Anglo-Dutch consumer goods giant Unilever is planning to increase its stake in Hindustan Unilever, its Indian subsidiary, through a proposed buy-back of shares.
The board of HUL, India's largest consumer goods company, will meet on July 29 to consider the proposal.
At present, Unilever and its group companies own a 51.42 per cent stake in the Indian operations. Except for India and Indonesia, the company owns 100 per cent in all Asian countries where it operates.
Analysts said the proposed buyback will reward shareholders and give them an attractive exit option, as the share price of HUL has been stagnating at around Rs 190 in recent times.
In the last three years, the stock price of the company has been underperforming the Sensex. Since January 2005, the stock has grown 30.06 per cent, compared with Sensex's 131.29 per cent rise.
"The company is also sitting on a huge cash reserve with no major capital expenditure plans in the near future," said an analyst.
According to the 2006 annual report, HUL has cash reserves and surplus in excess of Rs 2,500 crore.
Analysts added that Unilever has a lot to gain by investing in a high growth subsidiary.
"It is logical to consolidate in an emerging economy subsidiary as these are high growth markets that reflect well in the parent's global performance," said an analyst.
In recent times, a whole set of MNCs including Blue Dart, Motor Industries Company Ltd, i-Flex Solutions, Monsanto India, Alfa Laval, Avaya Global, 3M and Timken India is waiting to exit from Indian stock markets as their overseas parents use a stipulation of minimum public shareholding of 25 per cent to exit from the bourses.
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