HUL pares losses on hopes demand will recover as prices stabilise

Indian consumer giant Hindustan Unilever pared most losses after falling as much as 2.7 per cent on Monday as investors sought comfort from an expected recovery in demand after a consumption tax reform-led hit to sales.

The shares were down 0.2 per cent at 2,506.50 rupees as of 12:32 IST, while the benchmark Nifty 50 was flat. Hindustan Unilever's shares, rated "buy" on average by 39 analysts, as per data compiled by LSEG, have risen about 8 per cent so far this year.

India cut taxes from September 22 on a wide range of consumer goods ranging from soaps to air conditioners, to boost domestic demand as the economy faces pressure from steep US tariffs.

 

Hindustan Unilever said on Friday that the tax reforms led to a temporary hit to sales in September, which may persist through October as sellers clear older inventory and consumers delay purchases in anticipation of lower prices.

However, it expects a recovery in demand starting November as prices stabilise post the tax cuts.

Inventory-related headwinds will affect other Indian consumer goods firms as well in the July to September quarter, Jefferies said, adding that it expects a better third-quarter. "The GST rate cuts along with recent income tax cuts should help several consumption categories," the brokerage said.

BofA Securities echoed the optimism, projecting that restocking activity combined with a business recovery could drive growth for Hindustan Unilever in the second half of the financial year ending March 31.

The firm estimates consolidated business growth to remain flat to low single digits percent for the September quarter.