Pick the parent over overpriced Indian unit

As a company increases in size, growth tends to slow down due to problems in scaling

Indian subsidiaries of foreign parent companies listed on Indian stock exchanges are unanimously considered titans of quality and “value buys” for the long term. Their high P/E valuations are a testament to their widespread reputation in the investing world. However, the perception that they serve to be compounding wealth machines is questionable. A company such as Hindustan Unilever, with brands like Dove, Lifebuoy, Kissan, etc., has excellent brand recall and is undoubtedly a fantastic business with zero debt. This might lead one to believe that it makes for a good investment, but as Howard Marks says, “no asset is a good investment at all prices.” Despite having solid fundamentals, HUL makes for a poor investment due to its extravagant valuations compared with its prospective investment return. As of August 11, HUL is trading at a price-to-earnings ratio of 68.55, with a dividend yield of 1.3%. The argument many investors make to buy HUL at this valuation is its supposed growth prospects and brand recognition. At most, HUL has shown a compound average growth rate of 14% from 2010-2021.