HUL created separate 100% subsidiary for new Capex to avail Tax benefits

TradingFunda

Administrator
Staff member
#1
# As per our discussion with the company, HUL is looking to take advantage of tax benefit proposed in FY20 Union Budget (after formation of central government). As per the provisions laid out new investment (making fresh investment in manufacturing and initiating operations before March 31, 2023) would attract 15% tax with surcharge. As such the company is looking to set up facility to manufacture some of imported raw materials in India, in our view.

# The company is exploring options and noted it has sufficient time to think. Creation of company is first step in this process. Next it will consult with tax consultants to figure out dos and don't of the income tax provisions.

# Apart from this the company would also like to look at adjacent options like investment in high growth categories, new business model and import substitution (raw material which was imported can be manufactured here)

# Our view: Creation of company to benefit from lower tax would be viewed positively. Given it is 100% subsidiary, there are no concerns for HUL shareholders. Also company noted there is no proposal to have GSK business in separate entity.
 
Top