Nestlé India Shares Dip as BofA Cuts Rating to ‘Underperform’
Nestlé India saw its stock decline by over 3% after Bank of America (BofA) Global Research downgraded the FMCG giant to an “underperform” rating, citing margin pressure, moderation in volume growth, and adverse category trends. The downgrade has sparked conversation within the industry regarding growth prospects for premium consumption brands in the current economic landscape.
BofA has also cut its price target on Nestlé India to ₹2,600, significantly below the current market value. The brokerage flagged a slowdown in overall premium consumption across categories including chocolates, coffee, and infant nutrition—core contributors to Nestlé’s revenue in India. Analysts pointed out that urban discretionary demand is softening, with weak rural recovery further straining volume growth.
The report also noted that Nestlé India’s gross margins may face continued pressure due to high exposure to commodities like milk, barley, and wheat. This comes despite category leadership and consistent pricing initiatives aimed at maintaining profitability. BofA forecasts the company’s volume growth at just 3-4% over the next two years, trailing behind peers such as Hindustan Unilever (HUL) and Britannia.
While Nestlé India has remained largely resilient in its mass-market segments, key categories that rely on health-conscious and premium-positioned offerings are no longer showing the momentum seen post-pandemic. The performance of brands such as Maggi and Nescafé appears to be plateauing amid increased competition and shifting consumer preferences toward value-for-money propositions.
Industry experts note that while FMCG players focusing on premiumization benefitted in previous quarters, current macroeconomic indicators—including inflationary pressures and sluggish rural demand—may push consumers to tighten discretionary spending. This trend could continue impacting portfolio dynamics for players like Nestlé India, who rely heavily on urban middle- to upper-income consumers.
At the close of trading, Nestlé India shares were down by 3.2%, signaling cautious sentiment among investors. As the sector adjusts to evolving consumer behavior, portfolio recalibration and stronger rural penetration could become more critical for sustained growth.