HUL open offer begins at Rs 600 per share, stock trades flat

AppId is over the quota
AppId is over the quota

At present, Unilever PLC has 52.48 per cent stake in HUL. The proposed open offer is valued at $5.4 billion and post the offer the stake will go up to 75 per cent.

At 11:00 a.m.; HUL was trading 0.4 per cent lower at Rs 590.85. It hit a low of Rs 589.05 and a high of Rs 594.35 in trade today.

Rahul Singh, Head of Research, Standard Chartered Securities in an interview with ET Now said that the valuations seemingly look attractive, but if you compare it with the previous open offers we might get very less or lukewarm kind of tendering in this process.

"Long term, we continue to be positive on Hindustan Lever and anyone with a long term view may or may not choose to tender their shares in this offer if they think the premium is not good enough," he added.

HUL is a market leader in the fast moving consumer goods business in India, with brands spanning categories such as soaps, detergents, shampoos, skin care, toothpastes, deodorants etc.

The stock is up over 20 per cent since April and has remained in a range so far in the month of June.

According to analysts, minority investors can tender their stake in the company at the open offer price. At Rs 600 per share, the stock is valued at around 34xtimes FY15 earnings, making it look expensive in the short term.

The performance of Hindustan Unilever Ltd was a mix bag in Q4FY2013. The volume growth of 6 per cent in the domestic consumer business was ahead of the Street's expectation; however, the same is way below the 10% volume growth clocked by the company in the past.

"We believe the next two quarters will have to be keenly monitored in terms of any improvement in the volume growth," Sharekhan said in a note.

The brokerage firm broadly maintains their earnings estimates for FY2014 and F2015.

We have collated views from different brokerage firm as to what investors should do with the open offer:

CLSA: Open offer price if attractive; Recommend investors to sell the stock

IDFC: Subscribe to open offer; Stock is getting re-rated