Hindustan Unilever Limited (HUL) has filed a petition in the Bombay High Court challenging an income tax notice demanding ₹963 crore.
NEWS DELHI (Economy India): Hindustan Unilever Limited (HUL) has approached the Bombay High Court to challenge a ₹963 crore income tax notice issued by the Income Tax Department. The notice, which was received by HUL in August 2024, relates to an alleged failure to deduct TDS (Tax Deducted at Source) during the acquisition of GlaxoSmithKline’s (GSK) Health Food Drinks (HFD) portfolio in 2018. This legal case has drawn significant attention as it pertains to corporate tax compliance in India.
Background of the HUL-GSK Deal
In 2018, HUL acquired GlaxoSmithKline’s Health Food Drinks (HFD) portfolio, which included popular brands like ‘Horlicks’ and ‘Boost’. This acquisition allowed HUL to strengthen its market presence in India, Bangladesh, and 29 other Asian markets. The deal was a strategic move by HUL to expand its footprint in the health food sector, particularly among younger consumers.
While the acquisition was a major boost for HUL’s business, it has now come under scrutiny due to the income tax notice issued by the authorities, raising questions about the company’s tax practices during the deal.
Details of the Income Tax Notice
On August 26, 2024, HUL received an official notice from the Income Tax Department, which stated that TDS had not been deducted during the GSK acquisition. The total demand raised in the notice is ₹962.75 crore, which includes ₹329.33 crore in interest.
In its filing with the stock exchange, HUL mentioned, “We received a letter on August 26, 2024, demanding a total of ₹962.75 crore, including interest. This relates to the acquisition of India HFD IPR from GlaxoSmithKline (GSK) Group, where TDS was allegedly not deducted.”
Legal Proceedings and HUL’s Response
In response to the notice, HUL has filed a petition in the Bombay High Court, stating that the company has complied with all necessary tax regulations. HUL argues that the issue is related to complex tax laws and that it had followed all legal protocols during the acquisition process.
The company further clarified that this dispute revolves solely around TDS and does not impact its overall business strategy or financial stability.
Impact on the Stock Market
News of the legal case had an immediate impact on the stock market. On Friday, the Nifty 50 Index fell by 0.13%, while HUL’s shares dropped by 0.60%, closing at ₹2,938.70. Despite this, HUL’s shares have delivered a 19.3% return so far this year, reflecting the company’s overall resilience in the market.
Analysts’ Opinions
According to Bloomberg, out of 42 analysts tracking HUL, 24 have recommended a ‘buy’ rating for the stock, 13 have advised to ‘hold’, and 5 have given a ‘sell’ rating. The 12-month target price for HUL stands at ₹2,899.20, which is 1.2% lower than the last closing price.
Analysts believe that while the legal dispute may create short-term uncertainty, HUL’s long-term performance is unlikely to be affected. The company’s strong market position and diverse product portfolio ensure its stability in the face of such challenges.
HUL’s decision to contest the ₹963 crore income tax notice in the Bombay High Court has brought the company into the spotlight. Despite the significant financial demand, experts remain optimistic about HUL’s ability to navigate this legal challenge.
The outcome of this case will be closely watched by industry stakeholders, as it could set a precedent for future corporate tax matters. However, for now, HUL’s fundamentals remain strong, and it continues to be seen as a solid investment option in the long term.
(Economy India)
