Shares of Nestle India Ltd, the Indian subsidiary of Swiss multinational food and drink processing conglomerate Nestle, fell by 2% on Friday, January 5, 2024, as the stock started trading ex-split. The company had announced a 1:10 stock split last month, with January 5 set as the record date.
Stock Split Aims to Enhance Liquidity
The strategic stock split by Nestle India aims to enhance liquidity of the company’s shares and make them more affordable for small-scale investors. With the subdivision, Nestle India shares now have a face value of Re 1, compared to the earlier Rs 10 per share.
As per market observers, the increased affordability of Nestle India shares post-split can potentially boost demand. However, the stock started trading on a weak note, falling from the previous close of Rs 2,711.60 to an intraday low of Rs 2,657 on the Bombay Stock Exchange.
Strong Financial Performance Backs Demand
Nestle India has showcased a robust financial performance recently, which has supported overall positive market sentiment towards the stock.
In the July-September 2022 quarter, the company’s net profit surged 36% year-over-year to Rs 908 crore. Revenues also grew 9.6% to Rs 5,036 crore. Improved sales growth across categories like Maggi noodles, KitKat chocolates and Nescafe, coupled with pricing actions and focus on distribution expansion, aided the strong quarterly show.
Earlier, Nestle India was among the most expensive stocks in the Indian markets. While the expensive valuations have been a drag, its consistent financial outperformance, along with the recent split, can potentially turn retail investor interest in its favor.
Outlook on Nestle India Post Stock Split
With increased affordability and likely boost in liquidity, Nestle India shares are expected to garner higher investor interest after the stock split. The company’s continued focus on innovation, distribution reach, product premiumization and financial discipline can also contribute to sustaining demand.
However, any unexpected changes in input costs or consumer demand need close monitoring. Overall, the stock split has opened the doors for higher retail participation in Nestle India, which can drive greater value for shareholders.