HLL: Unileverís pride - Views on News from Equitymaster

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HLL: Unileverís pride

Apr 12, 2000

Hindustan Lever Limited (HLL) as we know is Indiaís No. 1 FMCG company. But do we know how much HLL is worth to its parent Unilever Group and how it is placed in Unileverís scheme of things. Based on annual reports of both the companies for the year ended December 31, 1999, equitymaster.com did a small study to compare the two. The results are an eye opener. So here goes...

HLL contributes around 6% to Unilever Groupís total turnover and 8.5% to its bottomline, implying that it earns better margins as compared to its parent. HLLís net profit margin is a hefty 45% more than that of Unilever. It also gives much better returns to investors. The companyís return on net worth stands at a healthy 51% compared to 38% for Unilever.

1 Pound = Rs 69.18

(Rs bn) Unilever
HLL HLL as a %
of Unilever
Turnover 1,867 109 5.8
Other Income 20 3 16.2
Staff Costs 266 6 2.2
Advertising 244 7 2.9
PAT 126 11 8.5
NPM (%) 6.8 9.8  
Advertising as a % to operating costs 15% 8%  
Advertising as a % to turnover 13% 7%  
Net Worth 334 21 6.3
RONW (%) 37.8 50.9  

HLL is notorious for being the top advertising spender in India, with the largest distribution and marketing network to back it up. But its ad spends donít come anywhere near that of its parent. Unilever spends around 13% of its turnover on advertising and promotions compared to HLLís Ďconservativeí 7% (which in India would qualify as one of the largest).

Interestingly, while foods is the largest contributor to Unileverís turnover (about 50%), home care and cleaning products contribute a lionís share of 36% to HLLís current turnover. Foods form only 26% of HLLís turnover. Now we know why HLL has identified foods as its future growth area.

1 Pound = Rs 69.18

(Rs bn) Unilever
HLL HLL as a %
of Unilever
Turnover by operations      
Foods (oil, dairy, bakery, frozen foods, culinary) 934 28 3.0
Home care & cleaning products 415 39 9.4
Personal care 486 18 3.6
Foods as a % of total turnover 50% 26%  
Home care & cleaning products as a % of total turnover 22% 36%  
Personal care as a % total turnover 26% 16%  

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