Board of HUL approves new royalty and services agreement with Unilever group
Jan 19, 2023 04:55 PM | Source: capitalmarket.com
AT meeting held on 19 January 2023
The Board of Directors of Hindustan Unilever (HUL) today approved the proposal to enter a new arrangement with Unilever group entities for the provision of technology, trademark licenses and services to HUL.
In the new agreement, the royalty and central services fees will increase from c.2.65% (FY22) to c.3.45% of turnover. This increase will be effected in a staggered manner over a period of 3 years. This arrangement is subject to appropriate regulatory approvals.
The current Technology, Trademark license and Central Services Agreement with Unilever group was entered into in January 2013 for a period of 10 years. This granted HUL the right to use Unilever owned trademarks, technology, corporate logo and gave access to central services provided by Unilever group.
Unilever's global brands, innovations, technical know-how, centralised services, and functional expertise enables HUL to win in the marketplace. During the tenure of the contract, HUL doubled its turnover and improved EBITDA margin by c.1000 bps
The new arrangement will ensure that HUL continues to receive the technology, services and IP support from Unilever.
• The new royalty and central services arrangements are proposed to be effective 1st February 2023 for a period of 5 years
• The new arrangement envisages a staggered increase of 80 bps over a period of 3 years from c. 2.65% to c. 3.45% of Turnover:
- c. 45 bps increase in effective cost for February to December 2023
- c. 25 bps further increase in effective cost for January to December 2024
- c. 10 bps further increase in effective cost from January 2025