Unilever, the Anglo-Dutch maker of Dove shampoo and Lipton tea, plans to spend as much as 292 billion rupees ($5.4 bn) to increase its control over Indian unit Hindustan Unilever Ltd.
Bloomberg reported that the early entry gave Unilever, based in London and Rotterdam, a lead on rivals such as Procter and Gamble Co. in the world’s second-most populous country. The latest investment would help it gain greater influence over a business that boosted earnings by 37 per cent last year selling brands tailored to Indians, such as Fair & Lovely skin lightening cream and shampoo sachets at about three rupees (six cents) apiece.
At stake is a $42bn market for beauty and home-care products and packaged foods where competitors from P&G to Colgate-Palmolive Company are making a bigger push to win shoppers. Hindustan Unilever has so far held its ground as India’s biggest consumer-products maker by catering to local tastes and building a distribution system of 6.3 million sales outlets, more than double P&G’s 2.5 million.
Unilever’s latest investment in India comes as economic growth is weakening and government bureaucracy slows the expansion of international companies from Wal-Mart Stores Inc. to Ikea. India’s economy expanded five per cent in the year through March, the national statistics agency estimates, versus an average of about 8 percent annually for the past decade.
“An Indian economy growing at five to six per cent is not enough,” Unilever Chief Executive Officer Paul Polman said in a December interview in New York. “India’s problem is India itself. The government has come to a grinding halt on making the reforms that need to be done.”
To boost its stake in Hindustan Unilever from the 52.5 per cent it owns to its target of 75 per cent, the Anglo-Dutch parent is offering 600 rupees a share, 21 percent above the Indian unit’s closing price on April 29, the day before the offer was made.