Just 1% return despite rising profits: Why HUL is struggling

Investors often cheer rising profits, assuming that more earnings automatically mean better shareholder returns. But what if a company’s profits are growing and yet its stock price barely moves? Case in point: FMCG giant Hindustan Unilever (HUL). HUL: A growth story that didn’t pay off HUL has grown its profits at a respectable 8.6 per cent annually over the past five years. But its stock price was up just 1.3 per cent a year in the same period. The problem? Poor efficiency. After acquiring GSK Consumer in 2019 (integration completed by 2021), HUL’s shareholder funds or book value surged by Rs 40,000 crore. This was a massive 480 per cent jump in shareholder equity in FY21, but sales rose only 18 per cent in the same year. Naturally, profit growth did not keep pace either. As