Nestlé India Limited, a leading player in the fast-moving consumer goods (FMCG) sector, holds a strong presence in the food and beverage industry. As a subsidiary of Nestlé S.A., Switzerland, which owns 62.76% of the company’s shares, Nestlé India is among the most influential companies in India’s FMCG landscape. This article explores Nestlé India’s operations, financial performance, growth strategy, efficiency metrics, and other key aspects in depth.
About Nestlé India Limited
Nestlé India, headquartered in Gurgaon, has established itself as a prominent name in India’s food and beverage sector. The company operates across various product categories, including:
- Milk products and nutrition
- Beverages
- Cooked food and cooking aids
- Chocolates and confectionery
The company’s portfolio includes many popular brands, such as:
- Nescafé
- Nestlé Everyday
- Ceregrow
- Nangrow
- Maggi
- KitKat
- Milkybar
- Milkmaid
- Milo
- Munch
- Bar One
- Polo
- Nestea
With nine manufacturing facilities and 22 co-manufacturers and co-packers across India, the company ensures a robust supply chain. Its R&D center in Manesar strengthens its leadership in nutrition, healthcare, and wellness, supporting innovation in emerging markets.
Sales Growth and Business Expansion
The company has exhibited steady sales growth over the past few years.
- Five-year compound annual growth rate (CAGR): 11.1%
- Sales in Q1 FY25: ₹4,814 crore, a 3% increase year-on-year (YoY)
Nestlé India’s domestic revenue grew by 4% YoY, although exports declined by 7% YoY. Growth was driven by product mix and increasing volumes. Notably, five of the company’s top twelve brands experienced double-digit growth.
The company’s growth strategy focuses on penetration-led volume growth and premiumization. Nestlé India continues to introduce innovative products and expand into new categories. One example is the company’s expansion of Maggi’s product line and chocolate offerings.
In 2023, premium products contributed 12% of total revenue, and innovations accounted for 6% of total sales. Nestlé India has also emphasized increasing the Indian product portfolio for global markets, enhancing both domestic and export revenues.
EBITDA and Profit Growth
- Five-year EBITDA CAGR: 12.2%
- Trailing 15-month EBITDA (as of March 2024): ₹5,820 crore
- Q1 FY25 EBITDA: ₹1,114 crore, reflecting a 6% increase YoY
The EBITDA margin stood at 23.15% in Q1 FY25, a YoY expansion of 49 basis points (bps). Rising costs of coffee, cocoa, cereals, and grains have posed challenges due to market trends and inflation. However, Nestlé India managed to mitigate these cost pressures through an improved product mix, operational efficiencies, and strategic price adjustments.
The management anticipates continued challenges in raw material costs, including higher milk prices due to harsh summer forecasts. Edible oil prices may also rise due to a global supply shortage and higher freight costs, exacerbated by the Red Sea crisis. The company aims to tackle cost challenges by optimizing costs and sweating existing assets.
PAT and Margins
- Five-year CAGR of profit after tax (PAT): 14.2%
- PAT (trailing 15-month period, March 2024): ₹3,933 crore
- Q1 FY25 PAT: ₹747 crore, a 7% YoY growth
The PAT margin stood at 16.12% for the trailing 15-month period. For Q1 FY25, the PAT margin was 15.51%, reflecting a YoY expansion of 52 bps. Effective cost management and a focus on high-margin products have contributed to this stable performance.
Cash Flow and Capital Expenditure
Nestlé India reported strong operating cash flow:
- Cash inflow from operations (March 2024): ₹4,175 crore
- Investment outflow: ₹1,237 crore, mainly towards property, plant, and equipment (PP&E)
The company has embarked on a major capital expenditure (capex) plan for 2023-2025, amounting to ₹5,000 crore. This investment will support product line expansions and sustainability initiatives across factories in locations such as:
- Moga
- Nanjangud
- Samalkha
- Sanand
- Tahliwal
- Pantnagar
- Choladi
- Ponda
- Bicholim
The capex will also fund the development of a 10th factory in Khordha, Odisha, at an estimated cost of ₹894 crore. Capex spending increased from ₹500 crore in 2022 to ₹1,300 crore in 2023 and ₹2,000 crore in 2024, with additional investments planned for 2025.
Efficiency Metrics and Asset Management
Nestlé India maintains a favorable working capital cycle, reflecting efficient receivable and payable management. The company has also improved asset utilization, as shown by its asset turnover ratio, which highlights efficient use of core assets.
Solvency and Debt Management
Nestlé India has a strong solvency position with negligible debt. Key solvency metrics include:
- Debt-to-equity ratio: Minimal, reflecting low financial leverage
- Interest coverage ratio: Strong, ensuring the company can meet interest obligations
While the company’s current liabilities exceeded current assets, higher provisions for employee benefits (such as pensions and gratuity) drove this trend. Cash and cash equivalents amounted to ₹819 crore as of March 2024, compared to ₹1,059 crore in September 2023.
Valuation and Dividend Policy
- Price-to-earnings (PE) ratio: 76.71x (trailing twelve months)
- Dividend per share (FY24): ₹32, adjusted for face value changes
The company has an aggressive dividend payout policy, consistently rewarding shareholders. For FY25, the company declared an interim dividend of ₹2.75 per share. The dividend payout ratio stood at 12% during the period.
Stock Performance and Market Outlook
Nestlé India’s stock has shown resilience over the years. After a low of approximately ₹1,300 in March 2020, the stock quickly rebounded and reached a high of ₹1,830. The stock has consolidated over time, regaining momentum in the past year.
Key stock levels:
- Support zone: ₹1,700-₹1,800
- Upside breakout level: ₹2,750-₹2,850
Long-term investors may find accumulation opportunities near the support zone. Further growth will depend on the company’s ability to expand its premium product range and increase exports.
Management and Leadership Transition
Nestlé India emphasizes leadership continuity and strategic focus on growth. The following leadership transitions will take effect from January 1, 2025:
- Rajat Jain (BEO, Foods Business) will move to a significant leadership role within the Nestlé Group.
- Rupali Rattan (BEO, Chocolates and Confectionery) will succeed Mr. Jain.
- Gopichandar Jagatheesan (BEO, Dairy Business) will take over Ms. Rattan’s role.
- Manav Sahni (Category Business Manager, Chilled Dairy, RTD, UHT) will assume Mr. Jagatheesan’s position.
Shareholding Pattern
The company’s promoter holding has remained stable at 62.76%. Notable changes in institutional holdings include:
- Foreign Institutional Investors (FIIs): Decreased from 12.10% (Q4 FY24) to 11.94% (Q1 FY25)
- Domestic Institutional Investors (DIIs): Increased from 9% to 9.18% during the same period
Key public shareholders include:
- Life Insurance Corporation of India: 2.40%
- SBI NIFTY 50 ETF: 1.36%
Conclusion
Nestlé India Limited remains a dominant force in the Indian FMCG sector, driven by innovative products, premiumization, and robust operational efficiency. With a strong financial position, consistent dividend payouts, and strategic investments, the company is well-positioned for future growth. As it expands its portfolio and strengthens its market presence, Nestlé India continues to be a valuable player in the Indian consumer market.
