Nestle India increases royalty rate to 4.5% from 3.5%

Processed foods maker Nestle India on Friday said it has increased its royalty rate to 4.5 percent from earlier 3.5 percent of sales.

The increase in royalty will be at 0.20% staggered over the next 5 years and effective Jan 1, 2014, the maker of Maggi Noddles and Nescafe instant coffee said.

"This will ensure ongoing access to the entire capabilities of Nestle, the world's leading nutrition, health and wellness company...and will enable Nestle India to continue to deliver long term sustainable profitable growth," A Helio Waszyk, chairman and MD of Nestle India said.

The Company has a General License Agreement (GLA) that allows it access to Swiss parent Nestle's intellectual property rights including global portfolio of brands, proprietary science and technology including over 1,300 patents, extensive research and development capabilities and expertise on best practices, it said.

The GLA includes access to over 6,000 brands such as Nestle, Maggi and Nescafe and technologies developed by the global network of 32 research and development  centres, including the one recently inaugurated at Manesar in Haryana, which will further assist in localization of global concepts, Nestle India added.

Nestle India is not alone that will now pay higher royalties to its multi-national parent. In Jan, rival Hindustan Unilever had announced a similar new royalty agreement with its Anglo-Dutch parent Unilever. According to the new pact inked by HUL, the royalty that it pays will increase to 3.15 percent of turnover by March 2018, compared with 1.4 percent now.

Nestle India shares closed down 1 percent at Rs 4,706.75 on NSE on Friday.