Nestle India shares among top Nifty gainers on constant royalty, CLSA upgrade

Shares of Nestle India have opened as the top gainers on the Nifty 50 index on Thursday after the company's board approved maintaining the royalty payout to Nestle S.A. at 4.5% of net sales. This marks a reversal from their earlier approval of increasing the royalty payout to 5.25% of net sales over the next five years.

However, the proposal faced resistance from shareholders of the India entity as nearly 70% of the total public shareholders and 57% of the total shareholders voted against the proposal to increase the royalty payout.

Nestle India informed of the royalty payout being maintained at existing levels in an exchange filing on Wednesday evening.

Back then, Nestle India's CMD Suresh Narayanan had told CNBC-TV18 that the royalty increase that was being looked at was "relatively modest".

Additionally, brokerage firm CLSA upgraded its recommendation on Nestle India to "outperform" from "underperform" earlier and also raised its price target to ₹2,798 from ₹2,719 earlier after increasing its medium-term growth assumptions from the company.

The brokerage said that with the stock having corrected over 7% so far this year and with higher expected growth compared to other staple companies, the risk-reward in the stock is now favourable.

Out of the 38 analysts that have coverage on Nestle India, 50% or 19 of them have a "buy" rating, 14 have a "hold" rating and the other five have a "sell" recommendation.

Shares of Nestle India are trading 1.6% higher at ₹2,578.2. The stock has been flat over the last one month. It also recently executed a stock split, where one share of ₹10 was split into 10 shares of ₹1.