Post by : Badri Ariffin

Hindustan Unilever Ltd (HUL) experienced a bullish trend on Wednesday as it unveiled the demerger of its ice cream division, Kwality Wall’s (KWIL), with the record date set for December 5, 2025. By 12:38 PM, HUL shares climbed to ₹2,444.3 on the BSE, marking a 1.69% increase, outpacing the Sensex, which noted a rise of 0.44% to 85,048.04.

According to analysts at Nuvama Institutional Equities, HUL’s ice cream sector accounts for approximately ₹50–55 of its current stock price. Though it makes up only about 3% of HUL’s overall revenue, the demerger is anticipated to create value by granting shareholders direct stakes in a dedicated ice cream venture, which boasts annual revenues nearing ₹2,000 crore and a robust growth forecast of 15–20% CAGR.

The separation will implement a mirror-shareholding system at a 1:1 ratio, meaning HUL shareholders will receive one share in the new ice cream entity for each HUL share held. This strategy aims to establish India’s premier publicly listed ice cream franchise, guided by a focused management team prepared to adopt strategies suited to the distinct features of the market.

Kwality Wall’s, encompassing well-known brands like Magnum and Cornetto, is ideally positioned to take advantage of the anticipated 15% CAGR growth in the Indian ice cream sector from 2024 to 2031. Growth is stimulated by advancements in cold-chain logistics, shifting consumer tastes, alongside a reduction in GST on ice cream from 18% to 5%, encouraging a transition from unorganised players to formal competitors.

HUL expects that the demerger will enhance its EBITDA margin by 50–60 basis points following Q3FY26, with the ice cream division classified as a discontinued operation thereafter. Analysts predict that Q4FY26 will be a critical recovery phase, with HUL shares priced around 45 times FY27E EPS, representing a favorable risk-reward scenario for investors.

This strategic move exemplifies HUL's commitment to refining its primary FMCG operations while allowing the ice cream division to explore its full potential through focused management.

#Share Market #Business & economy