HUL demerger: Kwality Wall's stock continues to 'melt' further post discounted listing - Buy, sell or hold?

Shares of Kwality Wall's (India) Ltd (KWIL) continued to reel under selling pressure on Tuesday, slipping 5 per cent to settle at Rs 28.04, a day after a muted stock market debut. The ice cream maker had listed at Rs 29.80 apiece on NSE, reflecting a 25.87 per cent discount to the discovery price of Rs 40.20 per share.

Kwality Wall's demerger from HUL

The listing follows the demerger of the ice cream business from FMCG major Hindustan Unilever Ltd (HUL). HUL's stock price had adjusted for the demerger in December last year.

In November 2024, HUL's board approved the demerger of its ice cream business, which houses brands such as 'Kwality Wall's', 'Cornetto' and 'Magnum'. The National Company Law Tribunal (NCLT) approved the scheme on October 30.

The ice cream division accounts for around 3 per cent of HUL's annual turnover, contributing approximately Rs 1,800 crore to its total revenue.

Under the approved scheme, the share entitlement ratio was fixed at 1:1, meaning every HUL shareholder received one share of Kwality Wall's for each HUL share held as on the record date. The record date to determine eligible shareholders was December 5, while the allotment date was set as December 29. Shareholders whose names appeared in the register of members as on the record date became entitled to receive shares of the demerged entity.

Expert view: What lies ahead?

A few market experts remain divided on the prospects of the standalone ice cream business.

Kranthi Bathini, Equity Strategist at WealthMills Securities, said that given the strong consumption story for HUL and the discretionary spending theme for Kwality Wall's, supported by rising incomes and evolving consumer preferences, the outlook remains positive. "The company is expected to do well. Investors with a long-term view can consider buying Kwality Wall's stock," he added.

In contrast, market veteran Arun Kejriwal struck a cautious note. "At Hindustan Unilever, the first is to view it as a company where all its units were doing well, except the ice cream business. So, they decided to carve it out, demerge it and make it a separate entity. Second, the markets were never quite comfortable with this business. So yes, the listing has happened, but this is not a stock that is going to make you money in the near term whatsoever."