Mumbai, June 24
LACK of a business up-trend seemed to weigh down investors at the AGM of Hindustan Lever Ltd (HLL) here on Friday, as they wished the company's incoming and outgoing chairmen well, but sought a reversal of fortunes in the balance sheet.
Replying to a shareholder who compared the company's situation to that of a tired climber, Mr M.S. Banga, Chairman, said, "When you run up a hill fast, you do tend to slow down a bit. We have been re-equipping ourselves for the steeper slope that you see in the market today. Let me assure you, we have no intention of slipping down that hill. We have begun the climb back up."
The Chairman's speech this time was titled, `Bringing FMCG Back To Growth.' A synopsis of HLL's restructuring, it said, in conclusion, "Over the next 10 years, the per capita income in India is likely to double.
"In FMCG, there is an opportunity to catalyse penetration, increase usage and upgrade consumers. As a result, the FMCG market is expected to grow to over Rs 100,000 crore from its current base of Rs 40,000 crore.
"We in the new Hindustan Lever see an exciting opportunity for growth."
It drew poetry and hope from some investors. But others worried over HLL's income, profitability, share price and the diversification in certain FMCG companies as opposed to HLL's penchant for shedding businesses.
One of them asked if the falling share price pointed to an eventual takeover by Unilever at a lower cost.
Mr Banga said only non-core businesses had been divested. The company had matched Rs 2,000 crore of non-core business with a growth in its core FMCG business. He urged shareholders to see the decline in profitability as the cost incurred for protecting HLL's market share.
"I would ask you to see last year's profit dip as protecting our market share, which is in turn an investment to protect future market share,'' said Mr Banga.
As for diversification, HLL works in several categories within the FMCG segment.
Known for his portrayal of growth as volume growth, followed by value growth and rise in profits thereafter, Mr Banga said, HLL's March quarter returned 13-14 per cent value growth in laundry and 20 per cent value growth in hair care products.
"As night follows day, as value growth comes, profit growth follows. That's the way of the game," said Mr Banga.
The decision to make the HLL Chairman a non-executive one was a "very conscious choice," stemming from the division of the company into two clear business groups with separate managing directors for each. But there will be no formal split of HLL into twocompanies.
"That is farthest from our minds," Mr Banga said, emphasising the enormous benefits HLL accrued by approaching the market as a single company.
"We have no intention at this stage to contemplate any change in direction," he said.
Meanwhile, on the rain washed street outside the AGM venue, one or two workers were distributing pamphlets issued by the company's union, seeking "a humane and more profitable Hindustan Lever."