HUL shares edge higher on plan to list ice cream biz as separate entity

Shares of Hindustan Unilever Ltd (HUL) edged higher in opening trade on Tuesday after its board of the company approved the demerger of its ice cream business into a separate entity. Going ahead, the FMCG major plan to list the demerged ice cream business as a separate entity on the domestic exchanges, HUL informed stock exchanges on November 25.

Extending its gaining streak for the third straight session, HUL shares opened marginally higher at ₹2,489.55, after ending up by 1.54% at ₹2,483.15 in the previous session. In the early trade, the FMCG heavyweight gained as much as 0.5% to ₹2,495.15, while the market capitalisation rose to ₹5.84 lakh crore.

The most valued FMCG stock touched its 52-week high of ₹3,034.50 on September 29, 2024, and a 52-week low of ₹2,170.25 on April 16, 2024. The counter has gained over 4% in three sessions, while it corrected nearly 4% in the past one month. In the calendar year 2024, the stock lost 7%, whereas it added 4% in the past six month. In the last one year, the share has risen over 1%.    

HUL's ice cream brands, which include Kwality Wall's, Cornetto, and Magnum, accounted for nearly 3% to the company’s total revenue.

"The decision to demerge is subject to the approval of the Board and the shareholders to the scheme of demerger to be placed before the board early next year. The Board considered different modes of separation of the ice cream business and after due consideration, with a view to maximise value for all the shareholders, the board has accorded in-principle approval to demerge the business," as per the exchange filing.

The release notes that existing shareholders will receive shares in the new entity in proportion to their shareholding in the parent entity, HUL. "A separate listed entity will unlock fair value for HUL shareholders and give them the flexibility to stay invested in ice cream’s growth journey," said the release.

The release further stated that the decision to demerge is subject to approval of the board and the shareholders, which will be placed before them early next year. “The board considered different modes of separation of the Ice Cream business and after due consideration, with a view to maximise value for all the shareholders, the board has accorded in-principle approval to demerge the business.”

In September this year, HUL’s board had constituted a committee of independent directors of the company to evaluate the future prospects for the ice cream business following parent Unilever’s decision to separate this business. Based on the recommendation of the independent committee, the board had announced the separation of the business in October 2024.

As per the company, the demerger of ice cream business will create a listed ice cream company in India, which will have a focused management with greater flexibility to deploy strategies suited to its distinctive business model and market dynamics thus realising its full potential. Further, the business will continue to be equipped with the portfolio, brand and innovation expertise from the largest global ice cream business enabling it to keep winning in the marketplace. 

(DISCLAIMER: The views and opinions expressed by investment experts on fortuneindia.com are either their own or of their organisations, but not necessarily that of fortuneindia.com and its editorial team. Readers are advised to consult certified experts before taking investment decisions.)