HUL board to meet on 11 June to decide on share buyback

Hindustan Unilever, the worst-performing company in consumer goods in the BSE sectoral index, has plans for a share buy back to boost stock prices and raise per share earnings in future. According to the company, its board would meet on 11 June to decide the price at which the shares may be bought and the quantity.

HUL, the Indian arm of Anglo-Dutch Unilever makes Rin detergents and Dove soaps. The company has lost 6.33 per cent this year, compared as against an 8.11 per cent gain for the BSE's Fast Moving Consumer Goods Index, according to Bloomberg data. HUL's rivals Godrej Consumer and tooth paste maker Colgate have returned 26 per cent and 22 per cent respectively, in the same period. 

Analysts say at a time when HUL is tackling a challenging market scenario, the move would safeguard investors' interest and boost investor morale.

Investors are keeping away from HUL stock due to the squeeze on its profit margins on account of intense competition. With rivals Procter & Gamble and Nestle in the fray it is struggling to grow sales satisfactorily. 

The company's shares trade at a lower price to earnings multiples that its peers due to the poor performance over the past few years.

HUL is currently trading at a price-to-earnings multiple of 25 times, Nestle trades at 41 times, according to Bloomberg data. Local competitors such as Dabur also trade at a premium to HUL with Parachute coconut oil maker, Marico, trading at 29 times and tiger biscuits fame Britannia Industries at 39.

With the completion of the buyback Unilever will up stake in the company beyond the 52.2 per cent it now holds. It had last bought back shares in July 2007. The buyback may serve as a cushion against a share price fall. 

Hindustan Unilever's net profit was up 47.10 per cent at Rs581.20 crore in Q4 March 2010 over Q4 March 2009, on a boost from exceptional gains. Net sales increased 8.2 per cent to Rs 4315.75 crore.