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INDEX

Sl.
Contents Page No.
No.
1 Company Profile 2

2 History 2

3 Operations 3

4 Presence in India 4

5 Nestle: Vision & Mission 4

6 Management: Nestle India 5

7 Products of Nestle 5

8 Competitors Analysis 6

9 Financial Statements: 7

10 Balance Sheet 7

11 Profit & Loss Statement 8

12 Sources of Funds 9

13 Analysis of Sources of Funds 9-12

14 Cost of Capital 12

15 Weighted Average Cost of Capital 12

16 Analysis of Cost of Capital 12

17 Capital Structure 13

18 Analysis of Nestle India's Capital Structure 14

19 Capital Budgeting Decisions 15

20 References 15
NESTLE INDIA
BSE: 500790 I NSE: NESTLEIND I SECTOR: FOOD PROCESSING

Market cap (Rs. Cr) 69,513.32 EPS (TTM) 104.43


P/E 69.04 P/C 51.09
Book Value (Rs) 312.57 Price/Book 23.07
Div (%) 630.00 % Div Yield (%) 23.07
Market Lot 1 Face Value (Rs) 10.00
Industry P/E 60.20 Deliverables (%) 78.82
*Note- Trailing EPS is displaying only when latest 4 quarter results are available

COMPANY PROFILE

Nestlé India is a subsidiary of Nestle S.A. of Switzerland. With seven factories and a large
number of co-packers, Nestlé India is a vibrant Company that provides consumers in India
with products of global standards and is committed to long-term sustainable growth and
shareholder satisfaction.

The Company insists on honesty, integrity and fairness in all aspects of its business and
expects the same in its relationships. This has earned it the trust and respect of every strata of
society that it comes in contact with and is acknowledged amongst India's 'Most Respected
Companies' and amongst the 'Top Wealth Creators of India'.

HISTORY

Nestlé was founded in 1867 on the shores of Lake Geneva in Vevey, Switzerland and its first
product was “Farine Lactée Nestlé”, an infant cereal specially formulated by Henri Nestlé to
provide and improve infant nutrition. From its first historic merger with the Anglo-Swiss
Condensed Milk Company in 1905, Nestlé has grown to become the world’s largest and most
diversified food Company, and is about twice the size of its nearest competitor in the food
and beverages sector.
In 2004, Nestlé had around 247,000 employees worldwide, operated 500 factories in approx.

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100 countries and offered over 8,000 products to millions of consumers universally. The
Company’s transparent business practices, pioneering environment policy and respect for the
fundamental values of different cultures have earned it an enviable place in the countries it
operates in. Nestlé’s activities contribute to and nurture the sustainable economic
development of people, communities and nations.

Nestlé’s relationship with India dates back to 1912, when it began trading as The Nestlé
Anglo-Swiss Condensed Milk Company (Export) Limited, importing and selling finished
products in the Indian market.

After India’s independence in 1947, the economic policies of the Indian Government
emphasized the need for local production. Nestlé responded to India’s aspirations by forming
a company in India and set up its first factory in 1961 at Moga, Punjab, where the
Government wanted Nestlé to develop the milk economy. Progress in Moga required the
introduction of Nestlé’s Agricultural Services to educate, advice and help the farmer in a
variety of aspects. From increasing the milk yield of their cows through improved dairy
farming methods, to irrigation, scientific crop management practices and helping with the
procurement of bank loans. Nestlé set up milk collection centres that would not only ensure
prompt collection and pay fair prices, but also instil amongst the community, a confidence in
the dairy business. Progress involved the creation of prosperity on an on-going and
sustainable basis that has resulted in not just the transformation of Moga into a prosperous
and vibrant milk district today, but a thriving hub of industrial activity, as well.

OPERATIONS
Nestlé has been a partner in India's growth for over nine decades now and has built a very
special relationship of trust and commitment with the people of India. The Company's
activities in India have facilitated direct and indirect employment and provides livelihood to
about one million people including farmers, suppliers of packaging materials, services and
other goods.

The Company continuously focuses its efforts to better understand the changing lifestyles of
India and anticipate consumer needs in order to provide Taste, Nutrition, Health and
Wellness through its product offerings. The culture of innovation and renovation within the
Company and access to the Nestlé Group's proprietary technology/Brands expertise and the
extensive centralized Research and Development facilities gives it a distinct advantage in

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these efforts. It helps the Company to create value that can be sustained over the long term by
offering consumers a wide variety of high quality, safe food products at affordable prices.

PRESENCE IN INDIA
Beginning with its first investment in Moga in 1961, Nestlé’s regular and substantial
investments established that it was here to stay. In 1967, Nestlé set up its next factory at
Choladi (Tamil Nadu) as a pilot plant to process the tea grown in the area into soluble tea.
The Nanjangud factory (Karnataka), became operational in 1989, the Samalkha factory
(Haryana), in 1993 and in 1995 and 1997, Nestlé commissioned two factories in Goa at
Ponda and Bicholim respectively. Nestlé India has commissioned in 2006 its 7th factory at
Pant Nagar in Uttarakhand.

NESTLE & COMMUNITY


Nestlé India has always focused on long term, sustainable and profitable growth and helped
communities around its factories to improve their quality of life in a similar manner. Nestlé
Agricultural Services has used the experience gained by Nestlé across the world to set up a
system of direct and efficient contact with the farmers. Company veterinarians and
agronomists supervise the milk routes and advise farmers on various issues including proper
feed for the herds. Milk storage facilities have been set up close to the farmers. Veterinary
services are provided free, and medicines provided at wholesale cost. The company assists
farmers in artificial insemination programs for their cattle, provides subsidy and helps them
in procuring loans.

VISION
To be a leading, competitive, Nutrition, Health and Wellness Company delivering improved
shareholder value by being a preferred corporate citizen, preferred employer, preferred supplier
selling preferred products

MISSION

Nestlé is the world's leading nutrition, health and wellness company. Our mission of "Good
Food, Good Life" is to provide consumers with the best tasting, most nutritious choices in a
wide range of food and beverage categories and eating occasions, from morning to night.

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MANAGEMENT - NESTLE INDIA
Designation Name

Chairman & Managing Director Suresh Narayanan

Director - Technical Martin Roemkens

Ind.Non-Executive Director Ashok Kumar Mahindra

Ind.Non-Executive Director Swati A Piramal

Ind. Non-Executive Director Rama Bijapurkar

Director & CFO ShobinderDuggal

Ind. Non-Executive Director RajyaVardhanKanoria

Ind. Non-Executive Director RavinderNarain

Ind.Non-Executive Director Rakesh Mohan

PRODUCTS OF NESTLE INDIA


Prepared Dishes Chocolates And
Milk Products Beverages
And Cooking Aids Confectionery
Everyday Dairy Maggi 2 Minute
Nescafe Classic Kit-Kat
Whitener Noodles
Everyday Ghee Sunrise Premium Veg Atta Noodles Kit-Kat Chunky
Milk Sunrise Special Rice Noodles Mania Munch
Slim Milk Cappuccino Cuppa Mania Munch Pop Choc
Nevista Pro-Heart Milo Smart Plus
Sauces Milkybar
Milk Ready –To- Drink
Fresh ‘N’ Natural Iced Tea With Green
Pichkoo Milkybar Choo
Dahi Tea
Jeera Raita Nestea Iced Tea Pizza Mazza Bar-One
Nesvita Dahi Magic Cubes Milk Chocolate
Milkmaid Fruit
Bhuna Masala Polo
Yoghurt
Coconut Milk
Milkmaid Eclairs
Powder
Milkmaid Funshakes Healthy Soups Milkybar Eclairs

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COMPETITORS OF NESTLE INDIA
 Britannia Industries Ltd.
 Ravalgon Sugar Farm Ltd.
 Vadilal Industries Ltd.
 Heritage Foods (India) Ltd.
 Hatsun Agro Products Ltd.
 Vadilal Enterprises
 ADF Foods Ltd.
 Bambino Agro Industries Ltd.
 Milkfood Ltd.
 Kwality Dairy (India) Ltd.

COMPETITORS ANALYSIS

Current Market Cap


Company Book Value P/E Ratio
Price (Rs. Cr.)

Oceanic Foods Ltd. 114.8 45.99 21.45 43.05

Kwality Dairy (India) Ltd. 97.85 41.96 14.17 2,328.43

Euro India Fresh Foods Ltd. 142.25 10.44 258.84 352.78

Usher Agro Ltd. 8.2 -33.51 0 63.69

Hatsun Agro Products Ltd. 709 22.81 80.53 10,788.73

Britannia Industries Ltd. 4,745.90 215.06 67.54 56,978.87


GlaxoSmithKline Consumer
Healthcare Ltd. 4,963.45 742.51 31.79 20,874.06

Umang Dairies Ltd. 71.25 15.26 93.01 156.77

DFM Foods Ltd. 1,749.00 80.75 110.23 1,749.29

Prabhat Dairy Ltd. 144 57.06 51.52 1,406.54

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FINANCIAL STATEMENTS

BALANCE SHEET (In Crores)


Year 2016 2015 2014 2013 2012
SOURCES OF FUNDS :
Share Capital + 96.42 96.42 96.42 96.42 96.42
Reserves Total + 2,917.28 2,721.42 2,740.79 2,272.33 1,701.99
Equity Share Warrants 0 0 0 0 0
Equity Application Money 0 0 0 0 0
Total Shareholders Funds 3,013.70 2,817.84 2,837.21 2,368.75 1,798.41
Secured Loans + 0 0.9 4.11 0.01 0.24
Unsecured Loans + 33.15 16.83 15.46 1,189.48 1,049.95
Total Debt 33.15 17.73 19.57 1,189.49 1,050.19
Other Liabilities+ 1,972.21 1,597.17 1,388.66 1,193.39 1,014.75
Total Liabilities 5,019.06 4,432.74 4,245.44 4,751.63 3,863.35
APPLICATION OF FUNDS :
Gross Block + 5,259.98 5,117.36 5,008.98 4,903.16 4,368.68
Less : Accumulated Depreciation + 2,530.52 2,219.51 1,832.34 1,533.85 1,164.41
Less: Impairment of Assets 0 0 0 0 0
Net Block + 2,729.46 2,897.85 3,176.64 3,369.31 3,204.27
Lease Adjustment 0 0 0 0 0
Capital Work in Progress+ 188.17 230.79 244.78 294.71 344.08
Producing Properties 0 0 0 0 0
Investments + 1,749.35 1,324.92 811.82 851.08 364.86
Current Assets, Loans & Advances
Inventories + 943.18 820.81 844.1 735.93 745.58
Sundry Debtors + 97.93 78.42 99.1 84.27 87.57
Cash and Bank+ 880 499.55 445.82 749.36 236.96
Loans and Advances + 82.84 103.56 67.29 105.2 55.15
Total Current Assets 2,003.95 1,502.34 1,456.31 1,674.76 1,125.26
Less: Current Liability and Provisions
Current Liabilities + 1,312.00 1,215.34 1,138.28 1,133.29 1,097.43
Provisions + 320.7 265.32 213.06 213.88 41.06
Total Current Liabilities 1,632.70 1,480.66 1,351.34 1,347.17 1,138.49
Net Current Assets 371.25 21.68 104.97 327.59 -13.23
Miscellaneous Expenses not written 0 0 0 0 0
Deferred Tax Assets 137.95 116.03 104.38 91.75 71.66
Deferred Tax Liability 292.16 288.96 327.1 307.22 233.74
Net Deferred Tax -154.21 -172.93 -222.72 -215.47 -162.08
Other Assets+ 135.04 130.43 129.95 124.41 125.45
Total Assets 5,019.06 4,432.74 4,245.44 4,751.63 3,863.35

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PROFIT & LOSS STATEMENT
(In Crores)
Year 2016 2015 2014 2013 2012
INCOME :
Sales Turnover + 9,556.24 8,482.48 10,178.07 9,419.02 8,614.15
Excise Duty 332.44 307.17 323.23 317.97 279.62
Net Sales 9,223.80 8,175.31 9,854.84 9,101.05 8,334.53
Other Income + 170.61 110.09 94.32 96.9 31.03
Stock Adjustments + 10.78 -11.97 67.43 -105.32 92.02
Total Income 9,405.19 8,273.43 10,016.59 9,092.63 8,457.58
EXPENDITURE :
Raw Materials + 3,890.47 3,456.94 4,591.39 3,313.68 3,238.44
Power & Fuel Cost+ 232.79 221.99 384.33 385.38 370.89
Employee Cost + 1,073.36 912.75 837.05 741.5 663.38
Other Manufacturing Expenses + 187.64 170.61 197.11 895.68 815.2
Selling and Administration Expenses 1,866.24 1,636.02 1,688.99 1,528.64 1,374.62
Miscellaneous Expenses + 356.02 710.94 191.6 183.27 138.68
Less: Pre-operative Expenses Cap+ 0 0 0 0 0
Total Expenditure 7,606.52 7,109.25 7,890.47 7,048.15 6,601.21
Operating Profit 1,798.67 1,164.18 2,126.12 2,044.48 1,856.37
Interest + 3.51 3.29 14.23 36.51 26.6
Gross Profit 1,795.16 1,160.89 2,111.89 2,007.97 1,829.77
Depreciation+ 353.62 347.26 337.54 329.95 277.15
Profit Before Tax 1,441.54 813.63 1,774.35 1,678.02 1,552.62
Tax+ 533.71 289.89 582.41 507.5 372.83
Fringe Benefit tax+ 0 0 0 0 0
Deferred Tax+ -18.71 -39.53 7.25 53.39 111.86
Reported Net Profit 926.54 563.27 1,184.69 1,117.13 1,067.93
Extraordinary Items + -19.38 -322.39 -0.19 9.19 0
Adjusted Net Profit 945.92 885.66 1,184.88 1,107.94 1,067.93
Adjst. below Net Profit + 0 0 0 0 0
P & L Balance brought forward 1,882.54 1,882.52 1,532.88 1,074.55 656.89
Statutory Appropriations 0 0 0 0 0
Appropriations + 731.08 563.25 835.05 658.8 650.27
P & L Balance carried down 2,078.00 1,882.54 1,882.52 1,532.88 1,074.55
Dividend 607.42 467.62 607.42 467.62 467.62
Preference Dividend 0 0 0 0 0
Equity Dividend % 630 485 630 485 485
Dividend Per Share(Rs) 63 48.5 63 48.5 48.5
Earnings Per Share-Unit Curr 83.27 48.5 111.55 107.62 102.89
Earnings Per Share(Adj)-Unit Curr 83.27 48.5 111.55 107.62 102.89
Book Value-Unit Curr 312.56 292.25 294.26 245.67 186.52
Book Value(Adj)-Unit Curr 312.56 292.25 294.26 245.67 186.52

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SOURCES OF FUNDS (in Crores)

Particulars FY 2012 FY 2013 FY 2014 FY 2015 FY 2016

Share Capital 96.42 96.42 96.42 96.42 96.42

Reserves & Surplus 1,701.99 2,272.33 2,740.79 2,721.42 2,917.28

Long term borrowings (Unsecured


1,049.95 1,189.48 15.46 16.79 33.15
loans)

Net worth (shareholders funds) 1,798.41 2,368.75 2,837.21 2,817.84 3,013.70

ANALYSIS

Percentage Distribution of Sources of Finance from FY 2012-2016

Particulars FY 2012 FY 2013 FY 2014 FY 2015 FY 2016

Share Capital 3.39% 2.71% 3.38% 3.40% 3.16%

Reserves & Surplus 59.75% 63.86% 96.08% 96.01% 95.75%

Long term borrowings


36.86% 33.43% 0.54% 0.59% 1.09%
(Unsecured loans)

SHARE CAPITAL AS SOURCE OF FINANCE FROM FY 2012-16


From the above table it can be analyzed that Nestle India uses approximately 3% of its total
finance from Share Capital or Equity Capital as a source of capital. The share of Equity from
FY 2012-16 has been unchanged on an average with respect to total capital. The value of
Equity capital has remained constant at Rs. 96.42 Crores from FY 2012-16.

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Share Capital
4.00%
3.39% 3.38% 3.40%
3.50% 3.16%
3.00% 2.71%
2.50%

2.00%

1.50%

1.00%

0.50%

0.00%
FY 2012 FY 2013 FY 2014 FY 2015 FY 2016

The above graph shows the total distribution of equity capital with respect to total capital in
percentage from FY 2012-16.

RESERVES & SURPLUS AS SOURCE OF FINANCE FROM FY 2012-16

Reserves & Surplus


120.00%
96.08% 96.01% 95.75%
100.00%

80.00%
63.86%
59.75%
60.00%

40.00%

20.00%

0.00%
FY 2012 FY 2013 FY 2014 FY 2015 FY 2016

The above graph shows how the capital structure of Nestle India has changed from FY 2012-
16. The company increased its reserves and surplus capital to use as its major source of
capital rather than Equity and Debt funding.

From the above table it can be analyzed that Nestle India used approximately 61% of its total
finance from Reserves & Surplus from FY 2012 to FY 2013 as a source of capital. However

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after FY 2013, In FY 2014, the company boosted up its reserves and surplus to an average of
96% of the total capital of the firm. This is presently their major source of finance / capital.

LONG TERM BORROWINGS AS SOURCE OF FINANCE FROM


FY 2012-16

Long Term Borrowings


40.00% 36.86%
35.00% 33.43%

30.00%
25.00%
20.00%
15.00%
10.00%
5.00% 1.09%
0.54% 0.59%
0.00%
FY 2012 FY 2013 FY 2014 FY 2015 FY 2016

The above graph shows how the capital structure of Nestle India has changed from FY 2012-
16. The company decreased its long term borrowings (Unsecure Loans) after FY 2013, from
an average 35% to >1% of the total source of funding.

From the above table it can be analyzed that Nestle India used approximately 35% of its total
finance from long term borrowings (Unsecure Loans) from FY 2012 to FY 2013 as a source
of capital. However after FY 2013, In FY 2014, the company decreased its long term
borrowings (Unsecure Loans) to an average of <1% of the total capital of the firm.

OVERALL ANALYSIS OF SOURCES OF CAPITAL FOR NESTLE INDIA


The sources of finance of Nestle India primarily consists of Equity Capital, Reserves &
Surplus Capital and Long term Borrowings (Unsecured Loans). The company doesn’t have
any debt funding in the previous five years of analysis. The equity funding consists of an
average of 3% of the total funding available. The major source of finance is from Reserves &
Surplus Capital which account to an average 96% of total funding after FY 2013.

Nestle India restructured its Sources of Finance after FY 2013, they reduced funding from
Long term borrowings & increased funding from Reserves & Surplus Capital.

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COST OF CAPITAL

Nestle India Britannia


Year Cost of Debt Cost of Equity Cost of Debt Cost of Equity
2012 1.90 1.18 0.10 0.32
2013 2.14 0.97 0.11 0.34
2014 62.58 1.18 0.06 0.23
2015 12.73 0.76 0.74 0.23
2016 594.99 1.08 0.59 0.17

WEIGHTED AVERAGE COST OF CAPITAL

Year Nestle India Britannia


2012 1.83 31.60
2013 2.04 19.14
2014 9.65 22.49
2015 2.52 24.71
2016 152.99 45.48

ANALYSIS
When we compare the weighted average cost of capital of Nestle India with Britannia. We
can clearly see that the cost of capital is less over the years upto 2015 as compared with the
cost of capital of Britannia. When we compare with year to year basis, we can see that in
2012 the weighted average cost of capital is less in a Nestle India when compared with the
Britannia. This shows that the company is able to manage their cost very well. And in 2013
there is a bit increase in the cost of capital in Nestle India when compared with the previous
year i.e 2012 but there is good record in cost when we comparison with Britannia. There is an
increasing trend in cost over the years but when compared with competitor the Nestle cost is
very low. This trend continued upto 2015. But in 2016 the weighted average cost of capital
values are totally different that means the cost of capital of Nestle India is more than the
Britannia i.e. the cost of capital is 152.99 of Nestle India and the cost of capital of Britannia

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is 45.48. We can see that there is huge in the values of cost in the year 2016 between Nestle
and Britannia. This says that the cost reduction technique is not followed by the company or
it failed in maintaining the cost. But when we analyse the overall cost of capital of capital of
company, it is quite satisfactory.

CAPITAL STRUCTURE

The capital structure of the Nestle India is fully with equity shares. There is no debentures or
loans from the financial institutions in the capital structure. Since there will be no much risk
to the company but the company should incur more cost due to the equity capital in the
company’s capital structure.

The authorised capital of the company is 100 crores. The issued and paid up capital is
96.42crores. The total shares of the company is 96415716 with a face value of Rs.10 each
that makes the total paid up capital of 96.42 crores.

Here the capital consists of only equity shares since there is no obligation of repayment of
shares, while in other way we can say as there is no debt part in the capital structure of the
company, there is no obligation to pay the periodic interests. This reduces the risk of the
company but cost of the company will be very high. This type of capital structure is followed
by Nestle India since from the year 1999. The earnings per share will be less in this type of
capital structures.

CAPITAL STRUCTURE (NESTLE INDIA)


Authorized Issued
Period Instruments -PAIDUP-
Capital Capital

Shares Face
From To (Rs. Cr) (Rs. cr) Capital
(nos) Value

2016 2016 Equity 100 96.42 96415716 10 96.42


Share
2015 2015 100 96.42 96415716 10 96.42
Equity
2014 2014 100 96.42 96415716 10 96.42
Share
2013 2013 100 96.42 96415716 10 96.42
Equity
2012 2012 Share 100 96.42 96415716 10 96.42

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2011 2011 Equity 100 96.42 96415716 10 96.42
Share
2010 2010 100 96.42 96415716 10 96.42
Equity
2009 2009 Share 100 96.42 96415716 10 96.42

ADVANTAGES AND DISADVANTAGES OF HAVING ONLY EQUITY


CAPITAL IN CAPITAL STRUCTURE
NO REPAYMENT REQUIREMENT

When you use equity capital, you have no obligation to make interest payments or to repay
equity investors’ initial investment. Debt capital, on the other hand, requires periodic interest
payments and repayment of the borrowed principal. Although you might distribute some of
your profits as dividends to equity holders, you can skip these payments if necessary. This
advantage helps your small business keep more of its profits and allows more spending
flexibility.

LOWER RISK

In general, a business that uses more equity than debt has a lower risk of bankruptcy. If a
business suffers a setback and fails to make its interest payments, its creditors can force it
into bankruptcy. Equity investors have no such rights. They must wait out any potential
downturns to be able to benefit when a business prospers. For example, assume you finance
your small business with all equity and have a bad year. Investors might be disappointed, but
their only option is to hope for improvement.

OWNERSHIP DILUTION
With every share of stock you sell to investors, you dilute, or reduce, your ownership stake in
your small business. Because equity investors typically have the right to vote on important
company decisions, you can potentially lose control of your business if you sell too much
stock. For example, assume you sell a majority of your company’s outstanding stock to raise
money. If investors disapprove of the company’s progress, they might vote you out of a
leadership position and bring in new management.

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HIGHER COST
Although equity does not require interest payments, it typically has a greater overall cost than
debt capital. Stockholders shoulder more risk from their perspective compared to creditors
because they are last in line to get paid if the company goes bankrupt. Consequently, equity
investors demand a higher rate of return on their investment. You typically must give up
more stock for a lower price when you raise equity to compensate investors for this risk.

It is better to have a mix of both equity and debt in the company because the cost of capital
will be less, risk will be moderate and the earning per share will be good.

CAPITAL BUDGETING DECISIONS


By seeing sources of finance, cost of capital, and the capital structure of the company we can
say that the company is capable of in investing in new projects whether it may be investing in
the fixed assets or investing for the expansion of the business or any other new project
because the company is maintaining the cost very well and it also has lots of funds to invest
in some other new projects. The situation of the company is good, even if they want to
increase the profits it is good to invest in fixed assets or in some other new project.

REFERENCES
 http://www.moneycontrol.com/financials/nestleindia/capital-structure/NI
 http://www.moneycontrol.com/financials/nestleindia/balance-sheetVI/NI#NI
 http://money.rediff.com/companies/Nestle-India-Ltd
 https://www.dynamiclevels.com/en/nestle-india-share-price-history
 https://en.wikipedia.org/wiki/Nestl%C3%A9
 https://www.nestle.in/info

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