HUL Announces 1:1 Demerger of Kwality Wall's, Acquisition of Minimalist
HUL's Q3 Strategic Moves
Hindustan Unilever Ltd. (HUL), a major player in the Indian FMCG sector, has revealed significant corporate developments as part of its Q3 FY25 updates. The company has announced the demerger of its ice cream business into a fully-owned subsidiary, Kwality Wall's (India) Limited. This new entity is planned to be separately listed on the stock exchange.
Details of the Demerger
The demerger will be executed following Sections 230-232 of the Companies Act, 2013, under a scheme approved by HUL's board. In a 1:1 share entitlement ratio, HUL shareholders will receive one equity share of Kwality Wall's for each HUL share they own. The ice cream division generated INR 1,595 crore in revenue for FY24, accounting for 2.7% of HUL’s standalone turnover. This strategic move is expected to provide enhanced growth prospects for the ice cream segment, which includes well-known brands like Magnum and Cornetto.
Acquisition of Minimalist
In addition to the demerger, HUL has expressed its intention to acquire Minimalist, a rapidly growing digital-first skincare brand. Minimalist has an annual revenue run rate of INR 500 crore and has been profitable since its inception. This acquisition is anticipated to significantly scale up Minimalist’s operations.
Analysis of the Minimalist Acquisition
According to reports, HUL's interest in acquiring Minimalist is a positive step. Minimalist, which operates with its own production capacity, recorded Rs 3.5 billion in revenue for FY24, achieving a mid-single-digit margin. Minimalist aims to reach Rs 10 billion in revenue and a mid-teens margin in the next three years, with one-third of this revenue coming from international markets. The acquisition is expected to benefit both companies, as Minimalist can expand by leveraging HUL's distribution network, while HUL gains access to a digitally savvy consumer base, research and development expertise, and manufacturing capabilities.
HUL's Q3 Financial Performance
HUL's Q3 FY25 consolidated net profit increased by 19.18% year-on-year, reaching INR 2,989 crore, compared to INR 2,508 crore in the same period last year. However, its operating profit saw a marginal increase of 1%, and margins declined slightly by 20 basis points to 23.5%. Total income for the quarter was INR 16,050 crore, with flat revenue growth. Despite these results, HUL’s stock experienced some selling pressure, trading almost 1% lower on January 23.
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