Hindustan Unilever Ltd (HUL) announced on Monday that its board of directors has granted in-principle approval to demerge its ice-cream business into a separate listed entity.
“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,” the company said.
The demerger would create a “leading listed ice cream company” in India, which would have focused management with greater flexibility to deploy strategies suited to its distinctive business model and market dynamics, the company said.
The scheme of demerger would be placed before the board early next year, with shareholders receiving shares in the new entity in proportion to their shareholding in HUL.
In September, HUL had set up a committee to evaluate the way forward for the business. Based on the recommendations of this panel, the board announced the separation of the ice cream business in October.
After the September quarter earnings last month, HUL’s CEO & MD Rohit Jawa had said that there were two options before the company. This included either selling the ice-cream business or demerging it into a separate listed entity.
Contributing Rs 1,800 crore annually or 3% of its roughly Rs 60,000 crore annual turnover, the ice-cream business includes brands such as Kwality Wall’s, Cornetto and Magnum, operating with mid to high-single-digit profitability. It ranks second to Amul among organised ice-cream players in India, with an estimated volume market share of 15% to Amul’s 35% market share. The organised ice-cream market in India is estimated to be Rs 15,000 crore in terms of size.
Jawa had said that both the brand and technology for the ice cream business were owned by Unilever.
“Unilever has announced a separation of the ice-cream business globally. HUL will have to invest to develop local capabilities to run the business if they decided to keep it,” Jawa said.
» Read More
