Ladies and gentlemen, good day and welcome to Hindustan Unilever Limited conference call. As a reminder, lines will be in listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star and zero on your touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Srinivas Phatak, Chief Financial Officer at Hindustan Unilever Limited. Thank you, and over to you, sir.
Thank you, Aman. Good afternoon, everyone, and welcome to a short call that we've organized on what is actually a very special day for all of us. 15 months ago, we had announced a plan to merge GlaxoSmithKline Consumer Healthcare Limited with HUL, and we are delighted to share that today that has actually been confirmed, having received all the approvals. We're equally delighted to welcome the 3,500 strong family of members who joined us today. Before I get into some details, I would like to bring your attention to the safe harbor statement for good order. This update is predominantly in the nature of a transaction update. This is not a full-fledged update in terms of the business case and the synergy. This presentation is already loaded on the website, and therefore, you will get a clear picture of what we are talking about.
What I want to start with is actually giving a very quick recap of this deal when we announced it in back end of December 2018. Clearly, from a strategy perspective, it was right bang on in terms of what we wanted to do. The HFD portfolio, the company, and the brands. This is actually the number 1 HFD portfolio in the largest HFD market. It was actually giving an opportunity for Unilever to enter into a new segment to serve the needs of many of our consumers. Clearly, from a strategic rationale perspective, market development was a key opportunity. Market development is the key opportunity arising from low levels of penetration.
If you recollect, we had talked about the total penetration of the category is less than 24%, 25%, much lower in the rural areas, and therefore, that really gives a big opportunity to actually build and grow the market and therefore grow the business. Equally, there was a very attractive opportunity to drive premiumization through the high sciences portfolio, and that is actually something we will look to unlock. There was also a big advantage of leveraging the HUL distribution system and the distribution muscle, all of which would actually be big growth enablers for us. At that point in time, we had called out the structural opportunity to be double-digit growth into the medium-term and the margin expansion in the range of about 800 to 1,000 basis points.
This was all using the financials which were available at that point in time, which was typically March 2018. All in all, this whole merger was based, or this acquisition was based on leveraging the mega trend of health and wellness. Some key highlights of the transaction. This is an all-equity merger for every one share in GSK, the shareholders receiving 4.39 shares of HUL. Consequent to the merger, GSK plc would own about 5.7% of the combined entity. As a consequence of this, Unilever shareholding will actually come down to 61.9% in a post-merger scenario. There is an aspect to the Horlicks brand, and I will come back and address it in the end, so just wait for that.
There was also a very interesting piece which was all about distributing the GSK's over-the-counter and oral health products under a consignment selling arrangement for a period of five years. These are typically brands such as Sensodyne, Eno, Crocin, and so on and so forth. All in all, when we went to the market and when we spoke to all of you, we had spoken to you about the attractiveness of the HFD portfolio and the complementarity which was coming through from the OTC/OH business. This has been a bit of a journey for us, and over the period of time, we have secured various approvals starting from December 18, went through stock exchange, Competition Commission. Subsequently, we received the shareholders' approvals.
Because we are two listed entities with different registered offices, we had to get NCLT clearances, which we did receive both from Mumbai bench as well as the Chandigarh bench. Today, with the board approvals coming through and us completing some of the formalities, the merger actually becomes effective. Effective first April 2020, GSK merges into HUL, and we will be running the operations. Obviously, this is a special day for us because this is one of the biggest deals in the FMCG space. It also brings to the fold a large business in a completely new segment, and therefore we are delighted to welcome the nutrition team into the HUL family. Here, I'm also drawing your attention to the statement which Sanjiv put out. Basically, if you really look at it, we're delighted to have on board iconic brands such as Horlicks and Boost.
That's a big tick in terms of brands. The second is, it's a unique opportunity to live our purpose and serve India, therefore address the nutrition-related challenges. I think, therefore, we are excited from that angle. Third is clearly, we're delighted to welcome the 3,500 people. When you really look at the ethos of HUL, it's all about brands, it's all about purpose, and it's all about people. Therefore, this merger is a win-win for us, and we are absolutely delighted and excited with where we are today.
If I now talk to you about what is likely to happen in the course of the next four weeks, we've already shared when we filed our return or filed a statement with the stock exchange, that 17th of April will be the date for record date for shares to be issued, fresh shares to be issued, and therefore allotted. Thereafter, we will complete a series of filings. Between end of April and early May, we hope to have all shares really being HUL shares and all shareholders really being HUL shareholders. I am sure that a lot of you will have a lot of questions in terms of the business case, the long-term growth opportunities, the synergy, and all are valid questions.
I think where we really would request you to have patience is when we will come back in early May, and we will give you a comprehensive update on all those aspects. Today is really about completing the merger and taking forward the next steps. There are also some challenges and opportunities just given what's happening of late in the environment. Because they were listed companies, it is only now that we get fully into the business into some of the granularities, and therefore we will use the next few weeks to sharpen some of the messaging and some of the financials, and we will be in a good position to talk to you in early May in a more comprehensive manner.
Not to say that we can't talk about many of those aspects today, but it only makes sense for us to do our total work and then share some of these details with you. If I really just give you a little bit of a flavor in terms of how we will be organized and how we will run this business. Obviously, the focus for now is to really facilitate a smooth transformation and get the business to drive growth. The way therefore we have organized it is that we will call this a nutrition business, and this nutrition business will be a separate CCBT or a category country business team, as we call it, within the FNR division. There will be this dedicated CCBT, which operates like a mini company, and that's the structure that we have across many of our businesses.
We almost have 14, 15 CCBTs. Therefore these guys will be responsible for leading the business strategy and execution and unlocking the market development opportunity. Krishnan Sundaram, who is also an integration lead over the last 12 months, will actually now take over as a Nutrition Business Head, and he will report into Sudhir Sitapati, who handles our total FNR business. Equally critical is that we will continue to hold on and maintain a strong and an experienced integration team because we still see there are massive amounts of work to be done to unlock this opportunity. To give you an example, we will now start to commence. While we have done a lot of planning at our end, it's now that we need to really implement some of those plans and IT is a good example.
We will now start implementation of an SAP system, migrate GSK's from JDE, and that work will commence now. Given that we will be wiring up the entirety of the operations, we expect that to take about nine to 12 months. Once we are able to get the backbone of an IT system running, we'll have to then map out some of the other business processes and ancillary systems, and therefore there is a fair amount of work which will come through from that stream. Equally, while we'll have certain people who are really looking at leading market development, we still want to capture the synergy benefits, and therefore the integration team will continue to work closely to lead and drive that.
We expect that some of this will continue for the next 12-18 months, within which we also hope to finish IT integration by mid of next year. Yeah, that gives you a bit of a flavor in terms of our thinking and how we are progressing. If I come to the last aspect of my presentation, which is really about the Horlicks brand acquisition. If I take you back to what we had said in December 2018. At that point in time, if you really remember, there was a certain law which was likely to come into force, where SEBI was looking to cap royalty payments at about 2%.
In that context, when we had evaluated the whole business case, then we really looked at a situation and said that, "Look, from an HUL perspective, we were fine whether the brand was acquired from a Unilever point of view or from an HUL point of view." That was one of the criteria amongst some of the others that we had looked at. In the course of the last 15 months, as we're all aware, that restriction is no longer there, which effectively means that royalties rates are now still can be as high as 5%. To be fair, even the 2% was subject, you could have gone ahead of 2% subject to shareholders' approvals. That is again, a material change which has really happened.
We've also looked at our utilization of cash on balance sheet and what is the best way to deploy it for the purposes of shareholders of HUL. Third is also, as we have understood the business and some of the various regulatory aspects to it, whether it's from a direct tax and an indirect tax, having both the economic ownership as well as the legal ownership within one entity was something which was clearly coming out in favor of doing it together. The last element also is that as we work through, I think having the ownership in HUL gives us more flexibility to do different things with the brands and therefore drive better salience from an Indian consumer point of view.
Considering all these aspects, we looked at the valuation because this has to really be at an arm's length and it has to be defendable from a governance perspective as well as from tax and regulatory perspective. We also had the valuation independently done by an expert team. We've also got fairness opinions from a separate independent agency to actually validate this. With all these elements, we actually went to the board of directors and we have got their approvals for HUL to actually acquire the brand at a consideration of about INR 3,045 crores. Yeah? Obvious implication of this is because HUL will be the owner, we will not be paying any brand royalty. Yeah? Therefore, that is really a summary of where we are with respect to the transaction.
As I've said, we are super excited because this is really something which is really on strategy for us. Gives us an opportunity to capture and serve the needs. Actually gives us an opportunity to serve the needs of consumers in a new segment, which is nutrition. We get onboard iconic brands. It enables us to really live our purpose, and we actually are delighted to have onboard a strong GSK team which joins us and therefore from today becomes all HUL. Yeah? I'll pause here and I'll hand it over to Aman for any questions.
Thank you very much. Ladies and gentlemen, we will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touchtone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets for asking questions. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is on the line of Rohit Dukania from IDFC Securities. Please go ahead.
Yeah, good evening. Thanks for the opportunity and congratulations on completion. Just two quick ones. On this cash payout for the brand, what all approvals would be required incrementally?
Rohit, these are standard approvals. We have the assignment because if you look at the original deal structure.
Sure.
There is always an option. There's nothing new. If you go back to the original SPA, either Unilever could have bought it or it could have been bought by one of the group companies. The SPA was always clear. From a central bank perspective, we've worked through with them. Most of the documentation is completely routine, and actually we have been able to make the payment today. It's not an intention, it's actually something which we have executed a little while ago.
Sure. Okay, great. The other part is, obviously brand royalty will not be there, as you pointed out. But I was just wondering, will there be the technology-related royalty and the shared services which HUL pays to Unilever? Will those things be applicable on these revenues?
Yeah. From a technology perspective, I think we'll have to break it up into 2. A lot of technology and the R&D, if you really see for the HFD parts of the business, is housed in India. Yeah? We've got a dedicated R&D team and a dedicated R&D setup, and they do a lot of work with respect to nutrition, and therefore, we will continue to leverage them. It is quite possible because many of these sciences travel between various of our categories and divisions.
In that case, if we were to access any of technology from Unilever.
We will pay on a use basis. Obviously, it'll have to stand scrutiny of being at arm's length. It'll have to give benefits to HUL, and it'll be subject to its routine governance processes, include going to the audit committee. If there is anything, then it'll come on that and there will be benefits to it. A starting point, a lot of the R&D.
Is actually something which is in-housed in the organization. The third part is if there are some elements related to central services, there is a certain methodology which we follow today. It comes back to the same principles.
The principles really being arm's length benefit to the organization subject to audit committee. If it satisfies those conditions, we will pay. The clear answer is in two parts. First is brand royalty, we will not pay.
Sure.
Technology in most parts is in-house.
Whatever we access technology or other services, subject to the conditions that I described, if they meet that criteria, we will pay separately.
Sure. Very clear, Srinivas. Thanks a lot and wish you all the best.
Thank you.
Thank you. The next question is on the line of Arnab Mitra from Credit Suisse. Please go ahead.
Yeah, hi. Just to carry on with the previous question. At a HUL level, currently, we pay about 2.8% to the parent. How much would this be? I mean, I've got your breakup, but is there a percentage you could share what you would be likely to pay for the GSK part of the business?
Look, I don't have any percentages and numbers because for the reasons that I explained to you just now, I think as I was answering the previous question. What's very clear is that I will not pay brand royalty. Yeah. Without getting into future expectations and future guidance and numbers, if you were to take a look at the last year's annual report, you would know what is the brand royalty payout. I think that was approximately INR 138 crores, but that's really a view of past. R&D, as I said, a lot of it is in-house. It really comes down to saying, what are we accessing from Unilever? That is something which at this stage I will not have any visibility. Central service is also something which I will need to work through.
At this stage, it will be very difficult for us to give a number. Maybe when we come back in May, we will try and see if it is possible, but at this stage, I will not be able to give you a number.
Sure. The second question was, now that you own the brand, is there any clarity on whether you will have amortization on intangible assets? Does it give you some kind of a tax shield on the amortization in the tax books?
Look, again, we'll have a detailed discussion in May. Two aspects. First is we are owning the brand for India territory. I think I just want to make sure that's clear, because as far as the rest of the territories are concerned, Unilever will own the brand. Obviously, there are two aspects to it. In this case, there is a cash payout, and therefore, there will be a tax amortization. There is a broader question of when we have merged the two entities and what happens to the intangibles. That is something that we will address back in May when we come for a detailed update. On this one, the position is very clear. There's a straightforward one in terms of this INR 3,045 crores. There should be a direct benefit of tax amortization.
Okay, thanks. That's it from me.
Thank you. The next question is on the line of Tejash Shah from Spark Capital. Please go ahead.
Good evening, thanks for the opportunity. Since the Horlicks brand acquisition by any of the group company was part of the original deal as well in 2018, how much value was assigned to the brand then?
If you go back and look at, I think Unilever put out a number there. I think it was EUR 425 million if I recollect, for brand in all markets. That was the total number given by Unilever.
Okay. The balance number is still being acquired by Unilever Global, the other 19 geographies or 20 geographies. Is that correct?
Yeah. The total business is in more than 100, 19, 20 geographies are key, and Unilever is acquiring the brand rights in all those markets. Not for me to comment on what value are they paying or what are they working on. I am sure if there are some releases from Unilever, you'll get a picture of that.
Sure. Thanks. Sir, second, when the deal was announced, we had visibility of 800 t0 1000 percentage points synergy benefits accruing in GSK operating margins. Since then, GSK margins have improved by 5 percentage points. What is the latest assessment of the synergy benefits for HUL?
What did I say? Therefore, I said, let's have a detailed discussion on this in May when we come back. That's not something which we are addressing in today's call. Some of it, look, they would have learnt from us, and some of it, benefits would have been captured in what has come through. While there are independent companies within what was available from a framework, we have been sharing some best practices. Some parts would be captured. Again, I do believe that there is a fair amount of benefit which we will realize, and May would be a good time to have a detailed conversation on this.
The good aspect of this is that if you look back and say that, look, if we did this merger and we got into a swap ratio in December of 2018, and if some of these benefits have flown through, from an economic and a cash flows perspective, some of the benefits are already in. I think that's an important lens to apply. Having said that, we will have a detailed discussion in May.
Lastly, any thoughts on other brands like Viva or Maltova, which has been dormant in the earlier setup? Are we planning to revive those, or it is too early to comment on that as well?
Look, there's a bigger opportunity to actually take Horlicks and Boost. We're talking about still penetration levels of less than 25%, and these are seriously iconic brands. To be honest, there is a lot more joy if you're able to lead with Horlicks and Boost. If you're able to actually stretch the portfolio right from sachets to premium in terms of price and benefits. Sorry, price and formats. Second is that if you're able to actually use benefit segments with high sciences and Protein+ and Horlicks Growth+, there is again, massive opportunity. I would really say that our first focus would really be on Horlicks and Boost, and then we'll think about Viva and Maltova. They're too small at this stage. I think a bigger joy is to really start taking bigger business and go for it.
Are we open to divesting some of these flanking brands, if at all, in future?
Look, too early.
Too early. Okay.
First, I think let's focus on Horlicks and Boost. In due course, we will really see, and if they're not strategic, look, everything is on the table. It's just not about what's coming through this merger. We do look at, from time to time, opportunities for acquisition. If some parts of our portfolio are not strategic, we are open to divestments. That's too early at this stage with respect to the brands that you've asked me.
Great. Thanks for carving out time in such difficult times. Thanks. Thanks a lot.
Yeah. Thank you.
Thank you. The next question is from the line of Shirish Pardeshi from Centrum. Please go ahead.
Yeah. Hi, Srini. Congratulations, and thanks for an opportunity. Just two questions. You have spoken on the Horlicks brand. Can you give some details on the fee income on OTC brands?
If you go back and I think what we had said, even if you look at December 2018, I think there was a detailed question on this, and we clarified. Broadly, if you see, the same equation holds. Yeah. I thought we had explained about a net margin being in the same levels that you see in the balance sheet. There is no change to that. There have been some changes to the responsibilities. If you see, originally, they were doing both the aspects of market building, market development, and distribution. In the revised scheme of things, it was GSK Consumer doing that on behalf of the others. In the revised scheme of things, where we are saying is that some of the development and brand development and brand ownership will be with the GSK entities. As far as HUL is concerned, we will really focus on distribution.
If you were to then start to model it from you, I think in the overall net margins that was coming through into the financials, I don't see that will be a material difference. In May, when we talk to you, we will actually spell out some of those numbers. For now, if you really want to get a very quick response, the net margins will continue to remain.
That's very helpful. The second question is on the penetration, what you have said is 24% in urban and 14% in rural. I think that was for a while ago. I'm sure in between last 15 months, GSK would have done some penetration as they have drawn on your synergy part. Do you have any number last quarter in December ending, what would be the penetration.
Look, I don't have a number straightaway, to be but honest and give or take, yes, there was definitely that GSK did work to take a brand to the rural markets. They definitely put in efforts to drive sachet portfolio. Definitely in a year, there would always be some pickup of penetration. I don't have a number offhand, typically in a year, penetration doesn't move by more than 200 or 300 basis points. While I don't have a number, but I don't think materially that is going to alter the attractiveness of what we're buying into. When you do market development over the medium term, there is a sizable benefit that you can really drive. Yeah. 200 or 300 basis points here or there is not going to make a big difference in its totality.
Okay. Just last question. See, right now, if I look at Horlicks and Boost portfolio is largely driven by the mass segment, and you have pushed in the presentation saying that the premiumization is the larger opportunity.
No, I did not say that, Shirish. Let me clarify. I said that is an opportunity.
Yeah. I see.
Y ou're talking about penetration of about 25%. There is massive opportunity even being where you are today. Yeah, but please continue.
Yeah. If I look at and quickly break up about 22% of the premiumization portfolio which Horlicks owns today, do you think that there will be a significant opportunity in, let's say, two to three years?
Look, I still continue to believe that. Look, we are in slightly difficult environment, and you're all well aware of that. I think first we need to get through that. If I keep that aside for a bit, I think there is very good growth opportunity for this business to grow in double digits, and that's really going to come from leading market development. Yeah. Therefore, I think that's how we really need to take it from there. Premium will be one aspect to it. Premium will be important, premium will grow, but let's take it step by step.
Wonderful. Thanks a lot and all the best to you.
Thank you.
Thank you. The next question is from the line of Ankit Kabra from Kotak. Please go ahead. Ankit, your lines are muted for questions. Please go ahead. Since there's no response on the line, we'll move to the next question that is from the line of Binoy Jariwala from Sunidhi Securities. Please go ahead.
Yeah. Hi. Thank you for the opportunity. My question was, when you gave the guidance of EBITDA margin expansion by 800 to 1,000 basis points at the time of acquiring GSK Consumer India, at that time, the base year was meant to be FY 2018, right?
That's right.
Okay. Second part of the question was on the goodwill, the intangible, the tax benefit that would accrue from writing off the intangibles. You've given a clarification that the cash payout of about INR 3,050 odd crores will definitely be eligible. Just wanted to understand, where is the lack of clarity from the share swap?
I said, let's keep it simple. I said that's something which we should pick up for a broader discussion in May. Yeah. There is enough in tax laws which you can argue on both ways. I would really suggest that we park it for May, and we have a broader discussion on that. Yeah. Because there are case laws in favor and it's a tax neutral merger when two companies merge. There are both pros and cons, and I think we'll come back to you with a point of view in May in terms of how we're looking at it. Yeah.
Understood. Thank you. Yeah. Thank you so much.
Perfect. What I want to do, just make sure that just want to pick up a couple of questions which are there on the web. There was the first question, I think, which came from Aditya Soman from Goldman Sachs saying, "How will you pay Unilever for the Horlicks brand?" No, we don't pay Unilever for the Horlicks brand. We pay GSK. The deal was originally structured. It's not that Unilever bought over and we are buying from Unilever. The SPA provided for Unilever or the group buying the brand. In this case, HUL has bought the brand for the India territory, and we are paying to GSK. Unilever will in turn pay its own share for whatever it is for its international markets to them. Yeah. In terms of the second question that's come from Chanchal Khandelwal in terms of channel synergies, how will this play out?
The pharma is an important one. It's absolutely an important one. Direct distribution is an important one. Rural is an important one. Pharma is an important one. I think from a pharma point of view, I think we've also answered in the past, Horlicks is an important addition. We have skincare and other products which go into the channel. That's again, an interesting piece. As we now distribute the OTC/OH products, that again, is something which is going to add to us. All in all, I think today we have a very good portfolio, and actually equally, if you see what we announced about a week ago in terms of a small brand, but an important one, which is really VWash. Again, something which helps us from a channel perspective.
I think we've got a good portfolio to really take to the pharma channel, and I think all of that will help us actually. We are very good at distribution, and that's what really Unilever is very good at, and I think that'll all come in for us as we do it. Yeah. There was one question from, again, Aditya Soman about the 800-1,000 basis points improvement, and you suggested the post-royalty or before royalty. Look, Aditya, we will address all of this next month. When we had originally talked about the 800-1,000 basis points, clearly the brand was being owned by Unilever. That was the plan at that stage, and we were paying royalty. We will rework all of these numbers and what they would mean.
As we also said, there's also about 15 months down the line, there's also been some improvement which has come through. Some because of some of the learnings which we have been able to share, some because the business itself did well. Let's put all of that together and we'll answer it in May, and then we'll give you a clear view of how we see both growth and margin expansion. We'll also get some more clarity in the next few weeks in terms of the current situation that we are in. Notwithstanding, I think it's important to talk a medium-term. Yeah. Maybe I'll just flip back, saying any other calls on anything on the lines? I just want to do one more question, maybe from the audio, or maybe at max two questions on the audio. I think they've got a couple of questions here on the web.
Sure, sir. We'll take the next question. That is on the line of Bharat Shah from ASK. Please go ahead.
Srinivas, this is a bit confusing. You originally mentioned that earlier the proposal was to acquire the brand by Unilever, and there was a likely proposal to keep the royalty payment to lower level. Since then that matter probably seems to be buried. I'm not able to then understand, not that I'm happy that Hindustan Lever has bought the brand rather than Unilever buying them, HUL making a royalty payment. I mean, that wouldn't have been the best arrangement, so I'm happy with this arrangement. I'm just trying to understand, how is that fitting in? If the royalty payment caps are going away, then from Unilever perspective, they would have been happy to own the brand and take the royalty out of that.
Couple of things to just clarify. I think while you may be happy with the current situation you are, I think the important lens for us to saying this, the stance that we took in December of 2018, did it make sense from a shareholder's perspective in Hindustan Unilever Limited? There was a rationale and a background I explained, and it did. Today, I've also taken some pains to explain why we believe is the right things to do and how it actually is beneficial from an Hindustan Unilever Limited shareholder point of view. As far as Unilever is concerned, obviously that's something which Unilever should answer. If you really look at it, there is a strong economic rationale when they worked out, and that is why they are happy.
If you have any specific questions on this aspect, I would request you to get in touch with our investor relations team, and they'll be able to explain it in a bit more detail for you.
Just a bit more on that. I think whether happy or not is a relativism. I'm just saying that in 2018, if the proposal was being considered because of the worries about potential royalty clamp down, if that is no longer there, then why would Unilever not be interested today?
Let's answer it this manner. I think it's absolutely a question you should ask Unilever, because I shouldn't be answering on behalf of Unilever. The question is the current proposal, and there's an economic rationale for all of this. Does it make sense from a shareholder's perspective, subject to independent valuation, fairness opinion, board approvals? Yes. That also makes sense for Unilever because from what I understand, Unilever is also going through major changes and transformation at a global level. They have their own tax perspectives of what positions and take what views they take. When we had discussions with them, they were happy to go with it. It made economic sense for them. It's not for me to privy to what that decision is, because in these cases, I'll really represent what comes through from an HUL perspective. Yeah.
Thank you.
Aman, is there any other last question, please?
Yeah. We'll take the last question, sir. That is from Shirish Pardeshi from Centrum.
I thought he did that already. Srini has already asked a question.
No, I got that answer in between. Thank you.
Okay.
Thank you, sir.
All right. Maybe I'll just take a last question or two on what's on the web. When can we expect to see a combined balance sheet? Are the assets from revalued? Yes. Let me answer the second. There's a question which has come from Nitin Gupta from SBICAP. Two questions. When can we expect to see a combined balance sheet and the assets from GSK Consumer revalued by a valuer? Let me take the second part first. Yes, the assets are being revalued by a valuer. We will be hoping to complete that soon. I think we would expect to see a combined balance sheet when we report the June quarter results. I think that's the first time that we will see a combined balance sheet. Yeah. There's one more question from Gautam Trivedi from Nepean Capital.
The question really is that, now that we have paid INR 3,045 crore, what's the price sales for FY 2019, 2020, 2021? I am not going there. I'm not getting into a forward projection of it. I would say you have all the information, and you should be able to use it. There's a question from Richard Liu from JM Financial. How was SEBI hiking the 2%- 5% now influences brand ownership? Shouldn't a higher royalty level make it easy for Unilever to own the brand and HUL to pay the royalty? GSK's cash of INR 5,000 crore or so will become HUL balance sheet. Let me take the second question first, Richard. Yes, GSK's cash will also come onto our books, and that's why when I explained the logic and the rationale for HUL considering all of this, it was three or four elements.
I talked about a royalty change. That was one. I talked about cash and utilization as a second reason. I talked about when I look at some of the aspects of direct taxes and the indirect taxes, and when I look at the strengthening of the claim, both from an economic ownership as well as from a legal ownership. That also comes into play. I also talked about a fourth aspect of the freedom and the flexibility to do a lot more with a brand which is local. You know that we have many other examples of local, which is really in terms of our Indulekha to our Bru to our Lakmé. It's a combination of four or five things which actually help us make the decision. Now, second aspect you said is that, yeah, Unilever should be happy to take a higher royalty.
Sure, Unilever can be happy to take a higher royalty. It's also functional now what is at a Unilever corporate structure, how they were looking at in terms of what tax benefits they would get and which entity would they put in. From the limited understanding that I have, and that's what I was trying to tell the other gentleman, there is also a lot of change which is happening at the Unilever corporate structure in terms of organization and entities, and you would have all read about it in the last 6, 9, 12 months. There are many of those moving parts, and which has got a ramification in terms of how Unilever were to look at it from a tax angle. Not for me to get more detail of what Unilever would see and why Unilever would make a certain decision.
What's very clear for me, and I think that's the more important question for me to answer, is if we are making this payment and if HUL is owning the brand for the Indian territory, is there a financial case for it? Which is what I've taken pains to explain that there is, done through an independent valuation, fairness opinion, board and audit committee looking at it and giving us the go ahead. That's the reason we're delighted that HUL will be owning this brand, and we will go ahead with this merger. Any further questions on this aspect on the Unilever side, I think it's only fair that you guys raise it with Unilever, and that, I think is the most appropriate one. Yeah? I'm conscious of time, and I'm also conscious of everything which is going on in everyone's lives. A few things.
First is, thank you for being available and giving us an opportunity to just explain this very quickly. Conscious that everyone is working differently, it's important to therefore put out a point of view. We will in due course have a broader discussion, we hope to do that in May in terms of the aspects relating to the business case, the synergies, the tax positions and various ins and outs. We will hopefully talk to you in May on all those aspects. Till such time, I think it's important that we all remain safe. We take care of yourselves, you take care of your families, collectively, we work towards fighting what's really is actually a human tragedy. I hope we'll all do our best and come out, emerge out stronger and then all work together for a brighter future. Please do take care.
We are delighted today and I think I do want to acknowledge all the people, many of the people who have worked on the integration team, many of the people who have worked for making all of this happen, and in the last weeks, it's been incredibly tough and interesting. Actually, on a lighter side, we also had our first completely agile board meeting and audit committee to make it happen. As we're all doing, I think many firsts, while I think we are keeping a good amount of social distance, I think we've never been better connected. Thank you for everyone from team HUL, which is one team from today. On that note, I will actually hand it back to Aman, to bring the call to a close.
Thank you very much, sir. Ladies and gentlemen, on behalf of Hindustan Unilever Limited, that concludes this conference. Thank you all for joining us and you may now disconnect your lines.