FMCG major HUL on Monday announced its plans to set up a subsidiary, which would be primarily engaged in manufacturing activities.

The company’s board has given a go-ahead to a proposal to set up a step-down unit, Hindustan Unilever Ltd (HUL) said in a statement.

According to sources, HUL is incorporating the subsidiary to get the benefit of the new corporate tax rate, which has been reduced to 15 per cent from 25 per cent for new manufacturing companies.

“The company would initially invest around Rs 500 crore to Rs 600 crore in the new subsidiary,” a source said, adding the investment will be increased substantially later.

The new manufacturing unit will be making products mostly for the FMCG segment, they said.

In September last year, the government slashed the corporate tax rate to 22 per cent without any exemptions or incentives and to 15 per cent from 25 per cent for new manufacturing companies.

“This subsidiary has been formed to leverage the growth opportunities in a fast-changing business environment and will help HUL in becoming more agile and customer-focused,” said HUL in the statement. “This company will be incorporated with an authorised share capital of Rs 2,000 crore,” it added.

For 2018-19, HUL, which sells products under popular brands such as Dove, Surf Excel and Kissan, had posted revenues of Rs 38,224 crore.

On December 3, 2018, Anglo-Dutch FMCG giant Unilever had announced the acquisition of the health food portfolio, including popular brands Horlicks and Boost, from GlaxoSmithKline in India and over 20 other markets for £3.1 billion (about Rs 27,750 crore). Under the deal, Unilever’s Indian arm, HUL, is acquiring GSK CH India via an all-equity merger, valuing the total business of the latter at Rs 31,700 crore.