The shareholders of Nestle India have rejected a proposal by the company for an increase in royalty payment to its Swiss parent.

The food & beverage giant, known for brands such as KitKat, Maggi, EveryDay and Nescafe, had sought the approval through a postal ballot.

Around 57.17 per cent of Nestle India shareholders voted against the ordinary resolution.

While the result was announced late Friday night, the development met with a positive reaction at the special trading on the stock markets on Saturday, with the Nestle India scrip ending with gains of 2.33 per cent or ₹57 at ₹2,502.20.

In April, the board of Nestle India had on the recommendation of the audit committee approved the payment of general licence fees (royalty) by the company to Société des Produits Nestlé S.A. (SPN or the licensor).

The royalty was raised to 5.25 per cent per annum net of taxes and net sales from 4.5 per cent per annum. The hike will be made “in a staggered manner over the period of five years by making an increase of 0.15 per cent per annum over the current license fees of 4.5 per cent per annum’’.

The higher royalty will be effective from July 1, 2024.

Proxy advisory firms like InGovern had asked shareholders to vote against the resolution.

“The royalty hike was unjustified and not comparable to any peers. As the proposal was to be voted by a simple majority of minority shareholders with promoter parent company not getting to vote, the proposal got defeated,’’ Shriram Subramanian, founder and MD, InGovern, told The Telegraph.

InGovern said Nestle India has not disclosed what its peers paid as royalty. It said Hindustan Unilever was paying 3.45 per cent royalty on sales and Colgate-Palmolive India 4.9 per cent “Without any proper cost benefit analysis, the increase in royalty payout if approved will further increase the gap in royalty paid by Nestle vis-à-vis its peers’’, it had observed.