Hindustan Unilever Shares Zoomed Over 3% After Announcing Divestment of Pureit

In a strategic move to sharpen its focus on core categories, Hindustan Unilever Ltd. (HUL) announced the sale of its water purification business, operated under the popular brand Pureit, to A. O. Smith India Water Products Private Limited on July 15, 2024. The deal encompasses the entire Pureit brand, including trademarks, copyrights, and other intellectual properties. Additionally, identified assets and contracts associated with the ongoing business will be transferred to A. O. Smith on a slump sale basis.

The transaction hinges on the fulfilment of customary closing conditions outlined in the official agreements. Notably, this divestiture does not constitute a Scheme of Arrangement, a legal process for corporate restructuring. Instead, HUL and A. O. Smith will execute a Business Transfer Agreement to finalise the sale. It’s important to note that the size of the water purification business falls below the threshold limits defined as an “Undertaking” under Section 180(1)(a) of the Companies Act, 2013.

The timeline for completing the sale is estimated at three months, subject to the fulfilment of the terms and conditions outlined in the transaction documents. The agreements themselves will determine any extensions beyond this timeframe.

Financially, the deal has an enterprise value of USD 72 million, which translates to approximately ₹601 crore. This consideration is subject to permissible adjustments as stipulated in the transaction documents and will be received entirely in cash by HUL.

This divestment signifies HUL’s strategic shift towards a more streamlined focus on its core business segments. While Pureit has provided essential water purification solutions to millions of Indian consumers, HUL believes this move will allow them to concentrate resources and further strengthen their position in their core categories. Conversely, A. O. Smith, a leading global water technology company, is poised to benefit from Pureit’s strong brand recognition, established distribution channels, and customer base, solidifying their presence in the Indian market.

On July 16, 2024, Hindustan Unilever shares opened at ₹2,620.65 and touched the day high of ₹2,724.95 at 12:25 PM

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