Hindustan Unilever Ltd (HUL) on October 23 said its board announced its decision to separate the ice cream business.
"The board’s decision to separate is in line with the recommendation made by the Independent Committee following a comprehensive review of the business," said HUL in a stock exchange filing.
HUL Chief Executive Officer (CEO) Rohit Jawa explained that there are two main options for separating a business: selling it or demerging and listing it as a separate entity. " These are both the options that the board is evaluating and the board has appointed an independent committee to review the way forward. The committee will work upon and then guided by committees' reviews, the board will decide to mode of separation between these two lead options," Jawa said in a post earnings press briefing.
The company's board is expected to decide on the mode of separation by December, according to the management.
"This portfolio restructuring will enable HUL to sharpen focus on the core business and further strengthen its play in trending demand spaces such as Beauty, Foods, Health and Wellbeing," the FMCG major added.
The decision follows the announcement, earlier this year, by the company's parent entity, Unilever PLC, about its intention to separate its global ice cream business across jurisdictions.
Hindustan Unilever reported near 4% fall in net profit in September quarter at Rs 2,612 crore as compared to Rs 2,717 crore a year ago as the consumer goods maker spent more on advertising to fend off stiff competition.
"The Independent Committee considered the following key aspects in arriving at its decision to separate the Business:
• Ice Cream, which contributes .3% to HUL’s turnover, is a high-growth category that needs significant investments to realise its full potential.
• Given Unilever owns the trademarks and know-how and has announced the
separation of its Ice Cream business, local capabilities will need to be developed to continue running the Business.
"• Ice Cream has a different operating model including cold chain infrastructure, and a distinct channel landscape, which limits synergies with rest of HUL," said HUL in a filing.
With the aim of maximising value for all shareholders, the board, based on the recommendations of the Independent Committee, will determine the mode of separation by the end of this year, added HUL.
On October 23, HUL's shares closed 0.8% lower at Rs 2,659.35 apiece.
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