Nestle India’s First Bonus Issue Goes Live, Stock Down
Nestle India’s maiden 1:1 bonus share issue has officially gone live, effective from Friday. This development means that the company’s existing shareholders will see their holdings doubled without any change in the investment value. However, the news has not been met with unbridled enthusiasm, as the stock price has taken a hit.
Buyers Miss Out on Allotment
It’s worth noting that investors who buy shares of Nestle India today will not be eligible for the bonus share issue. This is because the allotment is only applicable to shareholders who are already holding the company’s shares as of the record date. This means that new investors will have to wait for the next bonus issue or dividend declaration to benefit from the company’s capital appreciation.
Stock Price Takes a Hit
Despite the bonus issue, Nestle India’s stock price has fallen 8% in the past month, indicating a neutral retail sentiment. The stock has been under pressure due to a decline in quarterly profit, which we will discuss in more detail later.
Q1 Profit Drops 13.4%
Nestle India’s Q1 profit dropped 13.4% to ₹647 crore, primarily due to higher costs. The company’s revenue, however, rose 6% to ₹5,096 crore, driven by a strong performance in its dairy and beverages segments.
Cost Pressures Continue
The company’s higher costs were mainly driven by increased expenses in its dairy business, which was impacted by higher milk prices and higher employee costs. The company’s efforts to pass on these costs to consumers have been partially successful, but the impact on profitability has still been significant.
Segmental Performance
Nestle India’s dairy business continued to be a significant contributor to the company’s revenue, growing 8% year-on-year. The company’s beverages segment also performed well, with a 7% year-on-year growth. However, the company’s confectionery business remained under pressure, with a 2% decline in revenue.
Outlook Remains Challenging
Despite the company’s efforts to improve its profitability, the outlook remains challenging. The company faces intense competition in the Indian market, and the impact of COVID-19 is still being felt. The company’s ability to pass on costs to consumers and maintain its market share will be crucial in the coming quarters.
Conclusion
Nestle India’s maiden bonus issue has gone live, doubling shareholder holdings without changing the investment value. However, the stock price has taken a hit, indicating a neutral retail sentiment. The company’s Q1 profit has dropped due to higher costs, but revenue has risen 6% year-on-year. The outlook remains challenging, and the company’s ability to navigate these challenges will be crucial in the coming quarters.
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