Hindustan Unilever gains 2% as board approves formation of a new subsidiary

Hindustan Unilever (HUL) shares climbed over 2 per cent to Rs 2,279 on the BSE on Tuesday after the company's board approved the formation of a new wholly-owned subsidiary with an authorised share capital of Rs 2,000 crore. The stock was trading close to its lifetime high of Rs 2,307.20, hit on February 19, 2020

"This new subsidiary has been formed to leverage the growth opportunities in a fast-changing business environment and will help HUL in becoming more agile and customer-focused," the firm said in an exchange filing. 

The FMCG major's Chief Financial Officer Srinivas Pathak told Business Standard that the subsidiary was being set up for manufacturing purposes, with an aim at capitalising on the 15 per cent corporation tax available to new manufacturing firms. 

Finance Minister Nirmala Sitharaman had reduced the base corporation tax for existing companies to 22 per cent from 30 per cent, and to 15 per cent from 25 per cent for new manufacturing firms incorporated after October 1, 2019, and starting operations before March 31, 2023.

Pathak said HUL was setting aside Rs 500-800 crore for investment in new plants under the subsidiary. “We are yet to evaluate which categories will be manufactured by the subsidiary and where the new plants will be located. But we are working towards it,” he said.

The new unit would be set up in the next few months, he added, after which work on the new plants would start.

Meanwhile, earlier this month, foreign brokerage house JP Morgan upgraded HUL to ‘overweight’ with a March 2021 target price of Rs2,425.

Even as the broader demand environment remains subdued, we expect HUL’s revenue growth to fare better (vs home and personal care peers) on a relative basis given its market share growth agenda and participation in the categories/channels of the future. Further consistent beat on margin delivery (continued premiumisation and significant cost efficiencies) adds to confidence on healthy EPS growth, the brokerage firm said.

At 10:27 am, the stock was trading 1.89 per cent higher at Rs 2257.95 as compared to 0.17 per cent uptick in the benchmark S&P BSE Sensex. Almost 7.4 lakh shares have changed hands on the NSE and BSE combined so far.

HUL to Relaxo Footwears: Analysts upbeat on consumption-related stocks

Caught in the midst of a lack-of-demand-driven slowdown, consumption stocks have had a bumpy ride thus far in calendar year 2020 (CY2020). In the run-up to the Union Budget for 2020-21, stocks such as Avenue Supermarts, Bharti Airtel, Crompton Greaves Consumer Electricals, Relaxo Footwears, Dabur, and Hindustan Unilever (HUL) rallied between 7 and 20 per cent on hopes of a stimulus package to spur demand.

However, as the Budget dashed hopes of any immediate consumption revival, stocks, including ITC, Page Industries, Marico, Zee Entertainment, and Britannia Industries corrected up to 14 per cent between February 1 and 12. ITC, in particular, lost heavily on the government’s proposal to levy National calamity contingent duty (NCCD) on cigarettes.

Still, the proposals intended to double the farmers’ income, liberalise the agriculture sector, and double the milk processing capacity (to address rural distress), and income tax slabs rejig in a bid to increase the disposable income, may revive the consumption in the medium-to-long term, say analysts.

Rural economy-led recovery

Despite the near-term headwinds, analysts remain positive on the sector. Changes in the personal income-tax, hope of good monsoon and the on-going above normal Rabi acreage along with higher minimum support prices (MSP) are the key triggers analysts are betting on for the consumption revival.

“To increase rural disposable income and consumption, the focus has been on horticulture, fisheries and animal husbandry; agriculture credit, warehousing; and easy credit facility and facilitating export. All these measures aim to increase the income realisation from agriculture and allied activities,” wrote analysts at CARE Ratings.

Yet, a meaningful pickup is far away considering slowdown in other leading macro indicators like vehicle sales, index of industrial production (IIP), increase in inflation.

“Overall, we expect GDP growth to slide further to 4.3 per cent y-o-y in Q4 (from 4.5 per cent in Q3), before staging a weak recovery to 4.5 per cent in Q1 2020 (lowered from 4.7 per cent earlier). India is not directly exposed to the COVID-19 outbreak, but we are concerned that there will likely be indirect spillovers due to weaker global demand. For 2020, we expect GDP growth to remain below trend at 5.4 per cent in 2020, only marginally higher than 4.9 per cent in 2019,” wrote Sonal Varma, managing director and chief India economist at Nomura in a co-authored report with Aurodeep Nandi.

Where to invest?

In this backdrop, Vinay Pandit, head of institutional equities at India Nivesh remains bullish on the consumer durables segment (Voltas), autos (two-wheelers like Hero MotoCorp). He advises investors allocate 40-50 per cent of their portfolio to mid and large-cap companies, while the remaining 50 per cent should be allocated to quality small-caps such as V Mart Retail, VST Tillers, Minda Corp, Blue Star, Astra Microwave, JB Chemicals and TVS Srichakra.

Shirish Jaisingh Pardeshi, an analyst tracing the FMCG sector at Centrum Broking is positive on Asian Paints, Berger Paints, and Britannia which, he says, hold structural changes in the consumption patterns.

Government’s focus on doubling farmer income is likely to benefit HUL, ITC, Dabur, Marico, Asian Paints, analysts say, while the reduction in personal income-tax could benefit Trent, Aditya Birla Fashion, Jubilant FoodWorks, and Titan. That apart, the custom duty hike in footwear will benefit Bata and Relaxo Footwears, they add.

HUL reports 12.95% rise in consolidated net profit at Rs 1,631 cr

FMCG major Hindustan Unilever Ltd on Friday reported a 12.95 per cent rise in consolidated net profit to Rs 1,631 crore for the third quarter ended December 2019, helped by improvement in margins and volume growth.

The company had posted a net profit of Rs 1,444 crore in the October-December period of the previous fiscal.

Net sales during the quarter under review stood at Rs 9,953 crore, up 3.87 per cent from Rs 9,582 crore in the corresponding period a year ago, Hindustan Unilever Limited (HUL) said in a regulatory filing.

"Domestic Consumer Growth was 4 per cent with Underlying Volume Growth at 5 per cent" in the quarter, it said.

"This quarter witnessed an overall challenging market environment, mainly reflecting a sharp slowdown in rural and discretionary spends.

In this tough environment, HUL has delivered a resilient performance which is reflective of the strength of our brands, consistency in strategy and execution prowess," HUL CMD Sanjiv Mehta said.

"Our continued focus on innovation and market development has helped sustain underlying volume growth at a steady 5 per cent. We have also delivered a healthy margin improvement," he added.

Total expenses stood at Rs 7,849 crore as against Rs 7,900 crore earlier.

Shares of HUL on Friday settled at Rs 2,034.15 apiece on the BSE, down 1.18 per cent from the previous close.

Net sales during the quarter under review stood at Rs 9,953 crore, up 3.87 per cent from Rs 9,582 crore in the corresponding period a year ago, Hindustan Unilever Limited (HUL) said in a regulatory filing.

"Domestic Consumer Growth was 4 per cent with Underlying Volume Growth at 5 per cent" in the quarter, it said.

"This quarter witnessed an overall challenging market environment, mainly reflecting a sharp slowdown in rural and discretionary spends.

In this tough environment, HUL has delivered a resilient performance which is reflective of the strength of our brands, consistency in strategy and execution prowess," HUL CMD Sanjiv Mehta said.

"Our continued focus on innovation and market development has helped sustain underlying volume growth at a steady 5 per cent. We have also delivered a healthy margin improvement," he added.

Total expenses stood at Rs 7,849 crore as against Rs 7,900 crore earlier.

Shares of HUL on Friday settled at Rs 2,034.15 apiece on the BSE, down 1.18 per cent from the previous close.

Hindustan Unilever stops Tata from patenting technology for water purifier

HUL stops Tata from patenting technology for water purifier

Hindustan Unilever (HUL), which owns the brand Pureit, has won a pre-grant opposition against Tata Chemicals, which sells water purifiers under the brand Tata Swach. The patent office rejected Tata Chemicals’ application for an invention related to a water purifier based on the pre-grant opposition filed by HUL.

In 2012, Tata Chemicals was successful at the Intellectual Property Appellate Board (IPAB) in revoking one of HUL’s patents related to water purifier.

In the latest round, Tata Chemicals along with Tata Consultancy Services, had filed a patent application on July 8, 2008, for the invention titled ‘A Water Purifier’. And, HUL filed a pre-grant opposition under the Patents Act 1970 on January 13, 2011.

Based on the argument from both sides and documents submitted by the companies, the assistant controller of patents & designs, Delhi, in an order dated January 2, 2020, held that the claims lack inventive steps under certain sections of the Act.

The controller accepted HUL’s pre-grant representation. The order also observed that the invention is obvious to a person skilled in that particular technology.

Legal sources said that the assistant controller refused Tata Chemicals’ patent application. This was in view of a prior art (information/document already known) which Tata Chemicals depended on to get the HUL’s patent revoked earlier. The patent officer also relied extensively on the observations of the IPAB in the order which rejected the patent of HUL.

IPAB, in its order in 2012, had said that the technology used by Pureit was not new.

“Also, the expert evidence used by Tatas against HUL, in the earlier case, was used to hold the Tata invention as obvious,” said S Majumdar of S Majumdar & Company, who appeared for HUL in the pre-grant opposition. Essenese Obhan, of Obhan & Associates appeared for Tata Chemicals.

Tata Chemicals, in its patent specification filed with the patent office, had said that there is a need for a water purification device that is simple, a gravity-driven one that is inexpensive, easy to use and effective in removing bacterial contamination from drinking water.

The invention claimed by Tata Chemicals include a water purifier which could be connected to a water storage vessel, and having two chambers and purification materials for improved efficacy.

The pre-grant opposition was considered primarily on HUL’s grounds that the invention has prior claiming and lacks inventive step. HUL argued that the features of the alleged invention are present in the documents available.

The patent dispute between the water purifier manufacturers has been going on for several years now. Earlier, another patent of HUL, for ‘a gravity-fed water purification system,’ was revoked by the patent office in 2012. This was done based on a petition filed by Eureka Forbes, part of the Shapoorji Pallonji Group.

According to a report by TechSciResearch, India’s residential water purifier market was valued at $391.4 million in 2019. It is expected to grow at a compound annual growth rate of 13.3 per cent to touch $818 million by 2024. This will be possible owing to the growing concerns on water-borne diseases, increasing water pollution, and rising disposable income.

HUL shares slip over 1% as parent Unilever lowers sales guidance

Shares of Hindustan Unilever slumped 1.6 per cent to Rs 1,932 on the BSE on Thursday after the company's parent, Unilever, cut its sales guidance for calendar years 2019 and 2020 amid growth concerns in India, its largest market by volume and second-largest by value.

In an unscheduled sales update on Tuesday, the world's second-largest consumer goods company, Unilever, said that underlying sales growth would be below guidance in 2019 and in the first half of 2020 because of a slowdown in South Asia and weakness in West Africa. Unilever has a 67 per cent stake in Hindustan Unilever (HUL).

According to sector analysts, growth concerns had been priced in, with the company management indicating that near-term recovery would be weak.

During the company’s second-quarter results for FY20, the management said challenges remained in the domestic fast-moving consumer goods (FMCG) market and that rural growth had halved versus urban growth,” said Naveen Trivedi, research analyst at HDFC Securities.

But some analysts remain wary, saying the slowdown may prolong in India and that Unilever's sales update is an indication of that. “Contrary to Street expectations of a demand recovery in the second half of FY20, the environment has continued to deteriorate,” said Nitin Gupta, FMCG analyst at SBICap Securities. “According to our channel checks, month-on-month growth has deteriorated gradually in October and November of 2019,” he said.

Credit Suisse lowered its price target on the stock from Rs 2,180 to Rs 2,150. According to a CNBC TV18 report, the redit agency said the growth guidance cut implies revenue growth below 5 per cent and volume growth of around 3 per cent in Q3.

At 10:05 AM, HUL's stock price was down 1.23 per cent at Rs 1937 as compared to 0.17 per cent gain in the benchmark S&P BSE Sensex. A combined 6.12 lakh shares have changed hands on the NSE on the BSE so far.

In the last one year, HUL's stock price has gained 6.7 per cent, much lower as compared to the Sensex which has risen 14 per cent in the same period.

On the sectoral level, market research agency Nielsen has already forecast a low single-digit FMCG growth rate for the October-December period versus mid-single-digit growth seen in July-September for the market. The research agency also said rural growth had crashed to a seven-year low in the September quarter to 2 per cent and that weakness would remain in the subsequent months as well.

The Nifty FMCG index has underperformed the benchmark Nifty index by slipping 1.3 per cent in the last one year as compared to almost 12 per cent gain in the latter.

HUL future-proofing itself through precision skilling: CMD Sanjiv Mehta

At a time when digital disruption is growing and traditional players are having to reinvent themselves to compete with nimble-footed online rivals, Hindustan Unilever (HUL), the country's largest consumer goods company, is reskilling its workforce.

Speaking at the Confederation of Indian Industry's National HR Conclave in Mumbai on Thursday, HUL Chairman and Managing Director Sanjiv Mehta said the company was identifying skill sets needed by its employees to navigate the complex and ever-changing world of marketing, increasingly being led by technology.

"It is better to lead the disruption rather than to be swamped by disruption. The organisation of tomorrow will be like amoeba that has no structure at all," he said.

HUL has already begun implementing an end-to-end digital transformation programme which includes leveraging data and technology, as well as artificial intelligence, across the value chain. The company has also set up a digital council, and 85 experiments are under way across functions to help the company get future-ready.

The role of the human resources (HR) team within HUL would increasingly become critical, Mehta said, to help bring about this shift in culture, mindset and leadership as the firm gears up for the future.

"We are moving from mass marketing to massive personalisation to hyper personalisation. HR has become a key participant on the top table. And the role of HR will significantly get enhanced over time," he said.

"If we can focus on precision marketing, then why not precision skilling," he added.

India is among the largest markets in terms of volume for Unilever, with 98 per cent of households in the country using one or more HUL brands, and 45 billion units being manufactured by the company at its factories annually.

"We are feverishly trying to sell to the two per cent we don't reach and keeping our ears to the ground to get insights that could help us speak to them," he said.

HUL's people data centres are already picking up real-time consumer signals and using shopper data to drive marketing programmes to different cohorts at the same time.

The company is also embracing technology on the factory floor by reducing service lead time through an integrated sales and operation planning programme, creating a customer-focused factory network and a faster logistics and distribution footprint.

Hindustan Unilever trades higher for seventh straight day, hits record high

Shares of Hindustan Unilever (HUL) were trading higher for the seventh straight day, up 2 per cent at Rs 2,108 on the BSE on Thursday, after the company reported better-than-expected September quarter (Q2FY20) results.

The stock of fast moving consumer goods (FMCG) company surpassed its previous high of Rs 2,102 touched on September 23, 2019. In the past eight days, it has rallied 12 per cent, as compared to a 3 per cent rise in the S&P BSE Sensex.

HUL’s net profit grew 21 per cent at Rs 1,840 crore, while sales revenue rose 6 per cent at Rs 9,708 crore relative to the corresponding quarter of the previous fiscal. EBITDA (earnings before interest, tax, depreciation and amortization) margin, too, expanded 293 bps year on year to 24.8 per cent in Q2FY20. Benign input cost, improved product-mix, cost saving initiatives, lower employee cost and higher operating leverage contributed to better operating performance despite higher advertising expenses, the company's financial statement showed.

“The company took measures such as price cuts (soaps/detergents), passed on the benefits of lower palm oil prices to consumers to keep volumes intact, took cost savings initiatives and also benefitted from an overall benign commodity price environment. The fall in crude prices and other cost cutting initiatives undertaken by the company will lead to further EBITDA margin expansion to around 25 per cent by FY21,” analysts at KR Choksey Shares and Securities said in a result's update. The brokerage firm has assigned ‘accumulate’ rating on the stock with target price of Rs 2,203 per share.

Furthermore, analysts at Reliance Securities believe even with a likely pick-up in rural volume, the organic nominal growth will decline as the company will pass on the benefit of lower input cost to the consumers. With decrease in nominal growth rate, its earnings growth trajectory is unlikely to sustain at the current elevated levels, it added.

HUL to announce Q2 results today. Here's what analysts expect

Hindustan Unilever (HUL) is expected to report muted numbers for the second quarter of the financial year 2020 (Q2FY20) due later in the day. The results come at a time when the consumer goods sector has been struggling against low growth for the past two quarters, primarily owing to the consumption slowdown in rural India. Going by the analysts' view, this trend is likely to continue.

“After eight quarters of continued outperformance, rural growth slipped below urban growth for several consumer staple companies in Q2FY20. Additionally, the on-going liquidity concerns, succession of drought and floods during the monsoon season in large parts of the country, and muted initial response to the festive season added to the woes,” said analysts at Motilal Oswal Financial Services (MOFSL) in a recent report.

Those at Edelweiss Securities expect Q2FY20 to see the slowest volume growth for consumer goods companies since Q1FY18, which was impacted by GST-related destocking.

Here's a look at what brokerages expect from the HUL’s Q2 numbers:

Motilal Oswal Financial Services

We expect Hindustan Unilever’s revenue to grow 7 per cent year-on-year (YOY) to Rs 9,880 crore, with underlying domestic volume growth of 6 per cent in 2QFY20. Base quarter volumes were up 10 per cent YOY. Gross margins are likely to be up 140 basis points (bps) YOY to 53.4 per cent. Operating margin is seen expanding 150 bps YOY to 23.4 per cent in the quarter, leading to EBITDA (earnings before interest, tax, depreciation and amortisation) growth of 14.4 per cent YOY. Adjusted PAT (profit after tax) is likely to grow 6.1 per cent YOY to Rs 1,610 crore due to very high other income base in 2QFY19.

Comments on consumer demand environment, pace of rural growth, competitive intensity, especially in detergents, performance of Lever Ayush and WIMI (Winning in Many Indias) growth are some of the key things to watch out for.

Edelweiss Securities

We anticipate revenue, EBITDA and PAT to grow 4.8 per cent, 13.1 per cent and 5.8 per cent, respectively, on a YOY basis. We expect HUL to record volume growth of 3 per cent YOY on a high base of 10 per cent YOY. We expect the softness seen in Q1FY20 to continue for the full quarter. On the pricing front, the company has taken price cuts in select soaps portfolio; hence, we expect the pricing gap to be 1.5 per cent against 1.7 per cent in the previous quarter. Margin expansion, however, would sustain given a benign raw materials basket as well as cost-savings program. This coupled with soft competitive intensity led to ad spends under control. EBITDA is seen at 13 per cent, leading to EBITDA margin expansion of 170 bps YOY. The benefit of a lower tax rate of 25.2 per cent compared with 28.7 per cent in Q2FY19 is partially offset by strong other income in the base quarter (owing to a one-time tax adjustment).

ICICI Securities

We expect HUL to post 6.7 per cent YOY sales growth mainly driven by 5 per cent volume growth on the back of strong growth in home care segment benefiting from premiumisation trend and from foods & refreshment segment, as new launches are supporting growth. We expect HUL to witness operating margin expansion of 76 bps to 22.6 per cent due to Ind-AS accounting adjustment. We expect net profit to grow 10.6 per cent YOY to Rs 1,687.2 crore driven by a reduction in tax rates.

Antique Stock Broking

We expect HUL's volume growth to remain at 5 per cent YOY during 2QFY20 (volume growth of 5 per cent YOY in 1QFY20), impacted by moderation in rural demand. Overall sales growth is expected to be 7 per cent YOY during the quarter. Further, cost-saving initiatives will continue to lead margin expansion. A&P spends are expected to moderately grow at 3 per cent YOY.

Kotak Securities

We model 8 per cent revenue growth in the domestic FMCG business led by 5.5 per cent UVG and 2.5 per cent price-led growth. On a segmental basis, we bake in 9.5 per cent YOY revenue growth for home care, 5.8 per cent YOY growth for personal care and 10 per cent YOY growth for packaged food and refreshments.

We expect 270 bps YOY expansion in EBITDA margin aided by GM expansion (150 bps), operating efficiencies (20 bps) and adoption of Ind-AS (100 bps). We expect 16 per cent YOY growth in EBITDA (adjusted for Ind-AS 116). We estimate 17 per cent YOY growth in PBT. Net profit growth would be much higher owing to ETR cut and associated reversal of 1QFY20 taxes; we model 19 per cent ETR for 2QFY20 translating into 25.2 per cent ETR for 1HFY20.

HUL declares war on plastic with cardboard deodorant and bamboo toothbrush

When Hindustan Unilever (HUL) decided to put a curve on its best-selling Pond’s talc pack some time back, its patrons may have assumed the move was aimed at breaking the monotony of the cylindrical shape used for decades. While breaking the boredom was one of the reasons, the slight curve at the belly of Pond’s talc packs allowed the consumer goods giant to save one-third of the plastic that goes into each pack.

More recently, its distributors found that HUL had removed the plastic packaging layer inside the cartons of the best-selling Dove soaps. Dove soap packs now lay naked inside the carton boxes. The move has helped the local arm of the British-Dutch multinational cut down on single-use plastic.

While these measures started some time ago, HUL’s parent company, Unilever, has now launched a concerted effort to curb its use of plastic globally. As the voices against plastic waste get louder, the company aims to cut the use of virgin plastic by half by 2025. It also wants to collect and process more plastic packs than it can consume in seven years.

Unilever is tying up with plastic collectors and recyclers in all developed countries and in large developing markets like India. Through them, it has committed itself to collect and processing around 600,000 tonnes of plastic annually.

However, at the heart of Unilever’s bold commitment lies its design efficiency. Out of the 700,000 tonnes of plastic it consumes annually, it hopes to slash 100,000 tonnes by changing the design and packaging of its products.

According to Alan Jope, chief executive officer, Unilever, the design is the starting point of its project. “Reducing the amount of plastic we use and then making sure that what we do use increasingly comes from recycled sources is the goal. We are also committed to ensuring all our plastic packaging is reusable, recyclable, or compostable. This demands a fundamental rethink in our approach to our packaging and products. It requires us to introduce new and innovative packaging materials and scale up new business models, like reuse and refill formats, at an unprecedented speed and intensity,” said Jope.

Globally, the firm has reduced its plastic waste by a third since 2010. According to the company, through its ‘Less Plastic’ initiative, Unilever has explored new ways of packaging and delivering products — including concentrates, such as its new Cif eco refill, which eliminates 75 per cent of plastic.

It has been launching ‘refill stations’ for shampoo and laundry detergent across shops, universities and mobile vending outlets in Southeast Asia.

In addition to the ‘Less Plastic’ campaign, there is a ‘No Plastic’ project under which Unilever has brought innovations to the market that include shampoo bars, refillable toothpaste tablets, cardboard deodorant sticks, and bamboo toothbrushes.

It has also signed up to the Loop platform, which is exploring new ways of delivering and collecting reusable products from consumers’ homes. According to Ellen MacArthur, founder, Ellen MacArthur Foundation, Unilever is already running projects that involve eliminating unnecessary packaging through innovations such as refill, reuse, and concentrates. “These measures are increasing their use of recycled plastic,” she said.

The foundation works with business and schools to accelerate the transition to a circular economy (this means keeping plastics circulating constantly around a closed-loop system rather than being used once and discarded or leaked into nature) primarily through waste management.

In India, apart from introducing innovative packaging solutions and changes in design, HUL has launched pilot projects in 20 cities, including New Delhi, Bengaluru, and Kolkata. Through its partnerships with non-governmental organisations (NGOs), it runs a project in Maharashtra that educates and mobilises children at more than 1,000 schools to reduce plastic pollution.

“Segregation and collection of plastic waste, together with building the recycling industry, are critical aspects of a sustainable solution. We have made an ambitious commitment and we believe it is a right step towards our vision of a world where no plastic packaging ends up polluting the environment,” said Sanjiv Mehta, chairman & managing director, HUL.

In 2018, HUL has collected, segregated and safely disposed of more than 20,000 tonnes of plastic laminate waste in partnership with NGOs and start-ups in more than 20 cities across India. The Mumbai-based firm plans to scale it up further to cover more cities. HUL is working with the government and is tying up with the United Nations Development Programme for end-to-end pilot projects for plastic waste management.

War on plastic: What other firms are doing

Unilever

100,000 tonnes Reduction in use by design and packaging innovations

600,000 tonnes Plastic waste to be collected and recycled annually

ITC

100% Packaging that is reusable, recyclable, or compostable over the next decade

Coca-Cola India

5 million children and teachers in 20,000 schools to be made aware; over 35,000 waste management workers involved

Dabur India

20 million kilos Plastic waste collected, processed and recycled by March 2021

Flipkart

25% Cut in single-use plastic since August; to consume only recycled plastics from 2021

Amazon

0 Single-use plastic in packaging from June 2020

HUL's Indulekha enters Rs 2,000-cr club three years after acquisition

Around three years after it acquired the hair care brand Indulekha for around Rs 330 crore, Hindustan Unilever (HUL) has turned it into a Rs 2,000 crore brand in terms of valuation, which fetches the company around Rs 400 crore of revenue a year.

At the time of acquisition, this brand under its former owner, Mosons Group, was generating a top line of around Rs 100 crore and an EBITDA of 30 per cent.

Sanjiv Mehta, the company’s chairman and managing director pointed that it has been a successful acquisition for the company and he had himself visited Chennai to talk to consumers before signing the takeover agreement. He was speaking over the need for companies to have a consumer connect approach at an event organised by the Bengal Chamber of Commerce & Industry here.

“I had myself visited Chennai to talk to customers before the acquisition. There were consumers who had left using the brand; I spoke to them and they told me that their need has been taken care of and so they stopped using Indulekha,” Mehta said.

Initially, after the HUL team came up with this acquisition proposal to Mehta, he was hesitant as he did not have a “touch and feel” of this product and wanted to know how consumers perceive this brand. His visit to Chennai and interaction with consumers convinced him about the brand’s potential.

The acquisition HUL opened up the vast South Indian Ayurvedic market to the company.

Indulekha was first launched in 2009 as a premium Ayurvedic hair oil and was subsequently relaunched in 2014 with a unique comb like cap that aids direct application of oil on the scalp - an innovation which it’s consumers preferred.

The brand has a strong presence in Kerala, Tamil Nadu and Karnataka and Maharashtra.

Talking about the emerging and evolving marketing initiatives, Mehta said personalisation and hyper-personalisation on the advertising front is going to become a norm and will see more use of technology.

Other FMCG players like Emami had also opted for the acquisition route to enter the Ayurvedic haircare space with the takeover of Kesh King.