Nestle India shareholders have voted against a proposal for hiking royalty payments to its Swiss parent Nestle S.A. According to the company’s BSE filing, 57.18 per cent of the valid votes cast by the shareholders were against the proposal.

Nestle India had proposed hiking of royalty payment in a staggered manner over a period of five years by making an increase of 0.15 per cent per annum effective July 1. The resolution had proposed that the royalty payout to the parent company be increased to 5.25 per cent of net sales, net of taxes, compared to the current level of 4.5 per cent over a period of five years. Nestle India’s board had approved this proposal on April 5.

Proxy advisor firm Institutional Investor Advisory Services, in a report earlier this month had recommended rejection of the resolution.

Abneesh Roy, Executive Director & Head of Research Committee, Nuvama Institutional Equities said, “This is positive in the short term as there could potentially be cost savings due to no royalty hike. We would monitor if there is any revised proposal from the Board later, but for now this is a positive.” He added that this development also indicates that concerns of shareholders have to be taken seriously by companies.

In 2019, the India unit of the Swiss packaged food major had said that it will seek shareholders’ approval every five years on royalty payments made to its parent company. This was done after it received feedback from investors and proxy advisor firms.

As of March 2024, the promoter entities have a combined stake of 62.76 per cent in Nestle India. This includes Nestle S.A, which owns 34.28 per cent stake and Maggi Enterprises which holds 28.48 per cent of stake in Nestle India.