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After opening flat, the Indian stock markets have inched upwards and are presently trading in the green. Sectoral indices are trading on a mixed note with pharma and banking stocks leading the gains. However FMCG stocks are witnessing selling pressure.
The BSE-Sensex is trading up 62 points (up 0.2%) and the NSE-Nifty is trading up 22 points (up 0.3%). The S&P BSE Midcap index and the S&P BSE Smallcap index are also trading up by 0.7% and 0.1% respectively. The rupee is trading at 65.22 to the US$.
Stocks in the energy space are trading mixed with Castrol India leading the gains and MRPL leading the losses. As per a leading financial daily, the oil ministry has agreed to the demand of oil producers to switch from a fixed cess on oil-production to an ad-valorem duty, which will be based on a percentage of the oil price. This, if approved by the finance ministry, could help lower the duty paid by oil producers.
The key beneficiaries to the move will be Oil and Natural Gas Corporation (ONGC), Cairn India and Oil India Ltd. All of these companies have been demanding a switch to ad-valorem since the oil prices started crashing, leaving producers burdened with a disproportionate amount of tax.
At present levels, oil companies have to pay a fixed cess of Rs 4,500 per tonne. A switch to ad-valorem, on the other hand, will ensure their cess outgo varies along with the price, thereby limiting the outgo when oil prices are on lower side.
The company's net profit during the quarter slumped 60% to Rs 1.24 billion on a YoY basis. This was because the company was severely hit by absence of its popular brand Maggi noodles.
Net sales fell 32.1% YoY to Rs 17.42 billion. In addition to loss of sales from the business disruption, net sales worth Rs 153 million were reversed during the quarter in relation to Maggi noodles stock being withdrawn from the market.
Most of the loss and business disruption came with the Maggi issue, which accounts for about 30% of the company's revenue in India. The India's food regulator had passed an order to withdraw Maggi on allegations that the product contained lead and monosodium glutamate in excess of prescribed limits. However, Nestle India has since won the case by challenging the ban in the Bombay high court. Post this order, the product has been tested at three laboratories and was found safe.
For now, the company has resumed production of Maggi noodles at three of its five plants. The company has said that it will have to get the produced product tested once again before it can be re-launched.
We have discussed our views on this Maggie fiasco and its impact on the company's business in a recent 'The 5 Minute WrapUp' premium (Subscription required). You can read it here. Presently, the scrip of Nestle India is trading down by about 1%.
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