Subscribe to Unilever's open offer for HUL - IDFC

Reuters Market Eye - IDFC Institutional Securities says investors should subscribe to Unilever's open offer for its Indian unit Hindustan Unilever Ltd due to a significant premium and as it expects the offer to create a floor price for the stock.

Unilever plans to pay up to $5.4 billion to raise its stake in its Indian subsidiary, making its biggest deal in 13 years, a huge bet on the strength of demand for personal care and food products in Asia's third-largest economy.

Though its operational concerns on the business remain, IDFC says the new Hindustan Unilever is a leaner organisation than in the FY2001 and upgrades the stock to "neutral," saying the open offer and consequent re-rating will provide support to valuations.

The investment bank adds that other listed FMCG names with foreign parents are likely to follow suit in the future. Nestle India Ltd , Colgate Palmolive India Ltd , Procter & Gamble Hygiene and Health Care Ltd and Agro Tech Foods Ltd are the likely candidates.

Shares in Hindustan Unilever were down 1.4 percent at 12.28 p.m.

(Reporting by Abhishek Vishnoi)