HUL Announces Demerger Of Kwality Wall's, Nuvama Eyes High-Growth Potential

After Hindustan Unilever Limited (HUL) fixed the demerger date of its ice-cream entity Kwality Wall's, brokerage firm Nuvama weighed in on what this translates into for investors in the FMCG giant.

The brokerage entity values the stock at 60x FY27E EPS, yielding an unchanged "TP of INR3,195; maintain 'BUY' ".

HUL's Ice Cream Business Demerger - What It Means For Investors?

Nuvama noted, "The demerger shall give existing investors direct ownership in a pure-play ice cream business with ~INR20bn in revenue, a strong 15–20% CAGR potential and a portfolio of iconic brands such as Magnum, Cornetto and Kwality Walls. The segment has historically delivered healthy EBIT margins of 5–9%."

"Demerger of ice cream business shall create a leading listed ice cream firm in India, which would have a focused management with greater flexibility to deploy strategies suited to its distinctive business model and market dynamics, thus realising its full potential," it said.

The demerger date of Kwality Walls has been fixed at December 5, 2025, as per the BSE exchange filing.

Given mirror image shareholding at 1:1 ratio— each HUL shareholder shall receive one ice cream company (KWIL) share for every HUL share.

Also Read:  Agentic AI Can Improve detection Of Finance-Related Crimes: McKinsey

The company's ice cream business "contributes ~3% to its total turnover with historical 5–9% EBIT margins".

Nuvama Retains 'Buy' On HUL

"KWIL’s market cap is likely to be ~INR12–15bn. We reckon HUL’s EBITDA margin shall improve 50–60bp post-demerger; retain ‘BUY’," it said.

"The business shall continue to be equipped with the portfolio, brand and innovation expertise of the largest global ice cream business, The Magnum Ice Cream Company, enabling it to keep winning in the marketplace," according to Nuvama's brokerage note.

The demerger announcement by HUL comes at a time when India's ice-cream market is expected to grow at 
at a strong "~15% CAGR (2024–31), supported by better cold-chain infrastructure and rapidly evolving consumer preferences".

"This momentum is likely to strengthen further following the GST reduction on ice cream from 18% to 5%, which shall provide an additional boost to category growth. This tax cut could accelerate the shift from unorganised to organised players in the market besides driving affordability," it said.

As of 1:13 PM, the share price of HUL was 2437.35, lower by 0.14%.