1. CORPORATE INFORMATION

Nestle India Limited ("the Company") is a Company domiciled in India, with its registered office situated at 100/101, World Trade Centre, Barakhamba Lane, New Delhi - 110 001. The Company has been incorporated in 1959 under the provisions of Indian Companies Act and its equity shares are listed on the BSE Limited and NSE Limited in India. (Listing on NSE is effective from and after 1^st August, 2023). The Company is primarily involved in Food business which incorporates product groups viz. Milk Products and Nutrition, Prepared dishes and Cooking aids, Powdered and Liquid Beverages and Confectionery.

2. SIGNIFICANT ACCOUNTING POLICIES

Significant accounting policies used in preparation of the financial statements have generally been included in the relevant notes to the financial statements.

A BASIS OF PREPARATION AND MEASUREMENT a Statement of compliance

The financial statements of the Company have been prepared in accordance with and to comply in all material aspects with the Indian Accounting Standards (Ind AS) as notified under Section 133 of the Companies Act, 2013 and the relevant provisions of the Act, as applicable.

b Basis of measurement

The financial statements have been prepared on accrual and going concern basis under the historical cost convention except for certain class of financial assets/ liabilities, share based payments and net liability for defined benefit plans that are measured at fair value. The accounting policies have been consistently applied by the Company unless stated otherwise.

c Financial Year

The Company had opted the period of 1^st day of January to 31^st day of December, each year as its financial year for the purpose of preparation of financial statements under the provisions of Section 2(41) of the Companies Act, 2013, which the Company Law Board had allowed.

The Board of Directors on 27^th July 2023 have approved the change of financial year of the Company to uniform financial year commencing on 1^st April of every year and ending on 31^st March of the following year. Consequently, as a transitional arrangement, the current financial year of the Company is for a period of 15 months from 1^st January 2023 and ended 31^st March 2024 while the previous financial year was of 12 months from 1^st January 2022 to 31^st December 2022.

d Functional and Presentation Currency

The financial statements have been prepared and presented in Indian Rupees (H), which is also the Company's functional currency.

e Rounding off

All amounts in the financial statement and accompanying notes are presented in H million and have been rounded-off to one decimal place unless stated otherwise.

f Current and Non-current Classification

The Company has ascertained its operating cycle as 12 months for the purpose of current / non-current classification of assets and liabilities. This is based on the nature of products and the time between acquisition of assets for processing and their realisation in cash and cash equivalents.

g Measurement of Profit from Operations

For better understanding of the financial performance, the Company has chosen to present Profit from Operations as an additional information in the Statement of Profit and Loss. Profit from Operations is derived from Profit before Exceptional Items & Tax less Other Income and adding back Finance Costs (Including Interest Cost on Employee Benefit Plans) and Corporate Social Responsibility Expense.

h Use of Estimates and Judgement

The preparation of financial statements requires management to exercise judgement and make estimates and assumptions that affects the reported amounts of revenue, expenses, assets and liabilities. These estimates and assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances. Actual results may differ from these estimates. These estimates and underlying assumptions are reviewed on a periodic basis. Revisions to accounting estimates are recognised in the period in which the results are known/materialise.

The areas involving significant estimates and judgement include determination of useful life of property, plant and equipment (Refer note 6), measurement of lease liabilities and right of use assets (Refer note 6), measurement of defined benefit obligations (Refer Note 32), recognition and measurement of provisions and contingencies (Refer note 34) and recognition of deferred tax assets / liabilities (Refer Note 36).

i Approval of financial statements

The financial statements of the Company were approved for issue by the Board of Directors on 25 April 2024.

B FOREIGN CURRENCY TRANSACTIONS

Transactions in foreign currency are initially recorded in the functional currency i.e. Indian Rupees (H) using the exchange rate at the date of transaction.

Monetary items (i.e. receivables, payables) denominated in foreign currency are reported using the closing exchange rate as on each balance sheet date.

The exchange difference arising on the settlement or reporting of monetary items at rates different from rates at which these were initially recorded / reported in previous financial statements, are recognised in the statement of profit and loss in the period in which they arise.

Also refer to accounting policy on 'Derivatives and Hedge accounting'. (Refer Note 37)

C PROVISIONS, CONTINGENT LIABILITIES AND CONTINGENT ASSETS

Provisions for Contingencies/ Contingent liabilities are recognised/disclosed after evaluation of facts and legal aspects of the matter involved, in line with Ind AS 37 on Provisions, Contingent Liabilities and Contingent Assets and Ind AS 12 on Income Tax. Provisions are recognised when the Company has a present obligation (legal/constructive) and on management judgement as a result of a past event, for which it is probable that a cash outflow will be required and a reliable estimate can be made of the amount of the obligation. Provisions are measured at the best estimate of the expenditure required to settle the present obligation at the Balance Sheet date.

A disclosure for a contingent liability is made when there is a possible obligation or a present obligation that may, but probably will not require an outflow of resources. When there is a possible obligation or a present obligation in respect of which likelihood of outflow of resources is remote, no provision or disclosure is made.

Contingent assets are not recognised in the financial statements since this may result in the recognition of income that may never be accrued/ realised.

D BORROWING COSTS

Borrowing costs directly attributable to acquisition or construction of items of qualifying assets of property, plant and equipment which take substantial period of time to get ready for their intended use are capitalised as part of the cost of that asset. All other borrowing costs are charged to the statement of profit and loss in the period in which they are incurred.

E EARNINGS PER SHARE

Basic earnings per share is computed by dividing the net profit for the period attributable to the equity shareholders by the weighted average number of equity shares outstanding during the period. For the

purpose of calculating diluted earnings per share, the net profit for the period attributable to equity shareholders and the weighted average number of shares outstanding during the period are adjusted for the effects of all dilutive potential equity shares, if any.

On and from the Record Date of 5^th January 2024, the equity shares of the Company have been sub- divided, such that 1 (one) equity share having face value of H10/- (H ten only) each, fully paid-up, stands sub-divided into 10 (ten) equity shares having face value of H 1/- (H one only) each, fully paid-up, ranking pari-passu in all respects. The Earnings per share for the prior periods have been restated considering the face value of H 1/- each in accordance with Ind AS 33 -"Earnings per share".

F EVENTS OCCURING AFTER THE BALANCE SHEET DATE

All material events occurring after the balance sheet date upto the date of approval of financial statements by the Board of Directors on 25 April 2024, have been considered, disclosed and adjusted, wherever applicable, as per the requirements of Ind AS 10 - Events after the Reporting Period.

3. RECENT ACCOUNTING PRONOUNCEMENTS

The Ministry of Corporate Affairs (MCA) has issued the Companies (Indian Accounting Standards) (Amendment)

Rules, 2023 on 31^st March, 2023 amending:

(a) Ind AS 1, 'Presentation of Financial Statements' - This amendment requires companies to disclose their material accounting policies rather than their significant accounting policies.

(b) Ind AS 8 'Accounting Policies, Changes in Accounting Estimates and Errors' - This amendment has introduced a definition of 'accounting estimates' and includes guidance to help distinguish changes in accounting policies from changes in accounting estimates.

(c) Ind AS 12 'Income Taxes' - This amendment has narrowed the scope of the initial recognition exemption so that it does not apply to transactions that give rise to equal and offsetting temporary differences. The amendments clarify how companies account for deferred tax on transactions such as leases

These are applicable from Financial Year beginning on or after 1^st April 2023 (Thus for us will be applicable from

1^st April 2024).

Based on a preliminary evaluation, the Company does not expect any material impact on the financial statements

resulting from the implementation of these amendments.

4. EXCEPTIONAL ITEMS

Exceptional Items as disclosed in the Statement of Profit and Loss Account for 15 months ended 31 March 2024

comprise of the following, in aggregate:

i. Charge of H 972.2 million (previous year nil) towards past service cost and settlement loss recognised on account of change in cost of servicing the defined pension benefit under the Company's unfunded Defined Benefit pension plan following the decision to transfer the responsibility and administration for payment of the defined pension benefits of plan members upon their retirement, to insurance service provider. This includes a settlement loss of H 306.0 million (previous year nil) on the H 2,556.7 million settlement transaction with insurance service provider towards transferring the responsibility and administration for payment of defined pension benefits to existing pensioners effective 1^st April 2024.

The exceptional past service cost of H 666.2 million (previous year nil) included in the defined benefit obligation as at 31 March 2024, has been computed by the Company's actuaries based on expected annuity purchase price at the time of retirement, using projected unit credit method (refer note 32).

ii. Write-back of provision of H 1,015.9 million (previous year nil) made in earlier years for an indirect tax matter upon the settlement of dispute with concerned state Government authority.

5. BUSINESS COMBINATIONA. BUSINESS COMBINATION UNDER COMMON CONTROL

1. Pursuant to the business transfer agreement dated 18^th August 2022, the Company had acquired Pet Food Business from Nestle Business Services India Private Limited (Formerly known as Purina PetCare India Private Limited) with effect from 1^st October 2022, as a going concern on slump sale basis. Nestle S.A., the ultimate holding Company, has 100% ownership of Nestle Business Services India Private Limited (Formerly known as Purina PetCare India Private Limited) and 62.76% ownership of Nestle India Limited. Therefore, Nestle Business Services India Private Limited (Formerly known as Purina PetCare India Private Limited) and Nestle India Limited being subsidiaries of Nestle S.A., Switzerland are related parties. As a result, the transaction has been accounted in accordance with "Pooling of Interest Method" laid down by Appendix C (Business Combinations of Entities under Common Control) of Indian Accounting Standard 103 (Ind AS 103), notified under the Companies' Act, 2013.

The Company has acquired Pet Food Business from Nestle Business Services India Private Limited (Formerly known as Purina PetCare India Private Limited) for a total cash consideration of H 1,421.3 million, determined at arms' length basis fair value of the business acquired. As per the "Pooling of Interest Method" referred above, the assets and liabilities of the acquired business have been recorded in the books of the Company at their pre-acquisition carrying amounts and no adjustments have been made to reflect fair values (of tangible/ intangible assets acquired by the Company). Also, as required by the Appendix C to Ind AS103, there is no recognition of any new asset (tangible/intangible) or liability arising from this business combination irrespective of their market/fair values on the acquisition date. The retained earnings of the Pet Food Business have been merged with the retained earnings of the Company. The difference between the consideration paid and the net assets acquired as adjusted by the retained earnings amount, has been adjusted in the "Capital Reserve" as required by Appendix C to Ind AS 103 irrespective of the fair value of the net assets/liabitlities acquired.

As required under Ind AS 103, the accounting period ended 31^st December 2022 presented in the financial statements of the Company and accompanying notes have been prepared by including the accounting effects of the acquisition of the business, as stated above, as if the purchase had occurred from the beginning of the comparative period of the preceeding year in the financial statements, i.e. January 1, 2021.

Following are the assets & liabilities taken over by the Company on 1^st October 2022

(2) The Board of Directors have approved slump sale of Nestle Business Services ('NBS') Division of the Company to Nestle Business Services India Private Limited (Formerly known as Purina PetCare India Private Limited), which is a related party, being a 100% subsidiary of Nestle S.A, for an aggregate consideration of ~ H 798 million. The transaction shall be effective from 1^st July 2024, subject to customary closing conditions.

Non Current Assets - H 63.4 million reported in Property Plant and Equipment and Capital Work in Progress and H 37.9 million reported in Right of Use Assets pertaining to assets to be transferred as a result of the transaction.

B. BUSINESS COMBINATION - OTHERS

The Board of Directors have approved investment by the Company in the joint venture (JV Company) with Dr Reddy's Laboratories Limited (Dr Reddy's), for the purposes of manufacturing, developing, promoting, marketing, selling, distributing, and commercializing products in the field of medical nutrition, specialized nutrition, nutraceuticals, and supplements in India and other geographies as may be agreed by the Parties. Dr Reddy's will hold 51% and the Company will hold 49% in the JV Company with proportionate shareholder rights to voting, dividend distribution, and other economic rights as enshrined in the definitive agreement. Nestle India will have a call option to increase shareholding upto 60% after six years at a Fair Market Value. Dr Reddy's shall continue to hold at least 40% of the shareholding after the Company exercises its call option.

Items of property, plant & equipment are stated at historical cost less accumulated depreciation and accumulated impairment losses, if any. Cost is inclusive of freight, duties, taxes or levies (net of recoverable taxes) and any directly attributable cost of bringing the assets to their working condition for intended use.

Property, plant and equipment which are not ready for intended use as on the date of Balance Sheet are disclosed as "Capital work-in-progress".

Profit or loss on disposal / scrapping / write off / retirement from active use of an item of property, plant and equipment is recognised in the statement of profit and loss.

Advances paid towards the acquisition of property, plant and equipment outstanding at each balance sheet date is classified as capital advances under "Other Non-Current Assets".

Depreciation / Amortization

The Company has assessed the useful lives of property, plant and equipment as required by Schedule II to the Companies Act, 2013. Accordingly, depreciation has been computed on useful lives based on technical evaluation of relevant class of assets including components thereof. Useful lives and residual values are reviewed annually. Depreciation is provided as per the straight line method computed basis useful lives of property, plant and equipment as follows:

Impairment of Property, Plant and Equipment

At each balance sheet date, the Company reviews whether there is any indication that an item of property, plant and equipment including capital work in progress, right of use assets or intangible assets (asset / cash generating unit) may be impaired. For the purpose of assessing impairment, assets are grouped at the levels for which there are separately identifiable cash flows (cash generating unit). If any impairment indicator exists, estimate of the recoverable amount of the property, plant and equipment /cash generating unit to which the asset belongs is made. An impairment loss is recognised in the statement of Profit and Loss whenever the carrying amount of an asset/ cash generating unit exceeds its recoverable amount. The recoverable amount is the greater of the fair value less cost to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value based on an appropriate discount rate.

Reversal of impairment losses recognised in earlier years is recorded when there is an indication that the impairment losses recognised for the asset/cash generating unit no longer exist or have decreased. However, the increase in carrying amount of an asset due to reversal of an impairment loss is recognised to the extent it does not exceed the carrying amount that would have been determined (net of depreciation) had no impairment loss been recognised for that asset/cash generating unit in earlier years.

The Company's leases mainly comprises of land, buildings, plant & machinery and vehicles. The Company leases land and buildings primarly for offices, manufacturing facilities and warehouses.

The Company assesses whether a contract is or contains a lease, at inception of a contract. A contract is, or contains a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration.

At the date of commencement of the lease, the Company recognises a Right of Use asset ("ROU") and a corresponding lease liability for all lease arrangements in which it is a lessee.

The right-of-use assets are initially recognised at cost, which comprises the initial amount of the lease liability adjusted for any lease payments made at or prior to the commencement date of the lease plus any initial direct costs less any lease incentives. They are subsequently measured at cost less accumulated depreciation and impairment losses, if any. Right-of-use assets are depreciated from the commencement date on a straight-line basis over the shorter of the lease term or useful life of the underlying asset.

The lease liability is initially measured at the present value of the future lease payments. The lease payments are discounted using the interest rate implicit in the lease or, if not readily determinable, using the incremental borrowing rates. The lease liability is subsequently remeasured by increasing the carrying amount to reflect interest on the lease liability, reducing the carrying amount to reflect the lease payments made. A lease liability is remeasured upon the occurrence of certain events such as a change in the lease term or a change in an index or rate used to determine lease payments with a corresponding adjustment to the carrying value of right-of-use assets.

Lease liability and right-of-use assets are separately presented in the Balance Sheet and lease payments are classified as financing cash flows in the Cash Flow Statement.

The Company recognizes lease payments as other expense on a straight line basis over the period of lease for short term leases or leases of low value assets .