Unilever PLC’s offer price of Rs 600 for each share of Hindustan Unilever, is just above the stock’s all-time high, and is an attractive price at which Indian investors can exit the stock. At this price, the company would be valued at a price-earnings multiple of 40 times trailing 12-month earnings. This is a good premium over the 33 times that the stock averaged just before the announcement last month.

At the offer prices, HUL’s PE multiple would also match or exceed that of peers such as Marico, Dabur India and Godrej Consumer. It has been trading at a discount to the latter until now, due to its slower growth. The valuations being offered now are also at the higher end of the 5-year PE band for the stock.

Slow volume growth, waning consumer confidence and limited room to play with product prices to prop volumes has weighed on the HUL stock recently. A falling rupee now could make input costs dearer, and offset some of the gains from raw material cost savings that HUL has shown in recent quarters.

But while HUL shareholders may be tempted to tender their shares in the open offer, selling entire holdings through this route may not be possible. This is because the number of shares held by non-promoters exceeds the number that Unilever is willing to buy back.

The acceptance ratio, or the ratio between the number of shares on offer and those held publicly, suggests that theoretically, investors may be able to sell about 47 per cent of their holdings on an average, if everyone tenders to this offer.

> bhavana.acharya@thehindu.co.in

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