Nestle Sinks 10% as Crackdown Looms Over Maggi Noodles

Shares in Nestle, the company that makes Maggi noodles, dropped nearly 10 per cent in morning trade on Wednesday. The selloff in Nestle comes amid a raging controversy about its most popular product Maggi, which has come under a country-wide scrutiny for high content of lead and mono-sodium glutamate or MSG, a taste enhancer.

According to analysts, Maggi noodles contribute over 20 per cent to Nestle’s revenues and a ban on the product could cause a huge dent to Nestle’s bottom line.

Kerala has ordered a pullout of Maggi noodles from government-run outlets, while the Delhi government has said samples that it tested were found “unsafe”. Delhi government’s findings come days after Uttar Pradesh Food and Drugs Administration (FDA) raised red flags about Maggi noodles.

Haryana, Gujarat, West Bengal, Karnataka and Goa are some other states that are conducting tests on Maggi, according to media reports.

Nestle India has said that it has got samples of Maggi noodles tested in an external laboratory as well as in house and that the product was found “safe to eat”.

Investors should avoid bottom-fishing in Nestle shares:

Market analysts told NDTV that investors should avoid buying Nestle shares, given the controversy around its products. Gaurang Shah of Geojit BNP Paribas told NDTV that Nestle should be “avoidable” as of now as the problem is going to multiply.

Rajat Bose, independent analyst, told NDTV that there is substantial downside in Nestle as the stock looks set to breach its 200-day exponential moving average.

As of 09.37 p.m., Nestle traded 4.52 per cent lower at Rs 6,499.90.