Nestle stock at pre-Maggi ban level, hits year's high

On Monday, its stock touched a 52-week high of Rs 7,155, in anticipation of better financial performance in the June quarter

The price of shares in Nestlé India has returned to the pre-Maggi ban level for the first time since that controversy erupted last June.

That was when a ban was imposed on its flagship instant noodles brand. A little before the ban, the shares were trading at Rs 6,800 to Rs 7,500. They fell steeply to below Rs 6,000 in the aftermath of the ban, sliding below Rs 5,000 in February this year.

However, in the past two trading days, the stock fetched in excess of Rs 7,000 on the BSE, for the first time in a year. On Monday, it touched a 52-week high of Rs 7,155, in anticipation of good financial performance in the June quarter. Those results are to be announced on the coming Friday, July 29.

A fleet of new product launches, apart from adding new variants to the Maggi brand, have helped regain the confidence of investors, analysts say. So far in 2016, Nestlé has launched at least 26 new products or variants. Also, an announcement of the date of consideration for a second interim dividend on July 21 gave a push to the stock.

G Chokkalingam, founder, Equinomics Research and Advisory, said: “The stock price has been running up since May. One factor is that its regulatory hurdles are largely behind it. There have been a series of launches. The stock price touching pre-crisis levels is a result.”

According to Abneesh Roy from Edelweiss Securities, the “new avatar of Nestle” under current chairman Suresh Narayanan is more focused on premiumisation, overall sales and market share.  

“At a sectoral level, consumer goods are a good pick for investors. The monsoon advancement is good. The recommendations of the seventh pay commission will be implemented soon. All of this augur well for consumer companies. Nestlé has taken steps to get out of the crisis and this has improved investor confidence,” said an analyst from a Mumbai-based brokerage house.

Its woes on the Maggi issue are, however, not over. The company’s litigation against the stand of the government and the Food Safety and Standards Authority of India is underway in the Supreme Court, which will hear the matters in the third week of September.

In the past three months, the BSE FMCG (fast moving consumer goods) Index, which includes all the top names, of which Nestlé is one, has moved up nearly 13 per cent, to Rs 8,683.75, from Rs 7,704.05 earlier. The Index touched a 52-week high on Friday, to Rs 8,723.50.