HUL Approves Demerger Of Ice Cream Business Into Independent Entity

HUL said its board has given in-principle approval for the demerger, aiming to maximise shareholder value

HUL noted that its ice cream business, which contributes about 3 per cent to the company’s top line, operates under a distinct model that includes a specialised cold chain infrastructure and a unique channel landscape.

Source : HUL

FMCG giant Hindustan Unilever Limited (HUL) has announced the demerger of its ice cream business, which includes popular brands such as Kwality Wall's, Cornetto, and Magnum, into a separate listed entity. In a statement issued on Monday, HUL said its board has given in-principle approval for the demerger, aiming to maximise shareholder value. Existing HUL shareholders will receive shares in the new entity proportional to their current holdings, the company added.

The demerger, however, is subject to regulatory and procedural approvals as mandated by applicable laws.

Rationale for Demerger

HUL noted that its ice cream business, which contributes about 3 per cent to the company’s top line, operates under a distinct model that includes a specialised cold chain infrastructure and a unique channel landscape. This limits synergies with the broader FMCG portfolio.

"The Board considered different modes of separation and, after due deliberation, decided to demerge the ice cream business to unlock its full potential and create value for shareholders," HUL said.

The decision aligns with the recommendations of an Independent Committee formed earlier in September, which highlighted the business's unique operating requirements.

Steps Ahead

HUL’s management has been authorised to initiate the preparatory steps required for the demerger. The company also revealed that the board is working to finalise the separation process by the end of the year.

The move follows a similar initiative by HUL’s parent company, Unilever PLC, which earlier this year announced plans to separate its global ice cream business across jurisdictions.

Financial Performance

For the financial year ending March 2024, HUL reported a revenue of Rs 59,579 crore from product sales. The ice cream segment accounted for a modest yet strategic portion of this revenue. HUL had initiated a valuation of the ice cream business in October to ensure a fair assessment before moving forward with the demerger process.

The proposed spin-off marks a significant step in HUL’s strategy to streamline operations and focus on its core FMCG business while enabling the ice cream unit to operate independently and scale further.