INDIA – Hindustan Unilever, the Indian subsidiary of UK-based consumer goods company Unilever, has raised royalty payments to its parent company in appreciation for the immense value and competitive advantage that it gets from the relationship.
Moving forward, HUL will pay royalties of 3.45%, a slight increase from the 2.65% that the company has been paying for the past 10 years.
The new royalties are divided into brand and technology royalty payments comprising 1.95 of the company’s turnover and services fees which will be 1.48% of the turnover, according to Unilever.
“Royalty grants us the right to use Unilever-owned brands and access to Unilever’s cutting-edge technical knowhow, world class R&D and innovation capabilities,” said HUL CEO Sanjeev Mehta.
“The service fees enable us to leverage Unilever’s global expertise and functional services.”
News of the planned hike in royalty payments was poorly received by investors leading to a 4% drop in the HUL’s share price at the Bombay Stock Exchange.
Mehta however defended his company’s move. “These payments are justified and are in the overall interest of HUL,” Mehta told Economic Times in an interview.
“I am very confident that once we start engaging with the investors, they will fully understand the merit of these arrangements”
Despite the negative reception, HUL’s new rate is still lower than most of Unilever’s multinational rivals in the country, including Nestle, Colgate, Procter & Gamble and Mondelez, all of which pay royalty of 5-8%.