HUL Q3 Highlights: 1:1 Demerger Revealed, Kwality Wall's Shares to Hit the Market

Hindustan Unilever Ltd. (HUL), India's FMCG giant, which owns brands like Dove, Lifebuoy, Surf Excel, Vim, Brooke Bond Red Label has unveiled a major corporate move as part of its Q3 FY25 updates. On January 22, HUL announced the demerger of its ice cream business into a wholly-owned subsidiary, Kwality Wall's (India) Limited, with plans to list it separately.

HUL: Kwality Walls 1:1 Demerger Details

The demerger will be executed under Sections 230-232 of the Companies Act, 2013, as per a scheme of arrangement approved by HUL's board. In the 1:1 share entitlement ratio, HUL shareholders will receive one equity share of Kwality Wall's for every HUL share held. According to the regulatory filing, the ice cream business accounted for INR 1,595 crore in revenue for FY24, representing 2.7% of HUL's standalone turnover. This move is expected to provide focused growth opportunities for the ice cream segment, which includes popular brands like Magnum and Cornetto.

The company in an exchange filing said "The Pursuant to Regulation 30 of the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 ('SEBI Listing Regulations' / 'LODR Regulations'), it is hereby informed that the Board, at its meeting held today, based on the recommendation of the Independent Committee and Audit Committee, has considered and approved the Scheme of Arrangement amongst Hindustan Unilever Limited ('Demerged Company') and its wholly owned subsidiary Kwality Wall's (India) Limited ('Resulting Company') and their respective shareholders under Sections 230 to 232 read with other applicable provisions of the Companies Act, 2013 ('Scheme')."

Furthermore, the exchange filing noted that. "Issuance of equity shares by the Resulting Company to all the shareholders of the Demerged Company in accordance with the Share Entitlement Ratio, i.e., "for every 1 (one) equity share of face value of Re.1/- fully paid up held in the Demerged Company."

Acquisition of Minimalist

In addition to the demerger, HUL has announced its intent to acquire Minimalist, a fast-growing digital-first skincare brand. With an annual revenue run rate of INR 500 crore and profitability since inception, Minimalist is projected to scale up significantly.

Emkay Global, in its report, stated that HUL is looking to acquire the Minimalist brand, as positive. With 100% own capacity and a differentiated approach to address the skin- and hair-care needs of cohorts, Minimalist has rapidly logged Rs3.5bn in revenue for FY24, with a mid-single-digit margin. Minimalist targets revenue of Rs 10 billion and mid-teens margin in the coming 3 years, with 1/3rd of this revenue from international markets. If the deal with HUL materializes, we see it as a win-win for both, with Minimalist charting scale-up by leveraging HUL's offline distribution; similarly, HUL would gain access to a digitally savvy cohort base, R&D know-how, and manufacturing capability."

HUL Q3 Financial Performance

HUL's Q3 FY25 consolidated net profit rose 19.18% year-on-year to INR 2,989 crore, compared to INR 2,508 crore in the same period last year. However, its operating profit grew marginally by 1%, with a slight decline in margins by 20 basis points to 23.5%. Total income for the quarter stood at INR 16,050 crore, reflecting flat revenue growth. Despite these results, HUL's stock faced pressure and traded nearly 1% lower on January 23.