HUL ice-cream business demerger clears first hurdle after board nod

The board of directors of Hindustan Unilever (HUL) on Monday gave an in-principle approval to demerge the ice-cream business into an independent listed entity.

Subject to necessary approvals and procedures, shareholders of HUL will receive shares in the new entity in proportion to their shareholding in the company, HUL said in a release.

For the purpose of the proposed demerger, the board has also approved incorporation of a wholly owned subsidiary.

“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. Demerger will also facilitate a smoother transition for business as well as our people,” the release said.

The decision to demerge is subject to approval of the board and the shareholders to the scheme of demerger. The scheme would be placed before the board early next year.

The release said, “The board considered different modes of separation of the ice-cream business and after due consideration, with a view to maximising value for all shareholders, the board has accorded in-principle approval to demerge the business.”

The board has authorised HUL’s management to undertake preparatory steps required for the potential demerger of the ice-cream business, including the drawing up of the scheme of arrangement.

In September, the HUL board had constituted a committee of independent directors of the company to evaluate the prospects and way forward for the ice-cream business pursuant to Unilever’s decision to separate this business. Based on the recommendation of the committee, the board had announced the separation of the business in October.

“Ice cream is a high-growth business, with iconic brands such as ‘Kwality Wall’s’, ‘Cornetto’, and ‘Magnum’ operating in an attractive category, and has mid to high single-digit profitability. The demerger of ice-cream business will create a leading 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,” the release said.

HUL also said that the business will continue to be equipped with the portfolio, brand, and innovation expertise of the largest global ice-cream business, enabling it to keep winning in the marketplace.

Currently, the ice-cream business contributes to around 3 per cent of HUL’s turnover.