According to newspaper reports, Hindustan Lever Limited (HLL) is all set to bag Modern Foods, a bread and cakes manufacturer, as a result of its being the sole bidder for the government's 74% stake. HLL is the largest consumer products company in India. HLL's business portfolio comprises soaps, detergents, personal products, food products and frozen desserts. Modern Foods Limited has a network of 14 bread manufacturing units and a comprehensive distribution network comprising 22 operating franchisee units.
This acquisition, if is comes through, will benefit HLL in a number of ways. First, the company's burgeoning cash reserves will get absorbed and help improve overall return on equity. Second, the company's topline growth has failed to pick up even as the economy gains pace. This acquisition will enable HLL to generate topline growth even as its bottomline growth will continue to benefit from cost cutting exercises. Finally, the acquisition would be in line with the company's strategy to focus on the food segment in the coming years, as it sees a big potential in this market.
The other benefits of this deal include a nationwide distribution that Modern owns. Integrating this with the excellent distribution network of HLL would bring about increased distribution reach at lower costs. Moreover, the company would get to own the 'Modern' brand, which has a national appeal.
The biggest drawback of this acquisition would be to have the government as a co promoter. This would delay the implementation of cost cutting exercises via measures including employee rationalisation. The other concerns pertain to whether the food sector will witness the kind of growth that is being envisaged by HLL.
For the quarter ended December 2020, HUL has posted a net profit of Rs 19 bn (up 18.9% YoY). Sales on the other hand came in at Rs 119 bn (up 20.9% YoY). Read on for a complete analysis of HUL's quarterly results.
For the quarter ended September 2020, HUL has posted a net profit of Rs 20 bn (up 8.7% YoY). Sales on the other hand came in at Rs 114 bn (up 16.1% YoY). Read on for a complete analysis of HUL's quarterly results.
Here's an analysis of the annual report of HUL for 2019-20. It includes a full income statement, balance sheet and cash flow analysis of HUL. Also includes updates on the valuation of HUL.
Here's an analysis of the annual report of HUL for 2018-19. It includes a full income statement, balance sheet and cash flow analysis of HUL. Also includes updates on the valuation of HUL.
More Views on NewsA tiny chemical company, started in the Licence Raj era, is a great example of a new wealth creating opportunity.
In this video I'll show you exactly how I go about picking stocks for trading.
Rather than predicting the market, successful investing is more about preparing well and placing your bets accordingly.
What should you do if the market falls? In this video, I'll tell you what I will do.
Ajit Dayal on how India's vaccine strategy will impact the markets.
More
Equitymaster requests your view! Post a comment on "Hindustan Lever may bag Modern Foods". Click here!
Comments are moderated by Equitymaster, in accordance with the Terms of Use, and may not appear
on this article until they have been reviewed and deemed appropriate for posting.
In the meantime, you may want to share this article with your friends!