Stock Split Alert: FMCG Giant Announces First Ever Stock Split

2023 has been a year of dizzying heights for the Indian stock market.

The BSE Sensex, riding on a wave of positive investor sentiment, has delivered a stellar 16% return over the past year as of 21 December 2023.

Many stocks have skyrocketed, defying gravity and sending ripples through portfolios.

Every investor wants a piece of the skyrocketing Indian stock market, but eye-watering share prices are a barrier to entry.

So, to keep pace with soaring share prices, a wave of stock splits has swept across companies.

And joining this split party is FMCG giant Nestle.

Here's all you need to know.

• Nestle announced a stock split on 19 October 2023.
• The company will issue stocks split in a ratio of 1:10. This means a sub-division of one equity share of the company, having a face value of Rs 10 each, into ten equity shares having a face value of Rs 1 each.
• The record date for the same is 5 January 2023.

This is the first time the company has announced a stock split in at least two decades.

A stock split is done to increase the stock liquidity in the market. Investors who are holding the stock till the record date will receive the new shares in demat accounts, and the stock price will be adjusted according to the split ratio.

Post the stock split, the outstanding shares will increase from 96,415,716 shares to 964,157,160 shares.

A Close Look at the Financials

For the September 2023 quarter, Nestle India recorded a 9.6% YoY rise in revenue at Rs 50.4 billion (bn) while its net profit jumped 36% YoY to Rs 9.1 bn.

The company fared better than its major FMCG peers, which reeled under pressure from a sluggish rural recovery.

Between FY19 and FY23, the company posted a CAGR growth of 8% in its revenue. Along with the revenues, the net profits have also increased by a CAGR of 10.45% during the last five financial years.

Nestle Financial Snapshot (2018-22)

Particulars	18-Dec	19-Dec	20-Dec	21-Dec	22-Dec
Total Revenue (Rs in bn)	115.5	126.2	135	148.6	170
Revenue Growth (%)	-	9.2	6.9	10.1	14.4
Operating Profit Margins (%)	21	21.1	21.7	22	20
Net profit (Rs in bn)	16	19.7	20.8	21.2	23.9
Net profit margin (%)	14.3	16	15.7	14.4	14.2

Data Source: Equitymaster

Further, during the last five financial years, the company has maintained a steady operating margin, which has ranged from 20-22%.

Similarly, the net profit margins of the company were also steady floating between the range of 14% to 16%.

Steady margins over the years, despite the increase in revenues and profits suggest that the company has managed to keep its expenditure under control.

Capacity Expansion Plan

The company plans to invest a staggering Rs 42 bn by 2025. The investment includes the establishment of its 10th plant in Odisha, in addition to augmenting its existing manufacturing facilities.

The new funds will primarily focus on enhancing the company's manufacturing capacity, with a significant portion dedicated to the food space, followed by chocolate, confectionery and other nutrition-based sectors.

Nestle India's ambitious expansion plans also encompass a new factory in Odisha, with an allocation of approximately Rs 9 bn. Initially intended to serve as a noodles manufacturing unit.

What Next?

Nestle has been increasing its market size by focusing on strengthening its reach in small towns and large villages under its RURBAN strategy.

It has also continued to widen and customise our RURBAN portfolio by introducing products which cater to specific local requirements.

Further, Nestle is piloting NESmitra, its customer ordering app in RURBAN markets, that will help retailers connect with the distributors.

The company has accelerated its focus on Innovating and renovating, launching many new products. Currently, it has 30 new projects in the pipeline.

It is working on developing a diverse range of food products across multiple brands that highlight millet as a more eco-friendly and sustainable food option.

Additionally, the company has doubled its spending on sustainability in sectors such as dairy, plastics, and sustainable sourcing.

Being an established player in milk and nutrition products, chocolates and confectionary, Nestle India stands among the top FMCG stocks in India.

How Shares of Nestle have Performed Recently

The share price of Nestle has climbed by 3% in the past one month.

Over the past one year, shares of the company have rallied 25%. In the past five years, shares have delivered multibagger returns of over 125%.

The company touched its 52-week high of Rs 25,778.5 on 20 December 2023 and its 52-week low of Rs 17,880 on 15 March 2023.

About Nestle India

Nestle India is the 100-year old, second largest FMCG company in India. It dominates the noodle (Maggi) and the hot beverage (Nescafe) categories.

After more than a century-old association with the country, Nestle India today has presence across India with 8 manufacturing facilities and 4 branch offices.

Nestle India is a subsidiary of NESTLE S.A. of Switzerland. The company has more than 2,000 brands ranging from global icons to local favourites, and is present in 191 countries around the world.

The products offered by Nestle range across categories such as milk and nutrition, chocolates and confectionary, beverages, and prepared dishes and cooking aids.

Some of the famous brands of the company are Nescafe, Nestle Everyday, Sunrise, Maggi, KitKat, Milkybar, Milkmaid, Nestea, Munch, Bar one, Polo, and many more.

For more details about the company, you can have a look at Nestle India's factsheet and Nestle India's latest quarterly results on our website.

For more details about the FMCG sector, you can check out the FMCG sector report on our website.

You can also compare Nestle with its peers on our website.

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