Former Hindustan Unilever chief executive officer Nitin Paranjpe’s appointment as its non-executive chairman will help strengthen the company’s relationship with parent Unilever, which plans to restructure its business model, analysts said.
While Paranjpe’s appointment, effective March 31, was made in keeping with good governance practices, it has wider implications for the company, experts indicated.
The Securities and Exchange Board of India, the market regulator, had been urging listed companies to separate the roles of chairman and CEO or managing director. Sanjiv Mehta, the former chairman, will continue as CEO and MD, Hindustan Unilever said in a regulatory filing on February 24.
“The appointment will make the relationship between the parent Unilever and Hindustan Unilever much stronger and seamless given Nitin Paranjpe also occupies leadership roles at the parent Unilever,” said Abneesh Roy, executive director, institutional equities, at Edelweiss Securities.
Paranjpe is currently COO of Unilever and is set to become chief people officer and chief transformation officer in April. He will lead the company as it goes through a major restructuring, Unilever had said.
‘No one better’
Experts said Paranjpe’s experience as CEO of Hindustan Unilever will work in favour of the Indian unit.
“Paranjpe has earlier been a very dynamic MD and CEO of Hindustan Unilever, so he understands India and Hindustan Unilever extremely well and will enrich the board,” said Roy.
Paranjpe was CEO of Unilever’s Indian unit and served as executive vice president for the South Asia region from 2008 to 2013, when he was appointed president of the home care business at Unilever and then president of food and refreshments in 2018. Paranjpe became a member of the Unilever Leadership Executive in 2018 and COO of the company in 2019.
“Besides helming HUL for a long time, Paranjpe has also headed most divisions at Unilever globally. He is now going to spearhead the parent company’s transformation and there is no one better than him to be the chairman of HUL,” said Himanshu Nayyar, lead analyst – institutional equities, at Yes Securities.
Unilever announced a restructuring in January that is aimed at helping the company generate 600 million euros of cost-savings while adopting a leaner structure. According to company executives, Unilever’s matrix structure, under which the teams report to several heads, has become redundant and is no longer working.
“It slows down the decision-making and diffuses accountability,” Unilever CEO Alan Jope had said on an investor call earlier in February.
The proposed new organisation model will result in a 15 percent reduction in senior management roles, while junior management roles will be trimmed by 5 percent, equivalent to about 1,500 roles globally, the company said in a statement. The move is expected to result in job losses in India.
“In India, too, the company had adopted a similar structure and we expect some positions will be eliminated and there will be a downsizing. However, in the long term it will make the company more agile and help it in adjusting to the current business environment,” said Nayyar of Yes Securities. “But near-term disruption can’t be ruled out, which will impact employee morale.”
Another major move as part of the recast will be to organise its businesses under five distinct groups – beauty and wellbeing, personal care, home care, nutrition, and ice-cream. Each of these units will have a business leader reporting to the top management.
Currently, Unilever houses its businesses under foods and refreshments, beauty and personal care, and home care. Experts said the Indian unit may not be reorganised similarly.
“Globally, the ice-cream business is quite large, but not in India, and hence it is unlikely that we will see a separate ice-cream division,” indicated Nayyar.
The Rs 45,000 crore HUL is the largest FMCG company in India and sells products such as Lux and Lifebuoy soaps and Kwality Wall’s frozen desserts.
Hindustan Unilever is yet to state what the restructuring would mean in India.
The company, in response to a query from Moneycontrol last month, said HUL has a mutually beneficial and interdependent relationship with the Unilever Group and the company will continue to leverage this organisation structure to serve consumers and customers.“Changes, if any, will be announced in due course,” the company had said.