Nestle India hikes rate of royalty
FMCG giant Nestle India on Friday announced its decision to increase the rate of royalty its pays to its Geneva-based parent Nestle SA by 1.1 percentage points.
The increase, which will take effect starting January 1, 2014, will be paid over period of next five years at the rate of 0.20 per cent. Currently, the company pays the 3.4 per cent of its sales as royalty to its parent firm.
Announcing the increase, Nestle India Chairman & MD Helio Waszyk said, "It will enable Nestle India to continue to deliver long-term sustainable and profitable growth and create shared value for society and its shareholders."
The company also claimed that the approval to increase the rate of royalty was intended to make sure a high degree of corporate governance, keeping shareholders' interest in mind.
The Geneva-based parent firm had requested for an increase in the rate of royalty nearly two years back.
Nestle India has a GLA (General Licence Agreement) that allows it use Nestle Group's more than 6,000 intellectual property rights and technologies.
Royalty payments have been increasingly becoming a corporate governance concern among Indian companies. Over the past few months, a number of Indian companies, including Maruti Suzuki, Hindustan Unilever, ACC, Ambuja Cements and McDonald's Corporation, have increased their royalty rates.