HUL shares gain 3% on deal to sell Pureit to AO Smith India

Shares of Hindustan Unilever Limited (HUL) climbed over 3% on Tuesday after the FMCG major signed a deal to sell its water purification business Pureit to AO Smith’s India arm at an enterprise value of ₹601 crore ($72 million). The deal is in line with the company’s strategy to focus sharply on its core categories. The water purification business is part of the overall home care division, which contributed less than 1% of HUL’s turnover (₹293 crore) in the financial year 2023-24.

Following this deal, shares of HUL gained as much as 2.8% to hit an intraday high of ₹2,691.95 on the BSE, while the market capitalisation climbed to around ₹6.3 lakh crore. Early today, the FMCG heavyweight opened a tad higher at ₹2,620.65 after ending 0.18% lower at ₹2,618.90 in the previous session.

HUL shares touched its 52-week high of ₹2,723.90 on June 5, 2024, and a 52-week low of ₹2,170.25 on April 16, 2024. The counter has delivered flat returns in the last one year, while it gained over 4% in past six months. The stock has risen 1% in the calendar year 2024, while it added over 3% in a month.

In an exchange filing last evening, HUL said that its board in a meeting held on July 15, 2024, approved the sale and divestment of company’s water purification business carried under the brand ‘pureit’ to AO Smith India Water Products Private Limited, a subsidiary of A. O. Smith Corporation, USA. The transaction includes the trademarks, copyrights and other intellectual properties and identified assets and contracts associated with the business, as a going concern on a slump sale basis.

“There will be no change in the shareholding pattern of HUL pursuant to the proposed slump sale,” HUL says in the regulatory filing.

As per the release, the completion of the transaction is expected within an estimated period of 3 months, subject to fulfilment of terms and conditions as under the transaction documents.

In a separate release this morning, HUL says that its board will meet on Tuesday, July 23, 2024, to announce its financial results for the quarter ended June 30, 2024. According to a recent report by CRISIL Ratings, the FMCG sector is projected to achieve a 7-9% revenue increase this fiscal year, versus estimated growth of 5-7% in fiscal 2024, driven by expected volume growth due to resurgence in rural demand and consistent urban demand.

For FY25, CRISIL forecasts steady volume growth of 7-8% among urban consumers, bolstered by rising disposable incomes and a continued focus on premium offerings, particularly in the personal care and home care segments.

In the January-March quarter of FY24, the company, which owns brands such as Horlicks, Dove and Pepsodent, posted a 5.7% decline in its consolidated net profit at ₹2,406 crore as against ₹2,552 crore in the same period last fiscal year. The revenue stood at ₹15,210 crore in Q4 FY24 as against ₹15,215 crore in the corresponding period of FY23. The EBITDA fell marginally by 1%  to ₹3,535 crore as against ₹3,574 crore in the Q4 of FY23, while margin grew by 40 basis points to 23.8% in March quarter of FY24.

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