Nestle India faces 'marginal' impact from royalty hike: UBS

To implement a staggered increase in royalty payments of 0.2% per year over next 5 yrs to the parent company

Shares in Nestle India Ltd fall 1 percent after the Indian unit of Nestle Group said late on Friday it would implement a staggered increase in royalty payments of 0.2 percent per year over the next five years to the parent company.

UBS says the increase would reduce its earnings per share estimates for Nestle India by 1-3 percent in calendar years 2014-2016, calling the impact "marginal."

The investment bank adds Nestle India can offset its royalty payments with a favourable portfolio mix that saves on raw material costs and by gaining scale efficiencies.

UBS maintains its positive outlook on the stock, with a "buy" rating and a target price of 5,750 rupees, citing expectations for volume growth.