Curtains were brought down on one of the biggest share buyback programmes on Dalal Street through which Unilever hoped to hike stake in Indian arm.
This open offer was for acquiring 48.7 crore shares representing 22.52 per cent of the voting share capital of Hindustan Unilever by the Anglo-Dutch parent.
Against this, it could mop-up about 15 per cent stake, according to sources.
If this is the right number, Unilever’s stake will increase to 68 per cent in the Indian arm. It had targeted the level of 75 per cent. The open offer, priced at Rs 600 a share, opened on June 21, and ended today.
The Hindustan Unilever stock closed at Rs 600.75, up 2.27 per cent on the BSE after reaching a 52-week high of Rs 605.20 intra-day. The company management stated the rationale behind the buyback was to invest more in emerging markets such as India and provide a “liquidity opportunity at an attractive premium for existing shareholders.”
At present, India contributes approximately 7 per cent to the global revenues of Unilever which stand at about €50 billion.
Slowdown trigger
However, FMCG analysts believed the move was triggered owing to a slowdown in its European markets. They also felt that move could be a possible precursor to delist HUL from the Indian bourses in the future given that India is one of the biggest markets for Unilever and it would be beneficial to acquire a larger share in the Indian arm.
Sharekhan Securities FMCG analyst Kaustaubh Pawaskar said: “Going by the offer price, the valuation comes to 32 times which is a substantial premium to the company’s historical valuations.
“This would spell interest from long-term investors who would like to exit at attractive valuation and the acceptance rate too has been kept at 50 per cent which would be beneficial. Institutional and retail investors too would look at profit-booking through the open offer.”
“We are hopeful of the offer being partially subscribed with about a 50 per cent success rate. However, given the narrow difference between the market price and buyback offer price, the right strategy would have been to sell the shares in the open market rather than announce a buyback open offer owing to the benefit of avoiding long-term capital gains tax in case investors have held the stock for over one year,” he added.