Kwality Walls sees opportunity for double-digit growth after HUL demerger

Kwality Walls (India) sees an opportunity for double-digit growth as the ice cream category remains under-penetrated in India.

 

The company’s shares listed on Indian bourses on Monday after delisting from Hindustan Unilever (HUL). Shares last traded at ₹31 apiece, which values the company at ₹7,300 crore.

 

“When you look at various consumable categories in India, not many have the story of good double-digit volume growth for the next decade and a half or so. And we feel we are best poised right now to take this opportunity as we move forward,” Chitrank Goel, deputy managing director and executive director at Kwality Walls (India), told Business Standard in an interview.

 

He added that India is an under-penetrated country and explained that markets which are similar to India also have higher consumption. India’s per capita consumption hovers around 400-500 ml, according to Euromonitor International.

 

Prashant Premrajka, CFO at Kwality Walls (India), also said that despite the fact that per capita consumption is under-indexed, under-penetrated and under-consumed, half of the market remains unorganised, giving the company huge headroom to grow and premiumise the category.

 

He added that the company has its priorities set which are, “Setting up for the company, empowering the leadership, set the strategic vision and realising what we have captured in our equity story as the growth and the margin increases.”

 

While talking about bringing brands from its parent’s stable to India, Goel said that at the right time, its global brands enter the Indian market as there are enough channels in India and various kinds of consumers in India who are looking to consume these products.

 

The company holds the number two spot in the ice cream market in India behind Amul and holds a 10 per cent market share in the category.

 

Goel added that Kwality Walls (India) has close to 200,000 coolers in the market and the category as a whole has close to a million coolers. “If I look at a linear growth model, I have a very simple task to do — how do I drive execution rigour to add around 50,000 to 60,000 more outlets every year? So that drives a long-term volume growth for the business,” he said.

 

The Magnum Ice Cream Company (TMICC) has launched a mandatory open offer to acquire up to 26 per cent stake in Kwality Walls (India) Limited at ₹21.33 per share, valuing the offer at about ₹1,303 crore, following its acquisition of majority control from the Unilever group, according to its stock exchange filing.

 

The open offer, announced on Monday, is being made by The Magnum Ice Cream Company HoldCo 1 Netherlands B.V. along with its persons acting in concert, Magnum ICC Finance B.V. and The Magnum Ice Cream Company N.V. If fully accepted, the acquirer’s holding in the ice cream maker will rise to nearly 88 per cent.

 

The offer follows the completion of the demerger of the ice cream business of Hindustan Unilever Limited into Kwality Walls (India) Ltd and a subsequent share purchase agreement under which Magnum Ice Cream acquired a 61.9 per cent stake from Unilever group entities for about ₹2,997 crore. The transaction gives Magnum Ice Cream management control of the company, while the Unilever entities will exit the promoter group and be reclassified as public shareholders.