Latest News | Decision to Increase Royalty to 3.45 Pc to Parent Unilever After Detailed Evaluation: HUL Chairman

New Delhi, June 26 (PTI) The decision to increase royalty to 3.45 per cent to parent Unilever was taken after a detailed evaluation and due diligence, Hindustan Unilever Ltd Chairman Nitin Paranjpe said on Monday.

Earlier this year, leading FMCG maker Hindustan Unilever Ltd (HUL) increased the royalty paid to Unilever PLC to 3.45 per cent of the total turnover, which will be effected in phases over the next three years. Earlier, this was 2.65 per cent.

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While addressing the shareholders in response to a question about the rationale of such an increase, Paranjpe said the change was made "after plenty of due diligence and satisfying ourselves that we are getting adequate value for this payment that is royalty payment which is being made".

Before this, the company has also looked at the royalty paid by other FMCG companies to their parent global firms, he said.

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The contract terms that "we have got, were subjected to a detailed evaluation and due diligence first by a senior team from within the company. And the company assessed the situation and they came up with recommendations and recommendations first went to the audit committee," he said.

The audit committee evaluated the recommendations thoroughly and gave them some suggestions.

"The audit committee by the way, before doing this, took into consideration findings of an external assessment... it looked at benchmarks of other FMCG companies, which are MNCs what sort of comparable levels of royalty are being paid," he said.

This was done by Deloitte, which carried out this exercise and gave its feedback to the audit committee.

"This was then presented to the board, which found that the recommendations were fair and sensible and that there was a balance between the benefit that we were getting and the value that we were paying through a royalty," he said.

As a consequence, HUL agreed to increase the royalty from levels of about 2.65 per cent (with taxes) to 3.45 per cent.

HUL had a royalty and Central Services arrangement with Unilever, signed in January 2013 for 10 years.

This arrangement granted HUL the right to use Unilever-owned trademarks, technology, and corporate logo and gave access to central services provided by Unilever.

After the expiry of this, Unilever requested a review of the current arrangement.

(The above story is verified and authored by Press Trust of India (PTI) staff. PTI, India’s premier news agency, employs more than 400 journalists and 500 stringers to cover almost every district and small town in India.. The views appearing in the above post do not reflect the opinions of LatestLY)