilseeds and spices that may have an adverse impact on pricing. Coffee continues to be volatile because of the global supply deficit.

The weather during the harvest of the Indian Robusta crop may impact production. Upcoming winter weather may impact wheat production. Healthy milk flush is expected in winter which is expected to keep prices stable, the company said.