Higher royalty & dull results take sheen off HUL
The new agreement will increase royalty costs, in a phased manner, to 3.15% of total sales by March 2018, from the current 1.4% of turnover for HUL. The increase in royalty cost in the period from February 1, 2013, to March 31, 2014, is expected to be 0.5% of turnover, and thereafter in a range of 0.3% to 0.7% of total sales in each financial year, HUL said.
The announcement, together with a disappointing set of numbers for the December 2012 quarter, pushed the HUL scrip down more than 6% on the BSE.
Investors in the Indian arms of MNCs have given a thumbs-down to recent moves to hike royalty payments. Following opposition from shareholders, ACC has decided to seek shareholder approval through postal ballot, as part of a “good corporate governance practice”, even though the royalty issue can be essentially decided by the board, it said on January 9. Boards of cement companies ACC and Ambuja Cements, controlled by Switzerland-based Holcim, recently increased royalty payments on technology and knowhow to its parent firms. The two Indian cement companies are now required to pay 1% of their total sales as royalty to their parent company.
In December 2009, the government through press note 8, freed up caps for payments for foreign technology collaborations and royalty fees under the automatic route, including lump
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