India?s largest FMCG company Hindustan Unilever Ltd?s (HUL) announcement that the company?s board would meet on July 29 to consider a share buyback, has analysts divided on the possible reasons for the move. While many analysts think HUL is buying back its own shares to increase its stock price and that the company should have done this earlier, others say the move could be a prelude to Unilever?s (the Anglo-Dutch parent company) mega global plans, including a merger with Colgate worldwide. Unilever, which at present owns a majority 51.4% stake in HUL, has been keen on increasing its stake in the Indian company.
On the rationale behind HUL?s proposed move, a leading FMCG analyst here said, ?HLL?s stock has not shown any increase in value for quite some time. The company feels its stock price is under quoted. As buybacks offer immediate results, the company is confident enough to go ahead with this, primarily to up its stock price. In fact, HUL should have taken this step in the first quarter of 2007.?
Some FMCG analysts, however, opine that Unilever will soon want to increase its stake in HUL through a share buyback. ?In sync with current international trends, Unilever now wants to increase its stake in HUL. The recent name change of Hindustan Lever Ltd (HLL) to HUL was a clear indication of Unilever?s future plans,? said a leading advertising professional in Mumbai.
While answering a shareholder?s query at HUL?s annual general meeting in May this year, Harish Manwani, chairman, HUL had said: ?As Unilever has a majority stake in our company, we have to incorporate Unilever in our company?s name. Our new name retains the company?s commitment towards our local roots while leveraging global scale and reparation of Unilever with its consumers in India.? According to industry sources Unilever is planning to merge its oral care business
with Colgate worldwide and the proposed move for buyback shares is a forerunner for Unilever?s global plans.