HUL Price crosses Rs 700 !~Shareholders who Tender exited at Rs 600 were Foolish ~ and now Furious !

HUL Price crosses Rs 700 !~Shareholders who Tender exited at Rs 600 were Foolish ~ and now Furious ! and they have a full right to cry Foul here !

HUL is dealing with a Hot Potato here !

Early in May 2013 I had warned on my company website’s Scrip Standpoint Module that Shareholders should not participate in the Unilever Open Tender Offer giving a detailed reasoning  for this advice

Unilever to try increasing Stake in HUL to 75% ~ Why? and should Shareholders support the Open Offer at Rs 600?~ 08-May-2013

Now inside a fortnight and in the same month of July 2013 that the Open Tender Offer at Rs 600  by Unilever closed having attracted @ 32 cr shares and allowing Unilever to raise it’s Equity Stake in HUL from 52.48% to 62.26%,the Share Price of HUL has crossed Rs 700 this morning !

This morning have posted this on my company website:

Hindustan Unilever crosses Rs 700 ! inside a fortnight of Closing of Share Tender Offer of Rs 600! ~ Shareholders who exited in the tender were foolish but now they must cry Foul ! ~ 18-Jul-2013

This would mean that the foolish shareholders who fully or partially exited HUL in the tender by offering @ 32 cr shares now have notionally lost an incremental Rs 3200 crs !

They have a right to be furious as the HUL Price has risen because HUL has raised the price of some of it’s products by upto 15% inside 15 days after Share Tender Offer closing !

HUL Management could not have planned this price rise overnight and coming inside a fortnight of the Share Tender closing earlier  in the month is clearly suspect ! Why could they have not announced this rise in May or June 2013 before the Share Tender !? ~ The answer is obvious ! ~ They would not have got the response they did in the Unilever Open Offer with @ 32 cr shares being tendered at Rs 600 or they may have had to increase the Offer Price ! 

Shareholders that exited  in the Tender at Rs 600 probably because many ‘top’ advisors advised them to have every reason to feel furious and fouled !

The effect on Profits is stunning.These healthcare products are nearly 30% of the Sales.FY Sales were Rs @ 26000 crs and thus a 10% to 15% rise in the product prices would increase profitability by a @ Rs 1000 crs giving an incremental effect of Rs 5 on the EPS and at a PE Multiple of 30 that translates into a Share Price rise of Rs 150 !  

FY 13 bottomline was Rs 3800 crs .This year it should cross Rs 5000 crs

Read more thoughts and implications about this in the link provided above to my company website

I”m quite sure HUL Share Price will react from Rs 700 as many will begin thinking and realising on the lines I have voiced this morning !

One May not  Sell but one may Short ~ if you know what I mean ! 

….and expect an investigation 

7 thoughts on “HUL Price crosses Rs 700 !~Shareholders who Tender exited at Rs 600 were Foolish ~ and now Furious !

  1. I dont think the market has analyzed it the way you have – otherwise they would not be talking about the reduction in free float contributing to this rise from 600-700. Terrific analysis as usual !

    Coming to the numbers, if the profits rise from 3800 cr to 5000 cr and the EPS rises by the same 31.5% then is it wrong to give HUL a P/E of 31-35 ? In other words, 510-575 becomes a fair price ! So Unilever did not overpay – You can be sure that they have also done an analysis of the next 20 years before investing.

    The payback period will be reduced by a mix of royalty payments +increased dividend payout ratio + special dividends too. Just read that they have sold the Churchgate property for 350-400 Cr. Heard that several South Mumbai apartments are on the block too. Can expect a special dividend this year.

    You were spot on Sir ! I think we will see Rs.1000 sooner rather than later.

  2. Hi Anand,I’m astonished why no one has picked up this line of thought ! or they simply don’t want to !…but do expect a peeved shareholder who exited in the tender to raise some noise on this,if the regulator does not proactively….to me it was obvious Unilever and HUL did what they did quite deliberately and I think it was blatantly unfair and unethical…As Noise grows on this the Share Price will fall

  3. HUL is at 870 now – 45% higher than the offer price of 600 ! So Unilever has already made a small fortune ! Congrats,as always, for fantastic analysis not to tender shares at Rs.600 ( On 30/April/2013 when it spiked to 600, a lot of investors were tempted to tender ) Looks like we are headed to 1000+ in 2016.

  4. Hi Anand….Unilever has rejected the bid though Kraft is hopeful to persuade them….Interesting Build-up in India too should commence in HUL which closed unaware at ₹ 847 Friday ….It’s never crossed ₹ 1000 since the parent company increased stake to 67.2% in the offer at ₹ 600 a few years ago which I had termed as foolish to accept in a contrary view to many leading names…..₹ 954 & ₹979 were the highs in 2016 & 2015 respectively ….this acquisiton bid should trigger a new build up….Not sure of delisting though in India if Kraft does acquire Unilever…If it does happen you can guess at what price! :-)…Gaurav

  5. Thank you for your prompt reply Sir. Honestly – I cannot guess at what price delisting would take place but I just noticed that in my earlier comment on 12 Jan 2015 I have mentioned that HUL was trading at 870 then. I feel that after a 2-year consolidation we could see another 20-25% move (Darvas Box Theory)

    It’s a tribute to the Management that there was no buildup in the options on Friday.

  6. HUL @2100 now ! 3.5X from Rs.600 ! Who would have imagined at Rs.600 ! These stocks always appear overpriced ! We should be grateful Unilever has not delisted HUL. Why don’t they simply borrow at a coupon rate of almost 0 and pump it into the India operations ?! Wait a min – As minority shareholders, We should not be giving them such ideas !

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