HLL falls to 52-week low

HLL was hurt due to selling by market players in the futures and options segment.

This reflected on the scrip of the FMCG giant's stature in the cash market as well, as it slipped to its new 52-week low of Rs 137.45.

But it recovered slightly from there and, by 13:30 IST, was still lower than its previous day's close by 1.82% to Rs 137.60. Its day's high was Rs 140.90. Huge volumes were witnessed on the counter, at 3.90 lakh shares on BSE.

Dealers say the fall in the HLL scrip is due to substantial selling of positions in the futures and options segment ahead of the April 2003 contract expiry.

HLL is being weighed down by concerns that the FMCG sector has reached maturity in terms of growth and, from here on, potential seems low. The National Council of Applied Economic Research in its India Market Demographics Report 2002 on the FMCG sector has said that the toilet soaps, washing cakes and washing powders segments have reached a saturation point. Around 48% of HLL's revenue comes from the detergent and soaps segment. This is likely to bear heavily on the company.

Already, HLL's sales have been sluggish following a slowdown in the economy. To further add to the woes, the proposed introduction of the uniform Value Added Tax regime from 1 June 2003, at the rate of 12.5%, replacing the sales tax levied by various state governments, is expected to hit sales further. Due to the VAT, many dealers have cut down their existing inventories and are postponing fresh intake till the time there is more clarity on VAT. The impact of VAT, in fact, will be more seriously felt in the current quarter.

HLL will continue to face tough competition with the macro environment remaining uninspiring. Players feel rural demand will continue to remain sluggish as the monsoon is expected to be below normal this year. HLL gets 60-65% of its revenues from the rural segment.

Last week, HLL showed a 10.65% fall in net profit to Rs 382.92 crore (Rs 3.82 billion) in the first quarter. Net sales declined marginally by 0.55% to Rs 2,367.50 crore (Rs 23.67 billion) from Rs 2,380.66 crore (Rs 23.8 billion) in MQ 2002. But total income gained to Rs 2,508.77 crore (Rs 25.08 billion) from Rs 2,434.39 crore (Rs 24.34 billion).

Net profit turned out on the lower side of expectations though. A capitalmarket.com poll of six FMCG analysts had forecast a 6.6% to 10.8% fall in net profit to between Rs 382 crore (Rs 3.82 billion) to Rs 400 crore (Rs 4 billion). Top line was expected at between Rs 2,324.5 crore (Rs 23.24 billion) and Rs 2,488 crore (Rs 24.88 billion).

As on 31 December 2002, the promoters' holding in HLL was at 51.6%, while the public, domestic institutions and foreign institutional investors held 21.4%, 13.4% and 12.83% stake in the company, respectively.

BSE code: 500696