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You can view the entire text of Notes to accounts of the company for the latest year

BSE: 500790ISIN: INE239A01016INDUSTRY: Food Processing - Bakery/Dairy/Fruits/Others

BSE   ` 10677.00   Open: 10465.00   Today's Range 10420.70
+212.00 (+ 1.99 %) Prev Close: 10465.00 52 Week Range 7642.80
Year End :2017-12 

1. Capital Management

The Company's capital management objective is to ensure that a sound capital base is maintained to support long term business growth and optimise shareholders value. Capital includes equity share capital and other equity reserves.

The Company's operations are funded primarily through internal accruals. Return to shareholders through dividend is monitored as per the laid down dividend distribution policy.

2. The Company had reviewed the General License Agreement in 2013, the Board of Directors of the Company negotiated and Nestle S.A. accepted an increase in royalty from 3.5% to 4.5% of domestic sales in a staggered manner by making an increase of 0.20% per annum over five years effective 1 January 2014. The royalty rate on exports is aligned to 4.5% of sales.

4. Operating Leases

The Company's significant leasing arrangements are primarily in respect of operating leases for premises (office, residential, warehouses etc.) and vehicles. The aggregate lease rentals charged to the statement of profit and loss account under different revenue accounts are ' 718.8 million (Previous year ' 709.7 million).

5. Related party disclosures under Ind AS 24

(a) Related party and their relationship

(i) Holding Companies

Nestle S.A (Ultimate holding Company)

Maggi Enterprises Limited

(ii) Fellow subsidiaries with whom the company had transactions

CPW Middle East FZCO Nestle Panama S.A.

Nestec S.A. Nestle Philippines, Inc.

Nestec York Ltd. Nestle Product Technology Centre

Nestle (China) Ltd. Nestle Products (Mauritius) Ltd.

Nestle (PNG) Ltd Nestle Products Sdn Bhd

Nestle (South Africa) (Pty) Ltd Nestle R&D Center, Inc.

Nestle (Thai) Ltd. Nestle R&D Centre (Pte) Ltd.

Nestle Adriatic S DOO Nestle R&D Centre India Private Ltd.

Nestle Asean (Malaysia) Sdn. Bhd. Nestle ROH (Thailand) Ltd.

Nestle Australia Ltd. Nestle Romania SRL

Nestle Bangladesh Ltd. Nestle Servicios Corporativos, S.A.

Nestle Brasil Ltda Nestle Shanghai Ltd.

Nestle Bulgaria AD Nestle Shuangcheng Ltd

Nestle Canada Inc. Nestle Singapore (Pte) Ltd.

Nestle Caribbean Inc. Nestle South Africa Pty Ltd.

Nestle Cote D'Ivoire Nestle Suisse S.A.

Nestle Deutschland AG Nestle Taiwan Ltd.

Nestle Dubai Manufacturing LLC Nestle Thailand Ltd.

Nestle Equatorial African Region Nestle Tianjin Ltd.

Nestle France S.A.S. Nestle Trinidad And Tobago Ltd.

Nestle Ghana Ltd. Nestle Turkiye Gida Sanayi A.S.

Nestle Hong Kong Ltd Nestle UK Ltd.

Nestle Hungaria Kft. Nestle USA Inc

Nestle Iran Nestle Vietnam Ltd.

Nestle Japan Ltd. Nestle Waters Management & Technology

Nestle Kenya Ltd. Nestle Waters Marketing & distibution S.A.S

Nestle Korea Ltd. Nestle Waters North America Inc

Nestle Lanka PLC Nestrade S.A.

Nestle Manufacturing (Malaysia) Sdn Bhd PJSC “Lviv Confectionery Factory svitoch"

Nestle Mexico S.A. de C.V. PT Nestle Indonesia

Nestle Middle East FZE Purina Petcare India Pvt. Ltd.

Nestle Middle East Manufacturing Quality Coffee Products Ltd.

Nestle Nederland B.V. Servcom S.A.

Nestle Nigeria Plc SMA Nutrition India Private Ltd.

Nestle Operational Services Worldwide S.A. Societe des Produits Nestle S.A.

Nestle Pakistan Ltd.

(iii) Key Management Personnel Executive Directors

Suresh Narayanan, Chairman and Managing Director Shobinder Duggal, Director - Finance & Control and CFO

Aristides Protonotarios , Director - Technical (Director - Technical upto 31 March 2017)

Martin Roemkens , Director - Technical (Director - Technical w.e.f. 1 April 2017)

Non-Executive Directors Ashok Kumar Mahindra

Rama Bijapurkar (Non-Executive Director w.e.f. 1 May 2017)

Rakesh Mohan

Ravinder Narain (Non-Executive Director upto 1 May 2017)

R.V. Kanoria Swati A.Piramal

(iv) Employees benefit trusts where control exists Nestle India Limited Employees Provident Fund Trust Nestle India Limited Employees' Gratuity Trust Fund

(b) Nature of transactions

The transactions with the related parties have been entered in the ordinary course of business and are at arm's length.


Other transactions with Key Managerial Personnel:

- Remuneration includes lease rentals paid at market rates ' 3.6 million (previous year ' 3.3 million).

(1) As the liabilities for defined benefit obligations are provided based on actuarial valuation for the company as a whole, the amount pertaining to Key management personnel has not been included.

50. Segment reporting

Based on the guiding principles given in Ind AS 108 on 'Operating Segments', the Company's business activity falls within a single operating segment, namely Food. Accordingly, the disclosure requirements of Ind AS 108 are not applicable. The food business incorporates product groups viz. Milk Products and Nutrition, Prepared dishes and Cooking aids, Powdered and Liquid Beverages and Confectionery.

(ii) The Company has business operations only in India and does not hold any assets outside India. Revenue from major customers

There is no single customer that accounts for more than 10% of the Company's revenue.

(ii) Proposed Final Dividend

The Board of Directors have recommended a final dividend of ' 23.00 per equity share amounting to ' 2,217.6 million for the year 2017 (Previous Year: ' 23.0 per equity share amounting to ' 2,217.6 million) after the balance sheet date. The same is subject to approval by the shareholders at the ensuing Annual General Meeting of the Company and therefore proposed final dividend (including dividend distribution tax) has not been recognized as a liability as at the balance sheet date in line with Ind AS 10 on 'Events after the Reporting Period'.

6. The Company did not have any holding or dealing in Specified Bank Notes and other denomination notes during the period 8 November, 2016 to 30 December, 2016 and hence disclosure requirements as per the notification G.S.R. 308(E) dated 31 March, 2017 are not applicable to the Company. For the purpose of this clause, the term 'Specified Bank Notes' shall have the same meaning provided in the notification of the Government of India, in the Ministry of Finance, Department of Economic Affairs number S.O. 3407(E), dated the 8 November, 2016.

7. First Time adoption of Ind AS

The Company has adopted Ind AS w.e.f 1 January 2017 with a transition date of 1 January 2016. Accordingly, financial statements for the year ended 31 December 2017 together with the comparative information for the year ended 31 December2016 and opening Ind AS balance sheet as at 1 January 2016 have been prepared in accordance with accounting policies as set out in Note 2 - “Significant accounting policies".

The Company has prepared its opening Ind AS balance sheet as at 1 January 2016 by recognising assets and liabilities whose recognition is required by Ind AS, derecognising assets and liabilities which are not permitted by Ind AS, reclassifying assets and liabilities as required by Ind AS, and applying Ind AS measurement principles, subject to certain optional exemptions and mandatory exceptions. The resulting difference between the carrying values of the assets and liabilities as at the transition date under Ind AS and Previous GAAP have been adjusted directly against “Other Equity".

The effect of the transition to Ind AS on Company's financial position, financial performance and cash flows is set out below.

(a) Optional exemptions and mandatory exceptions

The Company has availed the following optional exemptions and mandatory exceptions on first time adoption of Ind AS as per Ind AS 101.

(i) Optional exemptions

Deemed cost for property, plant and equipment

The Company has opted to continue with the carrying value as per the Previous GAAP for all items of its property, plant and equipment as its deemed cost on the date of transition.


The Company has opted to determine, whether a contract or arrangement existing at the date of transition contains a lease on the basis of facts and circumstances existing at the date of transition rather than at the inception of the arrangement.

Designation of investment in equity instruments

The Company has opted to designate equity investments as at fair value through other comprehensive income (FVOCI) based on the facts and circumstances existing at the date of transition to Ind AS rather than at initial recognition.

(ii) Mandatory exceptions

Classification and measurement of financial assets

The Company has determined the classification and measurement of financial assets on the basis of the facts and circumstances existing at the date of transition.


The Company's estimates under Ind AS as at 1 January 2016 are consistent with the estimates as at the same date made in conformity with the Previous GAAP. However, estimates that were not required under Previous GAAP but now required under Ind AS have been made basis facts and conditions as at the date of transition.


I. Current Investments:

(a) Investments in mutual funds: Under Previous GAAP, investments in mutual funds were measured at cost or market value, whichever is lower. Under Ind AS, these investments have been classified as “measured at fair value through profit or loss (FVTPL)". Changes in fair value are recognized in the statement of profit and loss.

(b) Investments in treasury bills, certificate of deposits, commercial papers etc.: Under Previous GAAP, investments in treasury bills, certificate of deposits and commercial papers etc. were measured at cost or market value, whichever is lower. Under Ind AS, these investments have been classified as “measured at amortized cost". Interest income calculated using the effective interest rate (EIR) method is recognized in the statement of profit and loss.

II. Forward Contracts

Under Previous GAAP, the premium paid on forward contracts was recognized as expense or income over the life of the contract. Difference between the exchange rate on the date of inception and as at the settlement date of the forward contract was recognized as exchange difference. Further in case of forward contracts for highly probable forecasted transactions, net mark to market losses were recognized in the statement of profit and loss, and net gains, if any, were ignored.

Under Ind AS, derivative instruments such as forward contracts are measured at fair value. Forward contracts are designated as hedging instruments against changes in fair value of recognized assets and liabilities (fair value hedges) and against highly probable forecast transactions (cash flow hedges). When a forward contract is designated as a cash flow hedge, the effective portion of changes in the fair value of the contract is recognized in the other comprehensive income and is transferred to the statement of profit and loss upon occurrence of the related forecasted transaction. Any ineffective portion of the changes in the fair value of the contract is recognized immediately in the statement of profit and loss.

Changes in fair value of forward contracts designated as fair value hedge are recognized in the income statement.

III. Deferred Taxes

Under Previous GAAP, deferred taxes were accounted basis the income statement approach which required creation of deferred tax asset/liability on temporary differences between taxable income and accounting income. Under Ind AS, deferred taxes are accounted basis the balance sheet approach which requires creation of deferred tax asset/liability on temporary differences between the carrying amount of an asset/liability in the Balance Sheet and its corresponding tax base.

Application of Ind AS has also resulted in recognition of deferred taxes on new temporary differences arising due to adjustments made on transition to Ind AS.

IV. Proposed dividend

Under Previous GAAP, dividend proposed by the Board of Directors after the balance sheet date but before the approval of the financial statements was considered as an adjusting event. Accordingly, provision for proposed dividend (including dividend distribution tax) was recognized as a liability in the same year to which it pertained. Under Ind AS, proposed dividend is recognized when the same is approved by the shareholders in the Annual General Meeting.

V. Government Grants

Under Previous GAAP, government grants in relation to fixed assets were reduced from the cost of the related asset. Under Ind AS, such grants have been treated as deferred income and is recognized in the statement of profit and loss on a systematic basis over the useful life of the asset.

Under Previous GAAP, Government grants in relation to investment outlay were recognized as part of capital reserves. Under Ind AS, these grants have been recognized in the statement of profit and loss on fulfillment of the underlying attached conditions.

VI. Sales

(a) Excise duty: Under Previous GAAP, Sales were presented net of Excise Duty. Under Ind AS, Sales are reported gross of excise duty. Excise duty is presented as a separate expense line item in the statement of profit and loss. (Also refer Note 4)

(b) Marketing and Selling Incentives: Under Previous GAAP, certain marketing and selling incentives to trade were reported as advertisement/ selling and distribution expenses in the statement of profit and loss. Under Ind AS, these have been netted off from sales.

VII. Re-measurement of defined benefit plans

Under Previous GAAP, re-measurement of retrial defined benefit plans i.e. actuarial gains/ (losses) arising due to experience adjustments and change in assumptions were recognized in the statement of profit and loss. Under Ind AS, remeasurement of retrial defined benefit plans is recognized in the “Other Comprehensive Income".


VIII. Investments in equity instruments

Under Previous GAAP, investments in equity instruments were carried at cost less provision for other than temporary diminution in the value of such investments. Under Ind AS, these investments have been classified as “measured at fair value through other comprehensive income (FVOCI)" through an irrevocable election. Changes in fair value are recognized directly in the “Other Comprehensive Income".

IX. Cash and Cash equivalents

Under Previous GAAP, bank overdrafts were presented as part of “Cash flows from financing activities" in the statement of cash flows. Under Ind AS, bank overdrafts are included as a component of cash and cash equivalents in the statement of cash flows.