HUL board approves formation of a new subsidiary for manufacturing

The new subsidiary aims at taking advantage of 15% corporation tax

Hindustan Unilever (HUL) on Monday said its board had approved the formation of a new wholly-owned subsidiary with an authorised share capital of Rs 2,000 crore.
 

HUL’s Chief Financial Officer Srinivas Phatak told Business Standard that the subsidiary was being set up for manufacturing purposes, with an aim at capitalising on the 15 per cent corporation tax available to new manufacturing firms.

Finance Minister Nirmala Sitharaman had reduced the base corporation tax for existing companies to 22 per cent from 30 per cent, and to 15 per cent from 25 per cent for new manufacturing firms incorporated after October 1, 2019, and starting operations before March 31, 2023.

Phatak said HUL was setting aside Rs 500-800 crore for investment in new plants under the subsidiary. “We are yet to evaluate which categories will be manufactured by the subsidiary and where the new plants will be located. But we are working towards it,” he said.

The new unit would be set up in the next few months, he added, after which work on the new plants would start.

India is among the largest markets in terms of volume for Unilever, with 98 per cent of households in the country using one or more HUL brands and 45 billion units manufactured annually by the company at its factories, which are over 80 in number.

HUL has already begun implementing an end-to-end digital transformation programme, which includes leveraging data and technology as well as artificial intelligence across the value chain.

The company has also set up a digital council and 85 experiments were underway across functions to help the firm get future-ready, HUL’s Chairman and Managing Director Sanjiv Mehta said at the company’s 86th Annual General Meeting (AGM) last year.

“The announcement by HUL to set up a new subsidiary is linked with the ‘Make in India’ programme and the effort by the government to help firms to put up new manufacturing capacities here,” said Abneesh Roy, executive vice-president, research (institutional equities), Edelweiss.

The company is also embracing technology on the factory floor by reducing service lead-time through an integrated sales and operation-planning programme, creating a customer-focused factory network and a faster logistics and distribution footprint, Mehta had said during the AGM.