ITC, Dabur & all FMCG members join Hindustan Unilever party
Shares of most fast moving consumer goods companies gained 2-7 percent on Tuesday morning, buoyed by Anglo-Dutch Unilever's voluntary open offer to raise stake in the domestic market leader Hindustan Unilever.
April 30, 2013 / 11:53 IST
Moneycontrol Bureau
Shares of most fast moving consumer goods companies gained 2-7 percent on Tuesday morning, buoyed by Anglo-Dutch Unilever's voluntary open offer to raise stake in the domestic market leader Hindustan Unilever, which jumped 20 percent to a life high of Rs 597 on NSE.ITC shares rose 2 percent to hit a fresh high of Rs 335.60 and Dabur India raced 4 percent to a 52-week high of Rs 155.90 on NSE. Among other FMCG stocks, Colgate Palmolive soared 7 percent, Nestle, GlaxoSmithKline Consumer Healthcare were up 5 percent and 4 percent respectively and Godrej Consumer, Marico and Bajaj Corp gained 2-3 percent."The possibility of investors exiting HUL and that money shifting to the other conumer goods players is driving the stocks up," said an analyst at a local brokerage.The MNC stocks like Colgate Palmolive, GSK Consumer, Procter & Gamble Hygiene and Healthcare and Nestle India particularly saw brisk trade, on hopes of similar open offers from their parents.Foreign promoter and promoter group companies held 62.76 percent stake in Nestle India, 51 percent in Colgate Palmolive India and 70.64 percent in Procter & Gamble Hygiene & Healthcare as of March 31.GlaxoSmithKline Consumer promoters earlier in 2013 raised their stake in the Indian arm to over 72 percent from 43.16 percent in an open offer.Unilever's voluntary open offer is to buy 48.70 crore shares or 22.52 percent of total voting share capital from public shareholders at Rs 600 a share. Unilever directly and through arms currently holds 52.47 percent stake in HUL. As far as the HUL open offer is concerned, the analyst says it is unlikely that large shareholders like LIC (3.22 percent stake) and Oppenheimer (1.76 percent) and would want to exit at current point. However, he says it would be the "perfect time" for retail investors to sell the stock, given that there are lot of headwinds ahead of HUL.The maker of Lux soap, Surf Excel detergent, Bru coffee and Lakme cosmetics, reported better-than-expected earnings for the fourth quarter, but analysts say the results re-affirmed the slowdown across key segments. Jefferies ("Hold" rating) for instance notes that packaged foods sales were up just 7 percent, compared with trend growth of 20 percent per annum and soaps & detergents growth at 13 percent was far lower than 22 percent reported in the first nine months of FY2013.Other brokerages too echo similar sentiments. Citigroup maintained its "sell" rating on the stock post reviewing Q4 earnings, saying there multiple challenges going ahead."Given heightened competition, strategically ad spends will remain elevated, and investments in new brands/categories will impact margins. With
management's twin focus on volume growth and defense of its market shares, we think margin expansion may remain muted. Increase in royalty outgo and effective tax rates will also weigh on overall profits growth," Citi said.Nachiket Kelkar
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