Unilever plc (ADR) (UL): What To Watch For?

Unilever, which currently has 52.5% shares of Hindustan Unilever, now aims to buy further shares by spending as much as $5.4 billion in what could be the biggest ever acquisition by a multinational company in India. By doing so, Unilever will increase its stake to 75%; this is the maximum allowed under Indian laws.

Unilever plc (ADR) (NYSE:UL) is betting billions on Hindustan Unilever, and I believe that it is a safe bet. Although there are dozens of smaller rivals in India, but Hindustan Unilever is better positioned. It has been operating in the country for more than a century — i.e., before the creation of India. It knows the market better than its rivals through years and years of successful operations in both rural and urban parts of the country. Its dominance is well established. The company’s growth numbers are often taken as a reflection of the growth of India’s consumer goods sector.

In the last six months, Unilever plc (ADR) (NYSE:UL) has outperformed Procter & Gamble and Colgate. Both Unilever and Procter & Gamble have yields of more than 3%, but Procter & Gamble is relatively cheaper with a lower price-earnings ratio. Procter & Gamble has a rich history of regularly increasing its dividends, which has recently been raised by 7% to $0.6015 for the quarter. The company’s stock took a hit after it released its earnings; its shares dropped by 5.9%. FMCG companies are generally considered safe investments for those looking to add low-risk-modest-returns firms to their portfolio; therefore the current dip presents a buying opportunity. On the other hand, Colgate-Palmolive Company (NYSE:CL) generates a significantly higher return on assets (ROA) and equity (ROE) than its rivals, but despite its decline, the shares are still considerably more expensive than Procter & Gamble’s.

The article Unilever Takes the Spotlight in Emerging Markets originally appeared on Fool.com and is written by Sarfaraz Khan.

Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.