Mumbai: Unilever has failed to meet its buyback target in Hindustan Unilever (HUL), raising its stake in the Indian arm to 67.3 percent for Rs 19,180 crore -- short of the intended 75 per cent -- at the end of the open offer period which closed on Thursday.
The Anglo-Dutch FMCG giant could mop up only 14.8 percent of the targeted 22.58 percent stake hike in the domestic subsidiary. At the offer price of Rs 600 per share, this works out to be worth Rs 19,180 crore, at an average price of Rs 601.40 a share, the London-based consumer goods major said in a statement issued from London.
HUL shareholders tendered only 3.2 crore shares, as against the target of 48.7 crore, worth USD 3.17 billion, or Rs 19,180 crore, during the offer that began on June 21, it said.
At 14.8 percent, the success rate of the buyback programme was around 66 percent. The original plan was to buy back 48.7 crore shares from HUL shareholders. The offer value was 37 times HUL's earnings before interest, taxes, depreciation and amortisation (Ebitda) at Rs 600 apiece.
According to analysts, investors held back from tendering shares at that would have entailed them paying a hefty 21 percent in capital gains tax adjusted with a Government-provided index for inflation against a paltry 0.01 percent security transaction tax if they sell in open market.
HUL shares rose 1.4 percent to Rs 609.15 today on the BSE after rallying to Rs 631.95, up 5.1 percent, in morning session, while the benchmark Sensex gained 0.44 percent.
Since the buyback announcement, the HUL shares have soared 22.5 percent as of today.
HUL accounts for about 8 percent of Unilever's total sales, making India the Anglo-Dutch firm's third-largest market. HUL products on an average command a hefty 40 percent market share here, the highest for Unilever in the world.
The HUL offer is worth around 30 percent of the money that FIIs have pumped into the domestic equities so far this year. The additional liquidity has helped the rupee, which lost over 9 percent against dollar since this April, snap a three-day drop and end up at 60.13 to the dollar yesterday. But today, the rupee again lost ground and closed at 60.21.
Unilever ruled out another buyback in HUL. In any case, it will not be able to do so until the end of this fiscal.
The Anglo-Dutch company in April had announced it will buyback 22.58 percent, entailing an investment of USD 5.4 billion, or Rs 29,220 crore, into HUL, making the offer the biggest ever in the history of Indian market.
Based on the shares tendered, which represent 14.8 percent of HUL, Unilever would increase its stake from 52.48 percent to 67.28 percent.
Commenting on the development, Unilever Chief Executive Paul Polman said, "We are pleased to have received such a good response to our voluntary open offer. As a result, we will significantly increase our stake in HUL, which has the potential for attractive long-term growth."
The payment for shares tendered and accepted will be completed on or before July 18, the statement said. The open offer, announced on April 30, was managed by HSBC Securities.
It is learnt that LIC, which held 3.22 percent in HUL prior to the offer, has sold a substantial part of its stake in the open offer.
The largest public shareholders of HUL are Aberdeen (the third-biggest) with 4.4 percent stake, LIC (3.22 percent), Oppenheimer Developing Markets Fund (1.76 percent) and Virtus Emerging Markets Opportunities Fund (1.44 percent).
While many MNCs have delisted from the Indian market, many chose to up their stake in local arms. Early this year, GlaxoSmithKline increased its stake in the domestic unit to 72.46 percent from 43.16 percent, investing Rs 5,222 crore.
Prior to that Tata Steel had raised its stake in Tinplate Company and Tata Sponge Iron.
Yesterday, another British giant Diageo completed its open offer in United Spirits Ltd (USL), securing 25.02 percent in India's largest liquor company - till the other day controlled by Vijay Mallya - for Rs 3,135 crore.
Diageo has so far spent Rs 5,235 crore to own about half the stake it targeted last November when it entered into an agreement with Mallya to buy 53.4 percent stake in United Spirits for Rs 11,166 crore.
Post-deal, Diageo nominated Gilbert Ghostine and Ravi Rajagopal as non-Executive Directors and P A Murali as Chief Financial Officer and Executive Director of USL. Mallya will continue as non-Executive Director and Chairman.
The Diageo open offer, however, fell way short of target with investors selling just 0.4 percent after USL shares soared over the offer price of Rs 1,440 a piece. Today, USL shares closed at Rs 2,531.70, down 0.7 percent.
First Published: Friday, July 05, 2013, 10:20