Unilever?s $4.86-billion open offer ? the largest ever in the history of the Indian capital market and aimed at upping its stake in its Indian outfit Hindustan Unilever (HUL) ? ended on Thursday with the Anglo-Dutch major understood to have attracted a reasonable portion of the targeted shares. The size of the open offer has reduced considerably since it was announced?$5.4 billion then? since the rupee has depreciated against the dollar.
The HUL stock touched a 52-week high of R605.20 on the BSE on Thursday with over 61 lakh shares being traded on both the exchanges. This is far higher than the 20-day average volume of 43.16 lakh shares and the 3-month average volume of 32.18 lakh shares, but lower than the 10-day average volume of 70.67 lakh shares.
HUL has moved in the range of R570-595 range in the last two months, leaving little room for meaningful arbitrage opportunities between the offer price and the market price. Also the stock has gained a meagre 1.67% since the offer commenced on June 21.
By way of this open offer, Unilever plans to increase its stake in its Indian arm from the current 52.48% to 75% by shelling out over R29,220 crore ($4.86 billion at Thursday?s rupee-dollar rate of 60.13) for 48.70 crore equity shares at R600 per share. Incidentally, the open offer announced by Unilever dwarfs some of the largest offers that the Indian equity market has ever seen. It is even bigger than the combined value of the three largest open offers announced in India till date ? Vedanta (R13,631.48 crore), Ranbaxy Laboratories (R6,816.66 crore) and Siemens (R6,233.39 crore).
A few of the large institutional investors ? Life Insurance Corporation of India, Aberdeen, Oppenheimer and Virtus Emerging Market Fund?are understood to have stayed away from the offer, continuing to see value in the stock and also because tendering the shares would have meant paying long?term capital gains tax at 10% without indexation or 20% with indexation, since these are treated as off-market trades.
Adrian Lim, portfolio manager at Aberdeen Asset Management, in a recent television interview, had said that he would not necessarily offer all the shares; the Scotland-based global fund management company that holds 4.41% stake and is the third-largest shareholder in the Indian arm of Unilever.
Interestingly, Japanese financial services major Nomura had said the open offer from Unilever presented a good exit opportunity for investors. According to Nomura’s consumer goods analyst Manish Jain, HUL’s profit growth of low double digits over the next few years will be below the estimated sector average pace and slower than other mid-cap consumer names that could see valuation multiples correcting over time.
?Continued subdued volume growth performance
and a depreciating rupee are negative catalysts for the stock,? Jain said in his last week’s report, adding that
the stock trades at 31.9 times FY15f versus sector average of 26 times. The offer opened on June 21.