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HindustanTimes Sun,20 Apr 2014

More MNCs may go the Unilever way

HT Correspondent, Hindustan Times  Mumbai, May 02, 2013
First Published: 23:19 IST(2/5/2013) | Last Updated: 10:55 IST(7/5/2013)

After Anglo-Dutch giant Unilever announced a $5.4 billion (over Rs. 29,380 crore) offer to buyback shares in its Indian unit Hindustan Unilever (HUL) through an open offer, other MNCs may follow suit.

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Shares of Indian units of global giants including Nestle, Colgate-Palmolive, Astrazeneca Pharma, Bata and Procter & Gamble have jumped up to 5-7% in the past couple of days, triggering speculations of open offers.

Experts, however, said that retail investors should not jump into the bandwagon but wait till the end of the open offer to tender shares.

"Retail investors with long-term investment horizon (3-5 years) who are looking wealth creation should not rush to buy a stock when an open offer is announced. This is because in most cases the short-term trading opportunity pushes up the price to close the arbitrage in the open offer," said Lalit Nambiar, fund manager and head research, UTI Asset Management Company.

"These investors should instead wait for the open offer to end and enter the stock when price is closer to its fundamental value."

Experts also say that prospects of growth in Indian economy may lure MNCs to hike stake in their Indian units.

"Return on capital is comparatively high and the working capital requirement is also low in comparison to developed economy," said Suruchi Jain, equity research analyst, Morningstar India.

Analysts say that retail investors need not to worry about the quality of stocks as MNCs operating in India have sound fundamentals.

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