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HUL Profit Up 16%, Shares Fall On Royalties

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Hindustan Unilever Ltd (HUL), India's largest consumer goods maker, reported a 16 per cent jump in third-quarter net profit, but low volume growth and a rise in royalty payments knocked its shares down as much as 5 per cent.

Less discretionary spending among consumers cut sales of products such as packaged foods and personal care items, but higher prices and lower raw material costs aided margins.

The Indian unit of Anglo-Dutch conglomerate Unilever Plc said its net profit rose to Rs 870 crore for the fiscal third quarter ending December 31, from Rs 750 crore a year earlier.

HUL's shares have fallen over 10 per cent in the December quarter partially on concerns it may have to pay more in royalties, in line with Unilever in Indonesia, a move the company confirmed on Tuesday.

The royalty HUL pays to its parent company for use of its trademarks will gradually increase by March 2018 to around 3.15 percent of turnover, from the current 1.4 percent, it said in a statement.

The Indian company, valued at $19.5 billion, makes popular brands including skin creams Fair and Lovely, Sunsilk shampoo, Lux soap and Kissan ketchup.

Analysts had estimated a profit of Rs 880 crore on sales of Rs 6,570 crore, Thomson Reuters Starmine Estimates showed.

HUL stock trades at 28.5 times its 12-month forward earnings, compared with peers ITC's 25.5 times, and Godrej Consumer's 26.5 times, according to Thomson Reuters Starmine Smart Estimate.