The Board of Directors of HUL on Thursday approved the proposal to raise royalty payment to Uniliver Group. “The Board of Directors of Hindustan Unilever Limited (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," the FMCG major said in a regulatory filing.
The new royalty and central services arrangement, which envisages a staggered increase of 80 basis points over a period of three years, will be effective from 1 February, 2023 for a period of five years.
"We get the value for what we pay as royalty and service fees, whether it is in terms of innovation or product superiority," HUL Chief Executive Sanjiv Mehta said, comparing the payout to marketing, advertising and promotion costs.
"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," the company said.
The 80 bps hike in the royalty fee will take place in three tranches. The firm's royalty fee will increase by 45 bps for February to December this year, by further 25 bps for next year, and another 10 bps for 2025.
On current royalty arrangement
Mumbai-based HUL said 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 1000 bps.
The new arrangement will ensure that HUL continues to receive the technology, services and IP support from Unilever, the company stated.
