HLL: In a transformation phase - Views on News from Equitymaster

Helping You Build Wealth With Honest Research
Since 1996. Try Now

  • MyStocks

MEMBER'S LOGINX

     
Login Failure
   
     
   
     
 
 
 
(Please do not use this option on a public machine)
 
     
 
 
 
  Sign Up | Forgot Password?  

HLL: In a transformation phase

Apr 4, 2001

India’s largest consumer products company Hindustan Level (HLL) is in focus due to its restructuring initiatives. The company is aggressively looking for venturing into other high growth markets where the penetration level is low. In a bid to boost its ice cream business HLL plans to set up 1,000 kiosks across the country. These kiosks will sell the low priced softy ice cream under the brand name of ‘Kwality Walls’. HLL aims to double the turnover from the segment to Rs 4 bn in the next three years. The marketing for softy will not be through television, but through local visibility campaign. This consumer visibility promotion will boost the volumes.

Also, as part of its restructuring exercise of pruning the overall brand portfolio to 30, HLL will focus on ‘Cornetto’ and ‘Max’ brand under the umbrella brand ‘Kwality Walls’. The company has expanded its traditional distribution system of mobile and retail vending. Its ice cream distribution network covers 150 towns, 30,000 outlets and 6,000 mobile carts. The focus will also shift more towards selling ice creams through a new niche vehicle: a nationwide chain of parlours. It has already started on test marketing ice cream parlours in Kolkata and Delhi. These parlours offer some of the international brands like Viennetta and Magnum. The company is aggressively entering the ice cream business, which has the good growth potential considering the lower penetration level.

HLL has decided to hive-off its fragrances and flavours business into a joint venture with ICI India and Quest International. The consideration is fixed at Rs 1.6 bn, which includes a premium for management control. ICI India and Quest International will together hold 51% in the joint venture, while the balance 49% will be held by HLL. The venture would, however, exclude the aroma chemicals business of HLL and the erstwhile Industrial Perfumes Ltd, which will be carried on as a division of the company. This move of HLL is in line with its decision to exit non-core businesses and focus on core brands. To add to this, its parent Unilever has also divested speciality chemical business in 1997.

HLL has also planned to phase out several of the top brands of International Bestfoods, which its parent Unilever recently acquired worldwide. International Bestfoods (IBL) is likely to merge with HLL in India. The thought behind the strategy is to avoid cannibalization of ‘Kissan Annapurna’, HLL’s flagship brand in the foods business. The brands to be de-emphasized are ‘Captain Cook’ salt and atta, ‘Skippy’ and ‘Trinka’ soft drink concentrate, ‘Tarla Dalal’ range of recipes and ‘Glucovita’ glucose D. However, leading brands from IBL stable, like ‘Knorr’ soups, ‘Brown & Polson’ custard powder and ‘Rex’ baking powder and jelly will be retained, as these do not directly compete with HLL’s own products. The company has also decided to pass on the excise duty exemption on processed foods based on fruits and vegetables to the consumers. This would help the company in generating good volume growth in the competitive food segment.

Modern Foods, which the company acquired last year, is also undergoing a turnaround process. HLL’s comprehensive restructuring strategy included a focus on sales, quality and employee training. These strategies have been successful in arresting the decline in sales, which has been doubled in the current year compared to the previous year.

At the current market price of Rs 217, HLL is trading at a P/E of 30 times on December ’01 projected earnings and a market cap to sales ratio of 4.2 times. The company’s restructuring exercise is likely to yield positive results, which will fuel its bottomline growth in the current year. Revenues are also expected to grow in the range of 6-7% with its focus on promoting key 30 brands.

Equitymaster requests your view! Post a comment on "HLL: In a transformation phase". Click here!

  

More Views on News

HUL Announces Quarterly Results (2QFY22); Net Profit Up 10.5% (Quarterly Result Update)

Oct 20, 2021 | Updated on Oct 20, 2021

For the quarter ended September 2021, HUL has posted a net profit of Rs 22 bn (up 10.5% YoY). Sales on the other hand came in at Rs 130 bn (up 11.7% YoY). Read on for a complete analysis of HUL's quarterly results.

HUL's Marketcap Tops Rs 6 Tn. Key Factors Driving the Stock (Views On News)

Aug 21, 2021

HUL became the fifth Indian company to achieve the milestone of a Rs 6-tn market capitalisation.

HUL 2020-21 Annual Report Analysis (Annual Result Update)

Jul 26, 2021 | Updated on Jul 26, 2021

Here's an analysis of the annual report of HUL for 2020-21. It includes a full income statement, balance sheet and cash flow analysis of HUL. Also includes updates on the valuation of HUL.

What Happens if ITC Hives off ITC Infotech? (Views On News)

Nov 20, 2021

The cigarette to hotel conglomerate is reportedly mulling the demerger of its software business at a valuation of around Rs 250 bn.

What Sparked an 8% Rally in ITC Shares Today? (Views On News)

Sep 16, 2021

ITC did not participate in the rally after the second wave and continued to underperform its peers. Is this about to change?

More Views on News

Most Popular

This Multibagger Stock Zooms 20% After Dolly Khanna Buys Stake (Views On News)

Nov 24, 2021

Shares of this edible oil company zoomed over 50% in three days after ace investor bought around 1% stake.

Infosys vs TCS: Which is Better? (Views On News)

Nov 26, 2021

In the post pandemic era, the top two IT companies in India are fighting to capture the growing demand for IT.

How to Hit Rs 100 Crore Wealth in Your Lifetime (Equitymaster Wealth)

Nov 15, 2021

This is how you can achieve the ambitious goal of a net worth of Rs 100 crore.

Don't Sell these Stocks if the Market Falls (Profit Hunter)

Nov 17, 2021

These are the 3 types of stocks that you should not sell in a market crash.

MobiKwik IPO Opens for Subscription Soon. Key Things to Know Before Subscribing. (Views On News)

Nov 20, 2021

The Rs 19 bn issue is set to hit the market soon.

More

Become A Smarter Investor
In Just 5 Minutes

Multibagger Stock Guide 2022
Get our special report Multibagger Stocks Guide (2022 Edition) Now!
We will never sell or rent your email id.
Please read our Terms

HUL SHARE PRICE


Nov 26, 2021 (Close)

TRACK HUL

HUL - PEE CEE COSM COMPARISON

COMPARE HUL WITH

MARKET STATS