HUL board approves hiking royalty to parent from 2.65% to 3.45% of turnover

Hindustan Unilever Ltd on Thursday said its board has approved an increase in royalty and central services arrangement fee to its parent Unilever group for getting technology, trademark licenses and services.

The new arrangements envisages increasing royalty and central services fees to 3.45 per cent of turnover in a staggered manner over a period of three years from 2.65 per cent in FY22, the company said in a regulatory filing.

This arrangement is subject to appropriate regulatory approvals, it added.

"The new arrangement envisages a staggered increase of 80 bps over a period of 3 years from 2.65 per cent to 3.45 per cent of turnover," it said.

Initially, there will be a "45 bps increase in effective cost for February to December 2023; 25 bps further increase in effective cost for January to December 2024; 10 bps further increase in effective cost from January 2025".

The current technology, trademark license and central services agreement with Unilever group was entered into in January 2013 for a period of 10 years. This granted HUL the right to use Unilever-owned trademarks, technology, corporate logo and gave access to central services provided by the Unilever group, it said.

"On the imminent expiry of the current agreement, Unilever had requested for a review of the same. HUL has been receiving a steady stream of benefits from Unilever in terms of faster innovations, superior products and technology, greater expertise, and enhanced services," it said, adding this helps HUL to continue to meet emerging consumer needs with agility and create value for all stakeholders.

HUL said the new contract terms were subject to a detailed evaluation and due diligence led by its senior management and guided by its Audit Committee and Board.

"The Board also took into consideration the findings of an independent external assessment and concluded that the proposed arrangement continues to be competitive within the range when compared against relevant comparable transactions as identified in the independent external benchmark," it added.

The company asserted that the new arrangement will ensure that it "continues to receive the technology, services and IP support from Unilever".

"India remains one of the top three strategically prioritised markets for Unilever with dialled up access to innovations, investments, capabilities, and talent development," the company said.