Nestle India, a prominent player in the fast-moving consumer goods sector, has announced its intention to consider a stock split during its upcoming board meeting on October 19. This move comes alongside the company’s deliberation on declaring its second interim dividend for 2023.
What would a stock split mean for investors?
Stock splits are a strategic decision by companies to increase the number of shares in circulation by dividing each existing share. For instance, if Nestle decides on a 2-for-1 split, each shareholder would receive an additional share for every share they own, but the value of each share would be adjusted accordingly. The company’s announcement indicates a potential split of its equity shares, which currently have a face value of ₹10 each.
For shareholders, this doesn’t change the overall value of their holdings but can make the stock more accessible to a broader range of investors due to the reduced price per share.
The company’s performance in 2022 showcased total sales amounting to ₹16,790 crore and a net profit of ₹2,390 crore. Furthermore, they declared a dividend of ₹220 per equity share last year.
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Despite a recent downgrade from ‘buy’ to ‘neutral’ by UBS analysts, the brokerage remains optimistic about Nestle India’s future, even raising the stock’s target price to ₹24,500, suggesting a potential 7% upside. This optimism stems from Nestle’s diverse product range, including noodles, coffee, chocolates, and baby formula, solidifying its position in the market.
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