By R. Jai Krishna
NEW DELHI--Nestle India Ltd. (500790.BY) Friday said it will
increase its royalty payment to parent Nestle S.A. (NSRGY) to 4.5%
of sales over a period of five years from about 3.5% now.
Nestle India will increase the payment by 0.20 percentage point
every year starting 2014, it said in notice to local stock
exchanges.
The move is likely to hurt the profit of Nestle India, as it
would increase its costs, but boost its parent company's financial
performance.
Local units of global consumer companies pay a part of their
revenue as royalty to use their parent companies' technology and
brand names.
Nestle India sells brands such as Maggi, Nestle, Kit Kat and
Munch.
India's largest consumer goods maker by revenue, Hindustan
Unilever Ltd., had earlier said its royalty cost would go up to
about 3.15% of its revenue by the financial year ending March 31,
2018, from about 1.4% now.
Hindustan Unilever is the Indian unit of Unilever PLC.
Write to R. Jai Krishna at krishna.jai@dowjones.com
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