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Hindustan Unilever's royalty hike move hits investor mood, stock dips 4%

Brokerages cut earnings given pressure on margins but see stock performing in long term

Ram Prasad Sahu Deepak Korgaonkar Mumbai

Premium

4 min read Last Updated : Jan 20 2023 | 10:30 PM IST

Though Hindustan Unilever Limited (HUL) delivered better than expected operating performance in the December quarter for the 2022-23 financial year (Q3FY23), cuts in earnings estimates -- on account of a hike in royalty payments -- hit investor sentiment.

The royalty hike led to a 2-3 per cent downward revision in earnings by brokerages, which weighed on the investor’s mind and resulted in a 3.84 per cent fall in HUL's stock on Friday. In the past two trading days, the stock of India’s largest listed fast moving consumer goods company has dipped 5.15 per cent

HUL has approved an 80 basis points (bps) increase in royalty payments to its parent company – Unilever -- over the next three years. Royalty will increase over a staggered manner, from 2.65 per cent of turnover in FY22 to 3.45 per cent in FY25. This will start with a 45 bps increase for the February-December 2023 period.