Hindustan Unilever Receives ₹1,986 Crore Tax Notice, Company Plans Appeal

Hindustan Unilever Limited (HUL), a leading Fast-Moving Consumer Goods (FMCG) company, has been served a tax notice amounting to ₹1,986.25 crore for the financial year 2020-21. The notice, dated October 20, 2025, pertains to transfer pricing adjustments concerning payments to related parties and corporate tax disallowances on depreciation claims. HUL has clarified that this tax demand is not expected to have any material impact on its financial results, operations, or other business activities. The company plans to file a formal appeal with the designated appellate authority within the stipulated timeframe to contest the notice. This development follows HUL's recent quarterly results, where it reported a 4% year-on-year increase in consolidated net profit to ₹2,694 crore for the July-September quarter (Q2 FY26), with revenue growing 2% to ₹16,061 crore. However, the net profit was boosted by a ₹184 crore one-off gain from the resolution of prior tax matters. Excluding these one-off items, the profit after tax (PAT) actually saw a 4% dip. The company's EBITDA margin stood at 23.2%, a decrease of 90 basis points year-on-year, attributed to increased business investments. HUL's CEO expressed a commitment to accelerate portfolio transformation by enhancing consumer segmentation, aiming for volume-led growth. The Board also declared an interim dividend of ₹19 per share for the fiscal year ending March 31, 2026. Impact: The tax notice, while significant in value, is currently assessed by the company as having no material impact on its financials. However, the outcome of the appeal process could potentially affect future profitability if the company does not succeed. Investor sentiment may also be cautiously observed. The rating for immediate market impact is 4/10. Difficult Terms: Transfer Pricing: Regulations that govern the prices charged for goods, services, and intangible assets transferred between related entities (e.g., parent company and subsidiary) in different tax jurisdictions. The goal is to ensure these prices are "at arm's length," meaning they are the same as what unrelated parties would charge. Disallowance: A term used in tax law where a deduction or expense claimed by a taxpayer is not permitted by the tax authority, leading to a higher taxable income. Depreciation: An accounting method of allocating the cost of a tangible asset over its useful life. Tax authorities may challenge the rate or method of depreciation claimed. EBITDA: Earnings Before Interest, Taxes, Depreciation, and Amortization. It is a measure of a company's operating performance. Basis Points (bps): A unit equal to one-hundredth of a percentage point, or 0.01%. A 90 bps decrease means a 0.90% decrease. PAT: Profit After Tax, the net profit remaining after all expenses and taxes have been deducted.