Bombay HC allows Nestle to export Maggi noodles, India ban continues!!

This is an ironical news. India allows Nestle to export Maggi noodles, but ban on India remains.

In some relief to the Indian subsidiary of Nestlé, the world’s largest food maker, the high court here has allowed it to export Maggi noodles, even as a ban on selling the item within the country continues. A Bench comprising judges V M Ranade and B P Colabawalla said the company was free to export the noodles, subject to compliance with rules and health and food safety standards. The court will take up the matter again on July 14.

The relief for Nestlé India comes after the country’s apex food regulator, the Food Safety and Standards Authority of India (FSSAI), said it had no objection to the company selling the product abroad, though it stood by its decision to ban nine variants of the instant noodles in India, an order it had passed on June 5. The order had also sought Nestlé withdraw all variants of Maggi from the marketplace. This led to the largest product recall in India.

So are we made to believe that food quality standards are more stringent in India than other countries! This is obviously not true.  As Raamdeo Agarawal of Motilal Oswal says that Nestle’s reputation is 100 times more than India:

In an interview with ET Now, Raamdeo Agrawal, Joint MD, MoFSL, shares his views on Nestle. Excerpts:

ET Now: You mentioned Nestle in your book as well as one of those stocks you have studied. Do you have the courage to buy Maggi now, considering the kind of trouble it is in the country? Is this the time to be patient with the stock and say I believe in the valuations?

Raamdeo Agrawal: Patience and aggression to buy more.
ET Now: Really? Buy more Nestle at this point?
Raamdeo Agrawal: Yes. At the right price I will buy double.
ET Now: So you are not worried at all?
Raamdeo Agrawal: Not at all. Nestle’s reputation, worldwide, is at least 100 times more than government of India itself. Nestle bonds in Europe trade at negative yield. Government of India bonds trade at 7-8% yield. This is the kind of reputational gap. Today, Nestle is in trouble but it is still making about Rs 1,000 crore. Last year, they made Rs 1,000 crore profit. 10 years on, will it make 5000 crore or 500 crore profit? This is the question to be answered. If the answer to your question is that it will make 500 crore profit after 10 years; obviously, this is not the stock to be in. If they are going to make 5,000 crore profit in 10 years, then you should welcome the downturn in the stock to load up enough.

Hmm.. Am sure that if the Nestle crisis had erupted in US/Europe, Nestle yields would have risen sharply and India Govt would have higher reputation. The crisis in India has barely affected Nestle’s position worldwide. Another reason for low Nestle yield is monetary policy which has pushed yields to zero/negative levels. So much so for India;s emergence as a world economic power..

I don’t know but somehow I have still not got the Maggi crisis right. It perhaps came at a right time as India was increasingly tilting towards processed/artificial foods whereas other countries were looking at ways to rid of such foods. So, we in India needed to be warned against unhealthy practices. But for the crisis to take this dimension is quite amazing really given how lax our food standards are in India..

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