Nestle India Share Price has gone 283 times in the last 30 years. In other words, just 10,000 invested in the company in the year 1990 would be ₹ 28 lakhs today!
Between 1990 and 2020, all you had to do is – absolutely nothing.
Sounds easy? It is never as easy as it sounds because success or failure in investing is all about what happens between your two ears.
Very few people can hold a company for a long period of time. Even fewer can hold the same stock after it doubles.
In this article, I will take your through the Share Price journey of Nestle India. Its ups and downs. The Maggi ban, how the company went from extreme distress to regaining the status of market leader.
We will also discuss the brands of Nestle, their market leadership and what we can expect in the years to come.
You will enjoy reading the article and hopefully also learn. Do read till the end.
Nestle India Company Analysis
Market Leadership of Nestle:
|Lactogen Nan||Infant Formula||1||66%|
As you can see from the table above, Nestle India is the market leader across several segments.
Some key points:
- ITC is trying, but the love for Maggi among Indians is eternal.
- People don’t ask for Infant Food, they ask for Cerelac. This category has tremendous growth potential in a country like India.
- There has been a rise in consumption of ready-to-cook food, Nestle has brands like Maggi and Pazzta.
- KitKat, Munch, MilkyBar and Bar One are household names, which kids love.
- Globally, Nestle has more than 30 brands, out of which only 9 brands have been launched in India.
When the company has so many positives, could there be any negative? There always is. When a business is extremely strong, the share price is always expensive.
Nestle India commands a PE (price-to-earning) ratio of 78. In the last 10 years, the PE has never gone below 40.
Even in the global stock market crash of 2020, the Nestle Share Price fell by just 10-12% and bounced back quickly.
Nestle is a core portfolio company. It’s not a stock to trade. It’s not a stock where you can expect quick or big returns in the short term.
Let’s look at how the Nestle Share Price has performed in the last 30 years.
Nestle India Share Price
Nestle has certainly given “Good Food and Good Life” to its shareholders in the last few decades. The company has been a consistent performer.
The large dip in share price during the ‘Maggi ban’ between 2015-16 was a big opportunity. It was a crisis the company handled extraordinary well. Those who had conviction were rewarded as the share price has tripled in the last 4 years.
The company went from being a market leader in the ‘Instant Noodles’ segment to zero sales. Many companies would never recover. But Nestle quickly regained its top position.
When a product like ‘Maggi’ is banned, it creates a huge vacuum. Competitors usually pounce on such opportunities. But very few could capitalize. ITC with Yippee has tried but failed to make a significant dent.
The moment Maggi was allowed to be sold, people who missed the product, lined up to buy in large numbers. Once again proving that Maggi is irreplaceable in India.
Think of it like a popular local restaurant in your area, where people love the taste of the food. When it shuts down temporarily, people miss the taste and when it re-opens, people queue up to order.
That’s Maggi across the country.
And it’s performance of such strong brands that has reflected in the share price.
|Nestle||Price||Rise / Fall|
|1990 Share Price||65||–|
|1991 Share Price||117||80.00%|
|1992 Share Price||176||50.43%|
|1993 Share Price||237||34.66%|
|1994 Share Price||267||12.66%|
|1995 Share Price||201||-24.72%|
|1996 Share Price||211||4.98%|
|1997 Share Price||272||28.91%|
|1998 Share Price||457||68.01%|
|1999 Share Price||430||-5.91%|
|2000 Share Price||549||27.67%|
|2001 Share Price||516||-6.01%|
|2002 Share Price||523||1.36%|
|2003 Share Price||690||31.93%|
|2004 Share Price||585||-15.22%|
|2005 Share Price||936||60.00%|
|2006 Share Price||1136||21.37%|
|2007 Share Price||1500||32.04%|
|2008 Share Price||1453||-3.13%|
|2009 Share Price||2548||75.36%|
|2010 Share Price||3795||48.94%|
|2011 Share Price||4173||9.96%|
|2012 Share Price||4990||19.58%|
|2013 Share Price||5297||6.15%|
|2014 Share Price||6380||20.45%|
|2015 Share Price||5824||-8.71%|
|2016 Share Price||6030||3.54%|
|2017 Share Price||7845||30.10%|
|2018 Share Price||11107||41.58%|
|2019 Share Price||14790||33.16%|
|2020 Share Price||18392||24.35%|
|2021 Share Price||17492||-4.89%|
Out of the last 30 years, only 6 of those years Nestle India has given negative returns.
If you want to buy a company like Nestle and hold it for a long period of time, it always makes sense to wait for corrections.
Corrections does not only mean fall in stock price, but also when a stock undergoes time correction. If you find the earnings of Nestle improving, but the stock price hasn’t move for 1-2 years or more, it can be an incredibly good opportunity to slowly accumulate.
Nestle belongs to the FMCG segment. Such companies hold exceptionally well during a crisis, because people do not stop consuming food. In fact, sales of Maggi shot up during the Covid lockdown last year.
However, during good times the so-called ‘smart money’ moves from less risky companies like Nestle to riskier companies. Their earnings would be booming – while Nestle would be steady.
This is when earnings steadily increase, the share price remains stagnant and the P.E (price to earning) drops, making companies like Nestle more attractive. Wait for such opportunities, instead of buying Nestle at any price.
Do note, this article is for educational purposes only. We do not give buy or sell recommendations. Consult your financial advisor.
Nestle India Share Returns
How much returns has Nestle India given in the last 2 years? What about 3, 5, 10, 20 years?
Check out the table below:
The one thing which really stands out from the table above is – no matter when you invested in the shares of Nestle India, it has been an exceptionally good compounder.
A lot of people want to double or triple their money in quick time in the stock market. They forget doubling money means 100% returns. A bank fixed deposit currently gives less than 6% before tax.
Nestle has consistently given around 20% returns. The last 5 years have been significantly better, but over the 20-30 year period, the company has delivered 20% returns.
Those who chase quick returns, always remember, even compounding your money at 15-20% can make you wealthy over a long period of time.
At 20%, Nestle has turned one rupee into 280 rupees over a period of 30 years.
An individual who focuses on earning well, saving a decent amount of money and investing it in quality compounders like Nestle – can also become exceptionally rich.
Compared to some of the best performers like HDFC Bank, Pidilite etc. Nestle hasn’t really performed at that level. Yet it has converted 1 rupee into 91 rupees over 25 years. And every 1 rupee invested into 33 rupees over a 20 year period.
1 Lakh invested in Nestle India
If you had invested 1 lakh in ‘Nestle India’, how much returns has it given over different time periods?
The table below has the figures:
|1 Lakh Invested|
|1 year||1.24 lakhs|
|2 years||1.66 lakhs|
|3 years||2.34 lakhs|
|4 years||3.05 lakhs|
|5 years||3.16 lakhs|
|10 years||4.85 lakhs|
|15 years||19.65 lakhs|
|20 years||33.5 lakhs|
|25 years||91.5 lakhs|
|30 years||2.83 crore|
If you had invested 1 lakh in Nestle, 10 years ago, it would be 4.85 lakhs today.
This does not include dividends. In the last 10 years, Nestle has rewards its shareholders with dividends of more than ₹ 1100 per share.
Over the 30 year period, Nestle shareholders have converted 1 lakh into 2.83 crore.
Nestle Shares vs FD Returns
What if you opened a fixed deposit of 1 lakh in a bank and made another investment of 1 lakh in Nestle India Shares. Let’s assume both investments were made in the year 2010 (i.e. 10 years ago).
The results are below.
Note: FD interest rates have been adjusted each year, as per data taken from Reserve Bank of India. The average FD rate over last 10 years has been around 7.4%. It’s lower at the time of writing this article, but it was higher in 2010.
The chart of FD returns looks great. But 10 years is a long period of time. Let us re-live how an investor would feel.
- A lot of people in India prefer fixed deposits because it is very safe. The returns are guaranteed if you are not foolish enough to keep it in some local co-operative bank.
- Investing in Nestle carries risk of uncertainty. What if the company does not grow? What if the share has already gone up a lot when I purchase it? What if the market crashes?
- These are normal questions which cross the mind of every investor. There is fear in stocks, there is no fear in FD.
- This is a major factor, because Indians can risk their life by riding a bike without helmet, but they do not like taking risks with money.
- For the sake of comparison, let’s assume an investor deposited 1 lakh in FD and the same amount in Nestle.
- In the first 5 years, the returns were about the same.
- 6 years later, fixed deposit outperformed the returns from Nestle. This is quite significant.
- A risky-asset like Nestle had given lower returns than a fixed deposit between the years 2010-2016. We are talking about one of the top companies in India here.
- How many investors would lose patience here? The fear of Maggi not recovering in 2016 and poor returns over 6 years. Many would sell here. This was actually the time to buy more.
- Next 4 years, the battle was one-sided. While interest rates fell, Nestle went from strength to strength.
- At the end of the 10 year period, the investment in Nestle went up nearly 5 times. While investment in FD doubled.
- The above calculation does not include dividends. Nestle has paid more than 1100 per share in dividends between 2010-2020.
- An investor who invested 1 lakh in Nestle back in 2010 would’ve had around 26 shares of the company. That’s around 29,000 additional returns from dividends.
- And like Steve Jobs would say, there’s “one more thing”. When your FD matures, you have to pay income tax on the returns. If you hold Nestle Shares, you pay nothing till you sell it. And even if you do sell, long term capital gains would be 10%.
- The battle between investment in a well-researched good quality company and fixed deposit is one-sided.
- There is uncertainty and risk in one. There is safety in the other. That’s what it comes down to. Your pick? Tell us in the comments section below.
Can you share similar analysis of Berger paints, relaxo, Havells, PI industries,Deepak nitrite, Atul limited, Aarti industries, Vinati organics, SRF, Honeywell automation, Abbott, baja finance,
Saw your latest write-up on Bajaj finance. Excellent article.
Can you share similar analysis of Berger paints, relaxo, Havells, PI industries,Deepak nitrite, Atul limited, Aarti industries, Vinati organics, SRF, Honeywell automation, Abbott
Maybe 2 per week.
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Just a thought.
Keep up the good work
Sir itna data and crisp analysis ..Wow great work.must say
Which in your opinion is a better investment. HUL Or Nestlé??