Nestle India's share price is a major topic of discussion among investors, as the company navigates a significant corporate action and a mixed bag of recent financial results.
1:1 Bonus Share Issue Triggers Price Adjustment
On Friday, August 8, Nestle India's shares were in the spotlight as the company marked the record date for its first-ever 1:1 bonus share issue. This corporate action, which effectively doubles the number of outstanding shares, led to a corresponding adjustment in the stock price. An investor who held one share now has two, with the price of each share approximately halving to reflect the increased quantity.
For example, a stock trading at around ₹2,234 before the bonus issue would see its price reset to approximately ₹1,117. While the overall value of an investor's holding remains the same, the bonus issue is seen as a move by the company to enhance stock liquidity and make the shares more accessible and affordable for a wider range of retail investors. The eligibility cut-off for the bonus shares was Thursday, August 7.
Q1 FY26 Results Show Profit Decline Despite Revenue Growth
The bonus issue follows the company's recent Q1 FY26 earnings report, which presented a mixed financial picture. For the quarter ending June 30, 2025, Nestle India reported a 13.4% year-on-year decline in consolidated profit after tax (PAT) to ₹647 crore, down from ₹747 crore in the same period last year.
However, the company's revenue from operations showed resilience, increasing by 6% year-on-year to ₹5,096 crore. The growth was primarily driven by a strong performance in domestic sales and a notable increase in export sales.
According to the company's Chairman and Managing Director, Suresh Narayanan, the decline in profit was attributed to elevated commodity prices, higher operational costs due to manufacturing expansion, and increased finance costs from temporary borrowing. He noted, however, that prices for some key commodities like edible oil and cocoa are stabilizing.
Analyst Recommendations and Market Outlook
The recent developments have led to varied opinions among market analysts. While some analysts have maintained a "Buy" or "Add" rating with a positive long-term outlook, others have assigned a "Hold" or "Neutral" rating, citing concerns over high valuations and the recent dip in profitability.
Experts suggest that the company's robust brand portfolio and strong market position continue to be a positive factor. However, the stock's high valuation relative to its peers and its recent underperformance against the broader market index, the Sensex, are points of caution for some investors. The bonus issue is expected to attract more retail participation, but the company's ability to maintain earnings growth in a challenging cost environment will be a key factor for its future performance.
