Hindustan Unilever Limited (HUL), India's leading FMCG company, is set to demerge its ice cream business, Kwality Walls India, with plans to list it as a separate entity by the end of FY25. This strategic move is expected to unlock significant value for shareholders and accelerate growth in the ice cream segment.

Ambitious Growth Targets

HUL's Chief Financial Officer, Ritesh Tiwari, expressed confidence in the future of the demerged ice cream business, projecting it to double in size over the next 2-3 years. This optimistic outlook is underpinned by expectations of improving margins in the segment.

Current Performance and Future Potential

The ice cream business currently contributes ₹1,800.00 crore to HUL's revenue, accounting for approximately 3% of the company's total turnover. While the current EBITDA margins are in the low single digits, the company anticipates substantial improvement post-demerger.

Demerger Details

The demerged entity, Kwality Walls India, will encompass popular brands such as Kwality Wall's, Cornetto, Magnum, and The Dairy Factory. It will also include five ice cream factories and cold storage logistics infrastructure. HUL shareholders will receive one share of Kwality Walls India for every HUL share held, ensuring a fair distribution of value.

Market Opportunity

The Indian ice cream market, currently valued at ₹30,000.00 crore, is projected to reach ₹50,000.00 crore by 2028, highlighting the significant growth potential in this segment. India's per capita ice cream consumption stands at 600ml annually, compared to 13 litres in the US, indicating substantial room for market expansion.

Investment and Operational Considerations

The ice cream business requires higher capital expenditure, typically 5-7% of turnover, compared to under 2% for typical FMCG operations. This higher investment requirement is likely one of the factors driving the demerger decision, allowing for more focused capital allocation and management.

Post-Demerger Ownership Structure

Following the separation, The Magnum Ice Cream Company, a Unilever entity, will acquire a 61.9% stake in the demerged Kwality Walls India. This structure ensures continued strategic alignment with the global Unilever ice cream business while allowing for more independent operations and focused growth strategies.

Shareholder Approval and Timeline

HUL has received a "no objection" letter from the stock exchanges regarding the proposed demerger. The company has scheduled a shareholder meeting on August 12, 2025, to consider and approve the demerger scheme. Voting will commence on August 7, 2025.

Ritesh Tiwari stated during the company's recent earnings call, "We are on track to complete the demerger process by Q4 of Financial Year'26, subject to necessary approvals."

This strategic demerger is poised to create a more agile and focused ice cream business, better positioned to capitalize on the growing Indian ice cream market while potentially delivering enhanced value to HUL shareholders.

Hindustan Unilever Limited (HUL), India's leading fast-moving consumer goods company, has reported a 5% year-on-year growth in consolidated turnover for the quarter ended June 30. The company's performance was driven by a 4% increase in underlying volume growth, demonstrating resilience in a gradually recovering market environment.

Financial Highlights

HUL's consolidated turnover stood at Rs. 16,323.00 crores. The company's EBITDA margin was 22.80%, down 130 basis points year-on-year, reflecting strategic investments across various lines of the profit and loss statement. Despite the margin compression, the company's Profit After Tax (PAT) grew by 6%, primarily due to a re-estimation of certain tax provisions pertaining to prior years.

Segment Performance

The company witnessed varied performance across its business segments:

• Home Care: Delivered robust volume growth with a 4% Underlying Sales Growth (USG), driven by high single-digit Underlying Volume Growth (UVG).
• Beauty & Wellbeing: Achieved a 7% USG with low single-digit UVG, supported by strong performance in premium brands and market share gains in e-commerce.
• Personal Care: Grew 6%, primarily driven by pricing actions.
• Foods: Reported a 5% USG with mid-single-digit UVG, led by double-digit growth in the Beverages portfolio.

Strategic Investments and Portfolio Transformation

HUL continues to invest strategically in its business, focusing on portfolio transformation and future-readiness. The company has shifted approximately 500 basis points of its portfolio towards Future Core and Market Makers categories over the past two years. This shift aligns with evolving consumer preferences and high-growth segments.

Leadership Transition

HUL announced a significant leadership change. Rohit Jawa, who has served as CEO and Managing Director for the past two years, will be stepping down. Priya Nair, who returns to HUL after leading Unilever's Global Beauty & Wellbeing Business, will succeed Jawa as the new CEO and Managing Director.

Acquisitions and Business Expansion

HUL completed the acquisition of Minimalist, a skincare brand, for Rs. 2,706.00 crores. The company is focusing on leveraging synergies in R&D, supply chain optimization, international expansion, and offline distribution scale-up for Minimalist.

Additionally, HUL's health and wellbeing brand OZiva has shown remarkable growth, tripling its turnover year-on-year and reaching an annual recurring revenue of Rs. 450.00 crores.

Outlook

HUL expects the first half of the current fiscal year to perform better than the second half of the previous fiscal year. The company anticipates low single-digit price growth if commodity prices remain within the current range. HUL remains committed to driving competitive volume-led growth while maintaining its EBITDA margin guidance of 22-23%.

Rohit Jawa, outgoing CEO and Managing Director, commented on the results: "We have delivered a competitive performance this quarter with an Underlying Sales Growth of 5% driven by an Underlying Volume Growth of 4%. Our strategic focus on portfolio transformation and investments in future-ready capabilities positions us well to capitalize on the gradual recovery in consumer demand."

As HUL navigates through a changing market landscape and internal transitions, the company remains focused on long-term value creation for its shareholders while adapting to evolving consumer needs and market dynamics.