HUL's ice cream biz demerger: What's in it for investors? Nuvama decodes

Hindustan Unilever (HUL) shares were trading higher on Wednesday after the fast-moving consumer goods (FMCG) major announced December 5, 2025 as the record date for the demerger of its ice cream business, Kwality Wall’s (KWIL).

 

At 12:38 PM, HUL’s share price was up 1.69 per cent at ₹2,444.3 per share on the BSE. In comparison, the BSE Sensex was up 0.44 per cent at 85,048.04.

Ice cream business valuation

Nuvama Institutional Equities believes HUL’s ice cream business, given its lower margins and smaller scale, will likely be valued at a lower multiple than the core franchise. It estimates that the ice cream business accounts for roughly ₹50–55 of HUL's current share price (around ₹2,400). HUL currently trades at about 9 times its enterprise value to sales (EV/sales).

 

Analysts peg Kwality Wall’s (India) market capitalisation in the range of ₹1,200 crore–₹1,500 crore. Nuvama has maintained a ‘Buy’ rating on HUL with a target price of ₹3,195 per share.

How will the ice cream business demerger unlock value?

According to Nuvama, the demerger will give existing HUL shareholders direct ownership in a pure-play ice cream company with annual revenue of around ₹2,000 crore, a strong 15–20 per cent compound annual growth rate (CAGR) potential, and a portfolio of iconic brands such as Magnum, Cornetto and Kwality Wall’s.

 

The demerger will follow a mirror-image shareholding pattern at a 1:1 ratio—each HUL shareholder will receive one share of the ice cream company for every one share of HUL held.

 

Nuvama noted that the move will create a leading listed ice cream franchise in India, with a focused management team and greater flexibility to deploy strategies tailored to its distinct business model and competitive dynamics, thereby helping the business realise its full potential.

 

“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,” the brokerage said.  CATCH STOCK MARKET LIVE UPDATES TODAY

Demerger’s impact on HUL

HUL indicated during its Q2FY26 earnings call that the new ice cream entity is likely to list in Q4FY26. From Q3FY26 onwards, HUL’s results will exclude the ice cream business, which will be reported as a discontinued operation.

 

The ice cream business currently contributes about 3 per cent to HUL’s total turnover, with historical earnings before interest and tax (Ebit) margins of 5–9 per cent. Nuvama is building in a decent Q4FY26 for HUL, with a slightly muted Q3FY26 at this stage.

 

Post demerger, analysts expect HUL’s earnings before interest, tax, depreciation and amortisation (Ebitda) margin to improve by 50–60 basis points (bps). The stock has corrected about 9 per cent after muted Q2FY26 earnings, largely due to the impact of the goods and services tax (GST) transition.

 

Nuvama expects October to also be muted because of transition issues, with normalisation from November. Overall, it believes the risk-reward is attractive to play a Q4 recovery, as HUL currently trades at around 45 times FY27E earnings per share (EPS).

Ice cream industry outlook

Nuvama expects the Indian ice cream market to grow at a robust 15 per cent CAGR over 2024–2031, driven by improving cold-chain infrastructure and rapidly evolving consumer preferences.

 

This growth momentum is likely to be further supported by the reduction in the goods and services tax (GST) rate on ice cream from 18 per cent to 5 per cent, which should provide an additional boost to category growth. The tax cut is expected to accelerate the shift from unorganised to organised players, while also improving affordability for consumers.