HLL moved lower in continued investor disdain for the stock, but volumes were relatively high at 182,000 shares in just an hour of trade.

The volumes seem awesome considering that 270,000 shares were traded in the entire session on Monday. The scrip of the FMCG behemoth slipped 2.2% to Rs 149.25 on BSE in morning trades on Tuesday.

The FMCG major has been sluggish following market concerns over the company's weakening top line . From a high of Rs 183.45 on 26 December 2002, the stock has lost 18.6% to the current Rs 149.25.

The stock was hurt further today after the company said that it has postponed its AGM to June 13, 2003 as against 30 April 2003 originally scheduled. The company has been constrained to postpone the AGM since the dividend payment as well as payment of special dividend on the bonus debentures have been impacted by proposed changes in the Union Budget for 2003-2004. The budget proposed to replace the provision for taxation of dividend in the hands of the shareholders (including tax deduction at source) by a provision of dividend distribution tax in the hands of the company at a flat rate of Rs 12.81% (including surcharge).

There is however no change in book closure dates - 8 April 2003 to 23 April 2003 (both days inclusive). The fixing of the record date for issue of bonus debentures would be subject to the approval of the Reserve Bank of India under FEMA provisions.

Following the change in dividend tax norms in the Union Budget 2003-2004, the FMCG major will now bear the dividend distribution tax burden of Rs 219 crore (Rs 2.19 billion). The balance of Rs 388.5 crore (Rs 3.88 billion) will be distributed to the shareholders, by way of special dividend of Rs 1.765 per share of Re 1 each, over and above the bonus debenture of Rs 6. Accordingly, neither the bonus debentures as "deemed dividend" nor the special dividend would be taxable in the hands of the shareholders.

Earlier, on 9 August 2002, HLL's shareholders had approved the bonus debenture and special dividend scheme. The scheme comprised an issue of one bonus debenture of the face value of Rs 6 each for every share of Re 1 each and a special dividend of Rs 2.76 for every share of Re 1 each.

Meanwhile, foreign brokerage JP Morgan recently downgraded the stock to neutral from overweight. HLL has far lower pricing power now, resulting in loss of market share in many categories. While successes in newer categories such as staples could revive growth momentum, a return to historical growth rates of 20% seems difficult, the brokerage said. The increasing competition in highly penetrated categories, such as soaps, will keep product prices under pressure, it is reckoned.

HLL continues to pass through a difficult period, with a substantial slowdown in its domestic business in the past 8-12 quarters. An adverse monsoon in 2002 also further distanced any recovery in demand for the company's products. Analysts say demand is likely to remain subdued, with growth expected to remain flat for the next two quarters. Although the management is aggressively restructuring its business, the macro environment remains challenging.

For the full year ended 31 December 2002, HLL recorded a 7% growth in bottom line to Rs 1,755.68 crore (Rs 17.55 billion), but a 7% drop in top line to Rs 9,954.85 crore (Rs 99.54 billion). For the fourth quarter ended 31 December 2002, HLL registered a 7% growth in bottom line to Rs 466.51 crore (Rs 4.66 billion) on a 2% decline in top line to Rs 2634.5 crore (Rs 26.34 billion). At the profit after tax but before EO level, the company registered a 9% growth in net profit to Rs 542.84 crore (Rs 5.42 billion).

BSE code: 500694