Unilever's open offer gets Sebi nod

The open offer will commence on June 21 and end on July 4

Decks have been cleared for one of the largest open offers by a promoter, with the Anglo-Dutch firm Unilever receiving approval from the Securities and Exchange Board of India (Sebi) on Thursday for its Rs 29,202-crore share buyback programme.

This scheme, which will begin on June 21 and end on July 4, will see Unilever pay shareholders Rs 600 a share, taking up its stake from 52.48 per cent to 75 per cent in its Indian subsidiary, Hindustan Unilever Ltd (HUL). The latter closed trade today on BSE at Rs 594.75 a piece, up 0.19 per cent, while the benchmark Sensex lost 1.12 per cent to 18,827.16.

Unilever had made the announcement to raise its stake in HUL a day after it reported double-digit growth in revenue and profit for the fourth quarter.

The results came after three quarters of abysmal numbers from the Indian unit, with volume growth steadily going down from nine per cent to seven per cent to five per cent between April and December 2012.

Paul Polman, chief executive officer of Unilever, had said at the time of the announcement of the open offer: “This represents a further step in Unilever’s strategy to invest in emerging markets and offer a liquidity opportunity at what we believe to be an attractive premium for existing shareholders. The long heritage and great brands of Hindustan Unilever, and the significant growth potential of a country with 1.3 billion people makes India a strategic long-term priority for the business.”

Analysts, however, said the move by the Anglo-Dutch company to take greater control of the Indian business was motivated in part by its own underperformance in markets such as Europe, which had reported its slowest quarterly growth in two years recently.

Unilever derives over 55 per cent of its revenue from emerging markets, with countries such as India, China and Indonesia being key drivers of growth. Harish Manwani, chairman of HUL, had told Business Standard following the company's fourth-quarter results: "When you have a 16 per cent top line growth that adds Rs 3,300 crore to net sales, with an underlying volume growth of seven per cent and a margin improvement of 80 basis points, that does speak a lot and remember we have achieved this in a difficult environment."

HUL is expected to step up efforts to ramp up growth by investing in new, emerging categories, as well as newer channels of distribution. Manwani had said his company continued to have both a long-term and short-term point of view on the business here. HUL derives nearly half its revenues from soaps and detergents and the balance from categories such as personal products, packaged foods and beverages.

In recent years, the company has been steadily launching brands from the parent's global portfolio prompting the latter to take up royalty from 1.4 per cent to 3.15 per cent of net sales over the next five years. It is unclear at this stage whether HUL will be delisted from the bourses following Unilever's move to hike stake. Analysts say it is not likely to happen anytime soon.