Hike in royalty payout to parent could weigh on Hindustan Unilever margins

Analysts say impact depends on commodity and energy prices

The decision of fast-moving consumer goods major Hindustan Unilever’s management to increase the payment of royalty and technical fees to its parent Unilever could have an adverse impact on the company’s operating margins and earnings, at least in the short term.

The company announced on Thursday that it had entered a new agreement with Unilever, under which the royalty and central services fees would increase from 2.65 per cent of turnover in financial year 2021-22 (FY22) to 3.45 per cent. This will be staggered over three years, starting with a 45 basis point (bp) increase in effective cost for