Unilever India posts Q3 profit jump, to pay higher royalties to UK parent

HINDUSTAN Unilever (HUL), the Indian unit of the British multinational, on Thursday (Jan 19) reported higher-than-expected profits for its third quarter ended Dec 31, 2022 amid growing demand for its personal care products.

The company also said it would pay higher royalty fees to its parent group.

Based in Mumbai, HUL said that it would pay 3.5 per cent in royalty and central services fees to Unilever, up from 2.7 per cent currently. Unilever owns a stake of about 62 per cent in HUL.

The new deal will come into effect from Feb 1, replacing the current 10-year deal that will expire on Jan 31.

HUL chief executive Sanjiv Mehta said: “We get the value for what we pay as royalty and service fees, whether it is in terms of innovation or product superiority.” He compared the payout to marketing, advertising and promotion costs.

The company’s total profit for the quarter climbed nearly 12 per cent to 25 billion rupees (S$406.8 million), beating Refinitiv estimates of 24.8 billion rupees. Revenue from its beauty and personal care business rose nearly 11 per cent, as demand grew for products such as Close-up toothpaste and Clinic Plus shampoo.

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On the quarterly results, Mehta said “the worst of inflation” was behind HUL. He added that demand should gradually recover, with the company already seeing signs of a rebound in rural pockets, due to the pickup in farm incomes.

While the Indian consumer goods sector has grown rapidly over the years on rising household incomes and changing lifestyles, rural demand was hit by the escalating cost of living in recent quarters.

India’s retail inflation has hovered around 6 per cent for about a year now, around the upper end of the central bank’s tolerance band. The rate has eased only in the last two months of 2022.

This has helped customers digest HUL’s price hikes. The increases, along with increased volumes, drove the company’s total sales in its third quarter to about 16 per cent higher to 149.9 billion rupees. REUTERS