Subscribe to Unilever's open offer for HUL: IDFC

IDFC Institutional Securities has said that investors should subscribe to Unilever's open offer for its Indian unit Hindustan Unilever Ltd due to a significant premium and as it expects the offer to create a floor price for the stock.

Unilever plans to pay up to $5.4 billion to raise its stake in its Indian subsidiary, making its biggest deal in 13 years, a huge bet on the strength of demand for personal care and food products in Asia's third-largest economy.

Though its operational concerns on the business remain, IDFC says the new Hindustan Unilever is a leaner organisation than in FY01 and upgraded the stock to "neutral", saying the open offer and consequent re-rating will provide support to valuations.

The investment bank adds that other listed FMCG names with foreign parents are likely to follow suit in the future. Nestle India Ltd, Colgate Palmolive India Ltd, Procter & Gamble Hygiene and Health Care Ltd and Agro Tech Foods Ltd are the likely candidates.

Shares in Hindustan Unilever were down 1.4 per cent at 12.28 p.m.

Copyright: Thomson Reuters 2013