Anglo-Dutch parent Unilever’s acquisition of an additional 14.8% stake through an open offer to the shareholders sent the shares of Hindustan Unilever soar to record highs on Friday, although the $3.2 billion spending fell short of the parent’s aim to raise the controlling stake to 75%.
HUL’s shares soared to a record high of Rs. 632 in early morning trade on Friday before eventually closing at Rs. 609, a gain of Rs. 8.4 or 1.40 % up from the previous day’s close.
Unilever now owns 67.3 % of HUL, India’s largest consumer-goods company by revenue, from an earlier 52.48 %, according to a statement on its website.
“For the Indian arm (HUL) there is nothing specific,” said Gaurang Kakkad, vice president, Institutional Research Religare Capital Markets. “The revenue share for (companies like HUL) from markets like India is higher. India’s consumer market will grow faster as compared to western markets,” he added. The topline growth for the FMCG sector is in the 14 to 15% range, where according to Kakkad, HUL would fall short.
Unilever’s chief executive Paul Polman, said, “We are pleased to have received such a good response to our voluntary open offer and that as a result we will significantly increase our stake in Hindustan Unilever.” The acquisition is part of Unilever’s strategy of investing in emerging markets as growth in revenues from developed countries slows.
“The open offer and its price reveals Unilever’s view that India is a very important market for it,” said Sonam Udasi, head of research, IDBI Capital. India contributes 15 to 20% of Unilever’s revenues, analysts said, when consumer demand and growth in the developed markets of the United States and Europe has slowed sharply.
“Valuations for the company are pretty stretched and one could book some profits,” Kakkad said. “It is a good price to exit.”