HUL stock rises after firm issues clarification on NAA order

The Hindustan Unilever Ltd (HUL) stock rose in trade today after the FMCG firm clarified on an order from the National Anti Profiteering Authority (NAA) asking the firm for depositing Rs 223 crore for failing to pass on the benefits of GST cuts to consumers. The HUL stock rose up to Rs 1.15% to Rs 1,811.90 against the previous close of 1791.15  on the BSE. The stock has gained 32.85% during the last one year and risen 31.53% since the beginning of this year.

18 of 36 brokerages rate the stock "buy" or 'outperform', 14 "hold", three "underperform" and  one "sell", according to analysts' recommendations tracked by Reuters.

Also read: HUL stock falls over 2% after firm held guilty of not passing on GST rate cut benefits to consumers

The stock was trading above its 50 day moving average of 1762 level and below the 200 day moving average of 1679.18 level.

In a communication to the BSE, the firm said, "The NAA order refers to the need to pass on the benefit of reduction in rates to consumers which is fully consistent with HUL's stand and actions. However, it makes a narrow interpretation of the law and does not take into account well established industry practice backed by law. Also, no methodology has been determined by NAA as required under law to determine if benefit has been passed or not. Given there is divergence on some basic issues, HUL will, consider legal options available to it.

In the absence of set rules and guidelines on profiteering, HUL has gone by the spirit of the law, and passed on the entire benefit received under GST to consumers - either through reduction in prices or through increase in grammage."

 On Wednesday, the stock fell up to 2.33% to 1,742 level on the BSE.

The complaint before the National Anti-Profiteering Authority (NAA) stated that although the Goods and Services Tax (GST) rate on a large number of products was cut from 28 per cent to 18 per cent, HUL had not reduced the maximum retail price (MRP) of its products.

The NAA while passing the order said that Rs 383.35 crore worth "benefit has been denied" by HUL to his customers.

As per GST rules, 50 per cent of the amount profiteered or Rs 191.68 crore is required to be deposited by the company in the central consumer welfare fund (CWF), while the balance amount is to be deposited in the CWF of concerned states where the company sold its products.

Hindustan Unilever Limited is engaged in fast-moving consumer goods business comprising home and personal care, foods and refreshments. The company's segments are soaps and detergents, Personal Products, Beverages, Packaged Foods and others. Its brands include Lux, Surf excel, Rin, Wheel, Fair & Lovely, Pond's, Vaseline, Lakme, Dove, Clinic Plus, Sunsilk, Axe, Brooke Bond, Bru, Knorr, Kissan, Kwality Wall's and Pureit.

Meanwhile, the benchmark indices were trading higher on positive global cues. While the Sensex rose 216 points to 35,866, Nifty gained 58 points to 10,788.

Vedanta (2.49%), Sun Pharma (1.84%) and TCS (1.73%) were the top Sensex gainers.