22 Jun 2025
On June 26, 2025, Nestlé India, a leading fast-moving consumer goods (FMCG) company and the maker of iconic brands like Maggi, Nescafé, and KitKat, made a landmark announcement that has sent ripples through the Indian stock market. The company’s board of directors approved a 1:1 bonus share issue, marking the first such issuance in nearly three decades, since 1996. This move, coupled with the company’s recent financial performance and corporate actions, has put Nestlé India in the spotlight for investors and market analysts alike. Below, we dive into the details of this historic bonus issue, its implications, and what it means for shareholders and the market.
What is the Bonus Share Issue?
Nestlé India’s board has approved a 1:1 bonus share issue, meaning that for every fully paid-up equity share of ₹1 face value held by shareholders as of the record date, they will receive one additional equity share of ₹1 face value at no extra cost. This bonus issue will effectively double the company’s outstanding equity base, with approximately 96,41,57,160 new equity shares being issued, amounting to ₹96.41 crore, funded entirely from the company’s retained earnings (free reserves) as per its audited financial statements for the year ended March 31, 2025.
The bonus issue is subject to shareholder approval at an Extraordinary General Meeting (EGM) scheduled for July 24, 2025. The record date, which will determine the eligibility of shareholders to receive the bonus shares, has not yet been announced but is expected to be revealed closer to the EGM or during the company’s upcoming quarterly results announcement. Nestlé India has confirmed that the bonus shares will be credited to shareholders’ accounts by August 25, 2025, suggesting the record date will likely fall before this deadline.
In addition to the bonus issue, the board also approved an amendment to the company’s Memorandum of Association to increase its authorized share capital from ₹100 crore to ₹200 crore, accommodating the expanded equity base post-bonus issuance.
Why This Move Matters
This is Nestlé India’s first bonus share issue since 1996, making it a significant corporate action for the FMCG giant, which has historically relied on steady dividend payouts rather than bonus issues. The company’s decision to issue bonus shares reflects its confidence in its financial health and long-term growth prospects. According to Nestlé India’s outgoing Chairman and Managing Director, Suresh Narayanan, the bonus issue “recognizes the steadfast support and loyalty” of shareholders and aims to enhance share liquidity while expanding retail investor participation.
A bonus share issue does not alter the underlying value of the company but redistributes its reserves into additional shares, effectively reducing the per-share price and making the stock more accessible to retail investors. This move is often interpreted as a signal of management’s optimism about future earnings and cash flow stability, as it capitalizes a portion of retained earnings to reward shareholders. For Nestlé India, which has built substantial reserves over decades through its dominant brands like Maggi noodles, Nescafé coffee, and dairy products, this action underscores the depth of its financial strength.
Market Reaction and Stock Performance
Following the announcement on June 26, 2025, Nestlé India’s share price saw a positive response. The stock rose by approximately 1-2% during the trading session, with intraday highs reaching ₹2,444.65 on the Bombay Stock Exchange (BSE). As of 3:15 PM IST, the stock was trading at ₹2,430.40, up 1.08% from its previous close of ₹2,404.40, with a market capitalization of ₹2.34 lakh crore.
The stock had already gained momentum in the days leading up to the announcement, rising 1.94% to ₹2,364.05 on June 20 after the company disclosed the board meeting to consider the bonus issue. Over the past five days, the stock has risen 4.02%, with a 12.66% gain over six months and an 11.63% increase year-to-date in 2025. However, over the past year, the stock has underperformed the broader market, declining 5% compared to a 5% rise in the BSE Sensex.
Despite the positive market sentiment, the bonus issue announcement led to outflows worth over $200 million, according to analysts, possibly due to profit-taking by institutional investors.
Nestlé India’s Financial Context
The bonus issue comes on the heels of Nestlé India’s recent financial performance, which provides context for the company’s ability to undertake such a corporate action. In the March 2025 quarter (Q4 FY25), Nestlé India reported a 5.2% year-on-year decline in standalone net profit, falling to ₹885.41 crore from ₹934.20 crore in Q4 FY24. However, operational revenue grew by 4.49% to ₹5,503.90 crore, reflecting sustained consumer demand for its core products.
Earlier in 2025, Nestlé India announced a ₹10-per-share dividend with a record date of July 4, 2025, marking its second major corporate action this year. Since its stock split in January 2024, which reduced the face value of shares from ₹10 to ₹1, the company has also paid dividends totaling ₹42.50 per share across five payouts, reinforcing its shareholder-friendly approach.
Comparison with Peers
Nestlé India’s bonus issue sets it apart from peers like ITC, which has favored consistent dividend payouts over bonus issues in recent years. While ITC’s strong financials suggest potential for future corporate actions, Nestlé’s dual strategy of dividends and a bonus issue positions it as a standout in the FMCG sector for investors seeking both growth and value.
Implications for Investors
For current shareholders, the 1:1 bonus issue effectively doubles the number of shares they hold without additional investment, though the per-share price will adjust proportionally post-issuance.
This increased liquidity could make the stock more attractive to retail investors, potentially broadening the shareholder base. Investors should monitor official announcements for the record date, as holding shares on that date will be crucial to qualify for the bonus.
For prospective investors, the bonus issue signals Nestlé India’s confidence in its long-term growth, supported by its strong brand portfolio and market leadership in categories like instant noodles, coffee, and confectionery. However, the recent dip in profitability and the stock’s underperformance over the past year warrant a closer look at upcoming quarterly results, which may provide further insights into the company’s operational efficiency and margin trends.
Looking Ahead
Nestlé India’s first-ever bonus issue since 1996 is a historic milestone that reflects its robust financial position and commitment to rewarding shareholders. The approval at the EGM on July 24, 2025, and the announcement of the record date will be key events to watch. Investors are advised to stay updated through Nestlé India’s official communications or trusted financial news platforms to ensure they don’t miss critical deadlines.
As the FMCG giant continues to navigate a competitive market, its ability to sustain revenue growth and manage profitability will be critical. The bonus issue, combined with its strong brand equity and recent dividend payouts, reinforces Nestlé India’s position as a reliable investment option in the Indian FMCG sector. With shares already reacting positively, the market’s optimism suggests that this corporate action could pave the way for renewed investor interest in the months ahead.
Disclaimer: This blog is for informational purposes only and does not constitute investment advice. Always consult a financial advisor before making investment decisions.
