Nestle India to consider its first-ever stock split; share among top Nifty gainers
Nestle India has made a significant announcement by revealing its consideration of a first-ever stock split. This development is scheduled for discussion at a board meeting slated for October 19, which aligns with the company’s release of its September quarter results. If the proposal receives approval, it will mark a noteworthy milestone in Nestle India’s corporate history, as the company has never previously initiated a stock split or bonus issue.
The proposed alteration entails the sub-division or split of the existing equity shares, each with a face value of Rs. 10 and fully paid up. The specific details of the stock split, including the ratio by which the shares will be divided and the ensuing impact on the company’s share capital, will be determined and decided upon by the Board of Directors. This development will be closely monitored by investors and market observers, as it represents a strategic decision that can influence the company’s share price dynamics and market accessibility.
In response to this board proposal, Nestle India’s stock experienced a gain of over 2 percent intraday, positioning it as one of the top Nifty gainers. As of 11:40 am, the stock was trading at Rs 22,610, reflecting a 1.32 percent increase from the previous close. This development will be closely watched by investors and market observers as it represents a significant corporate decision for the company.
Nestle India is set to make important announcements on October 19, which include the declaration of the company’s second interim dividend for the year 2023, if approved. The dividend, if declared, will be paid starting from November 16, 2023. This decision reflects the company’s commitment to its shareholders and the distribution of profits.
Analysts have a positive outlook for Nestle India’s September quarter results, expecting it to outperform the FMCG (Fast-Moving Consumer Goods) sector. The company is anticipated to achieve this through stable volume growth and robust pricing growth. Nestle’s strategic pricing actions, particularly on products like baby food and coffee, have contributed to its strong performance. Analysts are modeling significant year-on-year growth in both domestic and export revenues, with a positive outlook for the company’s financial performance. This makes Nestle India an interesting player to watch in the FMCG sector.
Foreign broking firm UBS has noted that Nestle India’s current valuation is on the higher side, which may impose constraints on potential stock price growth. The stock is currently trading at a price-to-earnings (P/E) ratio of 66x based on 1-year forward earnings, a level that is 1 standard deviation above the mean multiple.
Despite Nestle India’s relatively high valuation, UBS maintains a positive long-term outlook for the company. The brokerage firm’s optimism is rooted in a combination of factors that it considers advantageous for Nestle India’s future growth and market position. One of the key factors is the company’s strong brand equity, which has contributed to its market dominance.
Additionally, Nestle India’s effective pricing strategies, emphasis on premiumization, and dedication to product innovation are seen as drivers of continued revenue and volume expansion. Importantly, the company’s focus on rural market growth aligns with the evolving consumption patterns in India. While the stock may trade at a premium at present, UBS believes that Nestle India’s strategic strengths position it for long-term success in the Indian market. Investors and market observers will continue to closely monitor the company’s performance and valuation trends in the coming quarters, considering its potential for sustained growth and market leadership.
