Brokerages slam HUL

Mumbai, Jan. 23: A number of brokerages today downgraded the Hindustan Unilever Ltd (HUL) stock, a day after the FMCG firm announced higher royalty payment to its parent and reported a disappointing 5 per cent volume growth in the December quarter.

Domestic brokerages Edelweiss Securities, Karvy Stock Broking and IDFC Securities downgraded the stock, while their foreign counterparts such as CLSA and Nomura cut their ratings on the stock to "sell" from "outperform," and "reduce", respectively.

The downgrades impacted HUL shares, which lost 4.33 per cent on the National Stock Exchange to end at Rs 460.05.

Brokerages expressed their concern over HUL's lower volume growth and higher royalty outgo. According to Nikhil Vora, managing director, IDFC Securities, HUL's volume growth, which has halved in the last four quarters, indicates the increasing pressure points in the existing portfolio.

He said the pressure was emerging in core brands such as Fair and Lovely, Wheel, some high-end products in skin care and the food portfolio.

IDFC said the timing of the move to raise royalty payment was debatable as it capped the margin expansion potential in the next three years.


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