HUL's share buy back: Opportunity for investors to exit

Buy back at attractive valuations, feel analysts

Hindustan Unilever’s European parent has surprised one and all with a voluntary open offer for acquisition of 487,004,772 shares of Hindustan Unilever from the public at a price of Rs 600 a share. The offer price is at 20.5% premium to the closing price of Rs 497.60 on Monday.

The stock price spiraled on the bourses on Tuesday morning on the news, touching a 52 week high of Rs 597.

The number of shares proposed for the buy back represent 22.52% of the Voting Share Capital from the public shareholders of Hindustan Unilever Limited. The parent company already holds 52.48% stake in the company and with this the promoter share holding will go up to 75% (maximum holding the promoter can hold).

The open offer by the company could be looked as an attempt by the European parent to ride on the growth of the emerging markets. The revenues from the emerging markets account for more than half of the revenue of the parent. The royalty by the Indian company to parent had already been increased by 30 top 35 basis points earlier and from the record dividend payout of Rs 13.50 declared by Hindustan Unilever yesterday, the promoter company will be the largest beneficiary already holding 52.48% stake in the company.

From investors point of view it seems to be a good valuation to sell, feel analysts.

Phani Shekhar, Fund Manager at Angel Broking feels that at 35 times PE multiples it is an attractive valuations for investors to sell the stock.