Nestle India Bonus Issue: A Sweet Deal or Market Trap

Bonus issue of shares is a popular mechanism to reward shareholders.

By issuing bonus shares, a company increases the total number of shares outstanding, which typically lowers the market price per share.

This makes the shares more affordable and attractive to retail investors, thereby enhancing liquidity and trading activity in the stock.

Recently, a multi-national company announced that its board will meet to declare bonus issue of shares. The stock in the action is Nestle India.

Here's all you need to know about the likely bonus shares details from the company:

• Board Meeting Date: 26 June 2025
• Last Bonus Declared: Nestle India last issued bonus shares in 1996 in a 1:2 ratio. Since then, the company has not declared any bonus issues for nearly three decades.
• Trading Window Closure: Trading window for dealing in the securities of the company will remain closed from 19 June 2025 to 28 June 2025 (both days inclusive).
• Face Value: The face value of the shares would be Re 1.
• Ex-Bonus Date: Likely to be known after the board meeting of the company on 26 June 2025.

Is this Nestle India Likely Bonus a Sweet Deal for Shareholders?

Nestle India intimated the exchanges of a board meeting for bonus declaration after market-hours on 19 June. On 20 June, after the intimation, the stock gained nearly 2%.

But there has been no major reaction in the stock. Investors will now watch for the bonus ratio on 26 June 2025. If the bonus ratio surprises positively there could be a positive movement in the stock.

The important thing to note is following the ex-bonus date, the stock will get adjusted. Share prices tend to correct based on the ratio of the bonus shares declared.

Let's explain this a little. Let's assume that company A has declared a bonus issue in the ratio of 1:1 and a day before the ex-bonus day, the stock is priced at Rs 200.

The next day being the ex-bonus day, the stock could correct by Rs 100 or thereabouts as shareholders buying after the ex-bonus date will not be entitled for bonus. The stock would therefore be traded around Rs 100.

At this price you get double the shares you held but the price also halves. In short, the value of your portfolio remains the same.

It's therefore imperative for investors to study the fundamentals - especially if you are a long-term investor.

So, is the likely bonus issue of Nestle India a sweet deal for shareholders?

The answer lies in examining the growth prospects and other fundamentals of the company and going beyond the likely bonus issue of shares.

A Look at the Financials

Nestle India reported a mixed set of results for Q4 FY25. Revenue from operations rose 4.5% YoY to Rs 55.04 bn.

Domestic sales for the quarter reached Rs 52.35 bn, the highest ever for any quarter, supported by improving volume growth.

Nestle India reported its Q4 FY25 results with a net profit of Rs 8.85 bn, a 5.2% YoY decline from Rs 9.34 bn in the same quarter last year.

The company saw double-digit growth in beverages and confectionery segments, with three out of four product groups delivering healthy growth.

Powdered and liquid beverages were the largest contributors to growth, while the confectionery segment, driven by KitKat, grew at a high single-digit pace.

Nestle India Financial Snapshot (FY21-25)

(Rs m, consolidated)	2020	2021	2022	FY 23-24 (15m)	2024- 2025
Net Sales	133,500	147,406	168,970	243,939	202,016
Net profit	20,824	21,184	23,905	39,328	33,145
Return on Equity (%)	103.1	108.8	97.2	117.7	80
Return on Capital Employed (%)	145.1	155	137.2	161.4	110.4

Source: Equitymaster

What Next?

Nestle India has showed a steady financial performance in the last few years.

The company is establishing a factory in Odisha. This facility is being set up with an initial investment of approximately Rs 9 bn. In its first phase, the facility will manufacture products from foods (prepared dishes and cooking aids) portfolio.

The management has said that it will remain focused on its RUrban journey. The company's RUrban strategy focusses on five key pillars: infrastructure, product portfolio, visibility, consumer connect, and technology.

The RUrban distribution touchpoints have increased to 27,730. The company is present in approximately 208,500 villages. RUrban smart stores and HAAT activities in village markets have been enhanced and use and interventions with technology accelerated.

On the export front the company has expanded footprint to Maldives and Papua New Guinea, offering diverse range of confectionery SKUs. MAGGI noodles was introduced in new markets in the Middle East and South Africa, while it saw a decline in North America.

The company is also making its presence felt in the fast-growing petcare business. Nestle India had acquired the pet food business from Purina Pet Care India Pvt. Ltd. It operates the Purina Petcare business in India, offering premium dog and cat food under the Purina brand.

The company is focusing on premium and healthier product segments, such as baby food with reduced sugar, targeting a huge market opportunity.

Nestle India continues to dominate in the noodle segment with a market share of more than 60%. This makes India the largest noodles market for the Nestle group.

The company is also chalking out ambition plans to expand reach. The target is to reach 6 m outlets in the near future.

While all this augurs well the company does face challenges. Rising prices of essential raw materials such as coffee, cocoa, edible oils, and milk have increased input costs significantly.

This inflationary pressure affects margins and forces the company to consider small price hikes to maintain profitability. The industry is also fiercely competitive adding to margin pressures.

How Shares of Nestle India Have Performed Recently

Over the last one month, the share price of Nestle India has remained flat. In the past one year, shares of Nestle India have lost nearly 7%.

The stock hit a 52-week high of Rs 2,777 on 27 September 2024. The stock also hit a 52-week low of Rs 2,115 on 5 March 2025.

About Nestle India

Nestle India is the Indian subsidiary of the Swiss multinational Nestle S.A. It's headquartered in Gurgaon, Haryana.

The company is a major player in India's fast-moving consumer goods (FMCG) sector, offering a diverse portfolio of food and beverage products including popular brands like Maggi, Nescafe, KitKat, and Nestea.

The company operates nine manufacturing facilities across India located in Punjab, Haryana, Karnataka, Tamil Nadu, Goa, Uttarakhand, Himachal Pradesh, and Gujarat, with a tenth plant under development in Odisha to expand capacity further.

The company's products reach two out of three Indian households, with 80% penetration in urban areas and 60% in rural markets.

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Investors should evaluate the company's fundamentals, corporate governance, and valuations of the stock as key factors when conducting due diligence before making investment decisions.

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