Stocks

Nestle India shares widen losses, FMCG stocks under stress

R Yegya Narayanan Coimbatore | Updated on January 24, 2018

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Shares of Nestle India Ltd, in the midst of a controversy over alleged presence of excess quantity of lead in its popular Maggi brand noodles, widened their losses though the stock has recovered from the day’s low with the company stoutly refuting the charges.

Surprisingly, the CNX FMCG index has emerged as the biggest loser among the sectoral indices on the NSE though Nestle does not form part of the 15 stock CNX FMCG index with only Emami and Procter & Gamble in the green nearly half way through the day’s trading.

Nestle India shares are trading at ₹6280, a loss of ₹523.25 or 7.69 per cent on the NSE shortly after noon today. The stock had slipped to a low of ₹6,109 on the exchange but recovered to around ₹6,457 levels about 40 minutes after trading began only to slip to lower levels later. It had opened lower at ₹6,500 on the exchange compared to its previous close of ₹6,803.25 and rapidly declined to a low of ₹6,109 before it appeared to be stabilising which however proved to be short lived.

The stock had acted negatively after reports appeared that tests had shown excess presence of lead in its Maggi brand noodles which is popular across India, particularly with children. Subsequently, media reports have appeared stating that lab tests in Delhi too had shown Maggi noodles as "unsafe". Kerala Government has ordered pulling out of the company's noodles from its retail stores. In Bihar, a court has ordered filing of FIR against some Bollywood stars who are its brand ambassadors.

In Bihar, a court has ordered filing of FIR against some Bollywood stars who are its brand ambassadors. Reports indicated that the Food Safety and Standards Authority of India (FSSAI) has asked for a nation-wide test of the Maggi Noodles’ samples and further action might follow depending on outcome of test results.

The company has said that it understood the concern of the consumers over reports that authorities in UP have "found elevated levels of lead in a sample pack of MAGGI Noodles". Nestle India said that it was "fully cooperating" with the authorities who were conducting more tests and was awaiting their results. However, Nestle India said that it had submitted samples of the noodles from almost 600 product batches to an external laboratory for independent analysis and had also tested samples from almost 1,000 batches at its accredited laboratory and these samples, Nestle India said, represented around 125 million [12.5 crore] packets. The company claimed that the internal and external test results showed that the lead levels are "well within the limits specified by food regulations" and asserted that "MAGGI noodles are safe to eat". The company was sharing the results with the authorities.

While stating that the the company regularly monitored all its raw materials for lead that showed that levels in MAGGI Noodles were "within permissible limits", it was "committed to continuing to improve" the quality of agricultural raw materials "across the food chain working with farmers, suppliers, authorities and the food industry to ensure food safety", Nestle said.

The FMCG index itself was the biggest sectoral loser, down by about 640 points on the NSE though Nestle does not form part of the index and not all companies in the index are into food product manufacture. Only Emami, which recently announced a big ticket acquisition and another MNC giant P&G are in the green. The biggest FMCG index losers were United Spirits, down by ₹154.70 at ₹3389.35, Colgate which shed ₹42.05 at ₹1908.20, Britannia which was down by ₹56 at ₹2453.10 and GSK Consumer which lost ₹53.55 at ₹6314.85 were the major losers.

Published on June 03, 2015

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