HUL gains 3% as Board approves sale of 'Pureit' to AO Smith for Rs 601 cr

HUL selling Pureit: HUL has been offloading non-core brands for a while now, as it wants to focus on core areas

HUL to sell Pureit; Shares of Hindustan Unilever (HUL) rose nearly 3 per cent to Rs 2,691.95 on the BSE in Tuesday's intraday trade. The rise in HUL share price came after the company said it would sell its two-decade old water purification business, Pureit, to AO Smith for an enterprise value of Rs 601 crore.

HUL, in exchange filing post market hours on Monday, said the Board has approved the sale and divestment of company's water purification business carried under the brand 'Pureit' including the trademarks, copyrights and other intellectual properties and identified assets and contracts associated with the business, as a going concern on slump sale basis, to AO Smith India Water Products Private Limited for an enterprise value of $72 million (Rs 601 crore).

The transaction is subject to customary closing conditions, and HUL will continue to manage the business until the completion of the transaction, the company said.

In the financial year 2024 (FY24), the turnover of HUL's water purification business stood at Rs 293 crore, which is less than one per cent of the FMCG giant's total turnover. HUL has been offloading non-core brands for a while now, as it wants to focus on core areas. It had sold Annapurna and Captain Cook last year.

Meanwhile, shares of HUL, the fast moving consumer goods (FMCG) giant, had hit a 52-week high of Rs 2,723.90 on June 5, 2024. Moreover, thus far in financial year 2024-25 (FY25), HUL share price has outperformed the market by surging 19 per cent as compared to nearly 10 per cent rise in the BSE Sensex.

According to analysts at Emkay Global Financial Services, the FMCG sector's valuations have seen re-rating post Q4 results, with positive management commentary regarding the demand outlook and expectations of pro-consumption Budget 2024.

FMCG firms, it said, have rightfully enhanced execution, wherein distribution and brand communication get a boost. The brokerage firm said it prefers HUL primarily due to the expected improvement in external settings.

Motilal Oswal Financial Services (MOFSL), meanwhile, believes that HUL's volume growth has bottomed out and expects a gradual volume recovery in FY25. HUL's wide product basket and presence across price segments should help the company achieve a steady growth recovery.

"HUL has consistently reinforced the fundamental factors that have contributed to its success in India. They include: (a) embracing technology to gather valuable data and enable informed decision-making, (b) adopting the ‘Winning in Many Indias’ (WiMI) strategy that emphasizes decentralization and tailored approaches, (c) identifying emerging trends and proactively investing in them, (d) reinvesting cost savings into the business, and (e) showcasing exceptional execution capabilities that have led to consistent earnings growth," the brokerage firm said after the release of HUL's annual report. MOFSL maintains a 'Buy' rating on the stock with a target price of Rs 2,900 (55x P/E FY26).