Friday, May 15, 2009

Hindustan Lever & Procter & Gamble India

HLL (Hindustan Unilever) has decided to go for pricing to retain market share in soaps and oral care (toothpastes). HLL made a very interesting comment - in times of low commodity prices, new small competitors come up. I guess smaller competitors dont need to invest as much in working capital during times of lower commodity prices, so they become more aggressive. 

I am pretty sure that what has started in soaps and oral care will slowly spread to other categories - investors wont get price increase, volume increase as well as margin expansion in these companies.

P&G has a listed company in India - Procter and Gamble Health and Hygiene - through which they sell Whisper and Vicks. They also have a 100% subsidiary, through which they sell everything else. There seem to be serious corporate governance issues here - at a time when media costs are falling for all other FMCG companies, this company has a huge jump in media costs on no new product launches. The same is true for employee costs. I guess P&G India is booking its costs in the listed company, so that they can depress the share price and then delist it at a later stage.


Roshan said...

Gaurav, If this is what you feel is happening, I think there must be some way to enforce a check for the same. I suspect similar things happening in other listed companies. What does a lay investor do?

Gaurav said...

Either go to the court, create a media ruckus if you can, or sell the stock.