Nestlé India Faces Margin Pressures, Yet Shows Signs of Consumer Resilience
Nestlé India Ltd. has reported a 5 percent decline in net profit for the quarter ending March 2025, as elevated raw material costs continued to exert pressure on margins. The company posted a net profit of ₹885.4 crore, which was broadly in line with analyst expectations. Despite the dip in profitability, there were positive signs of recovery in consumer demand, with the company registering a 2 percent growth in volumes for the quarter.
For the January–March period, Nestlé India’s revenue from operations rose by 4.5 percent year-on-year, reaching ₹5,503.8 crore, up from ₹5,268 crore in the same quarter last year. The growth in revenue was in line with analyst expectations, as a Moneycontrol poll of 11 brokerages had predicted a 4.4 percent increase, bringing the estimated revenue to ₹5,500 crore.
Highlights:
Net Profit Decline: 5% drop to ₹885.4 crore in Q4 FY25.
Revenue Growth: 4.5% increase in revenue to ₹5,503.8 crore.
Volume Growth: 2% increase signaling a recovery in demand.
In Line with Estimates: Results largely match analyst projections.
Strong Domestic Performance Despite Inflationary Pressures
Nestlé India’s domestic sales witnessed robust growth, increasing by 4.2 percent to reach ₹5,235 crore. The overall sales growth was 3.7 percent, signaling that the company’s strategic focus on innovation and distribution is beginning to pay off. Chairman and Managing Director Suresh Narayanan emphasized that the growth in volumes, particularly within the core food and beverage categories, pointed to a gradual recovery in demand, particularly across urban markets.
The company highlighted strong performance in several segments, with high double-digit growth in its Powdered and Liquid Beverages category, supported by NESCAFÉ’s expanding reach and increased household penetration. Nestlé’s Confectionery business, led by its iconic Kit Kat brand, also posted high single-digit growth, while the Prepared Dishes and Cooking Aids segment, including its flagship Maggi brand, achieved mid-single-digit growth and marked a return to volume expansion.
Highlights:
Domestic Sales Growth: 4.2% increase to ₹5,235 crore.
Segment Performance: Strong growth in beverages, confectionery, and cooking aids.
Consumer Resilience: Volume growth signals improved sentiment.
Persistent Cost Inflation Pressures Profitability
While Nestlé India demonstrated resilience in terms of sales and volume growth, the company continues to face challenges related to rising input costs. Elevated prices for essential commodities, particularly coffee, cocoa, and milk, have kept margins under pressure. Although the company noted that cocoa prices had slightly corrected during the quarter, milk prices firmed up due to seasonal factors, and edible oil prices remained relatively stable.
These rising input costs have significantly impacted the company’s profitability despite higher sales volumes. In response, Nestlé India has focused on enhancing operational efficiencies and continuing investments in innovation to protect its margins while maintaining competitive pricing.
Highlights:
Cost Pressures: Increased prices for key commodities like coffee, cocoa, and milk.
Cocoa Price Adjustment: Slight correction in cocoa costs.
Operational Efficiencies: Efforts to counteract cost pressures and protect margins.
Shareholder-Friendly Approach Amid Challenging Times
Despite the headwinds posed by cost inflation, Nestlé India remains committed to maintaining a shareholder-friendly approach. The company declared a final dividend of ₹10 per equity share for FY25, with the record date set for July 4. If approved, the dividend will be paid starting July 24, reinforcing the company’s commitment to delivering value to its investors.
This dividend payout follows interim dividends declared earlier in the year, underlining the company’s balanced approach to profitability and shareholder returns, even amidst ongoing macroeconomic challenges.
Highlights:
Dividend Declaration: Final dividend of ₹10 per share for FY25.
Shareholder Returns: In addition to interim dividends, reinforcing investor confidence.
Outlook: Gradual Margin Recovery Expected in FY26
Looking forward, analysts anticipate a gradual recovery in margins for Nestlé India in the second half of financial year 2026. This recovery is expected to be driven by easing commodity prices, potential rate cuts by the Reserve Bank of India, and fiscal support measures outlined in the Union Budget. However, these improvements are expected to materialize slowly, with urban demand remaining subdued due to high rental inflation and stagnant wage growth.
A report by Nuvama suggested that urban demand may continue to remain soft until the first quarter of FY26. However, a more significant rebound is expected from the second quarter onwards, as policy measures take effect, boosting disposable income and consumer spending.
Highlights:
Margin Recovery: Analysts expect gradual improvements from H2 FY26.
Urban Demand: Expected softening until Q1 FY26, with recovery anticipated in Q2.
Policy Impact: Anticipated improvements driven by fiscal measures and easing inflation.
Nestlé India’s Strategic Positioning for Demand Rebound
Despite short-term challenges, Nestlé India is well-positioned to capitalize on the expected recovery in consumer demand. The company’s strong brand portfolio, coupled with its robust distribution network, positions it to navigate current market uncertainties effectively. However, the near-term focus will be on managing input cost volatility and maintaining its volume growth momentum across key segments.
With a combination of strategic investments in innovation and a focus on enhancing market share across core categories, Nestlé India remains optimistic about its long-term prospects, even as it faces the ongoing challenges of inflation and cost pressures.
Highlights:
Strategic Positioning: Strong brand portfolio and distribution network.
Focus Areas: Managing cost volatility and maintaining volume growth.
Long-term Optimism: Despite challenges, the company remains positive about its future prospects.
