IGI Logo

Upon demerger of EBITDA loss making Consumer Products Business, market would 1) rerate Building Products Business valuation multiple and 2) ascribe positive value to the loss - making consumer business

HINDWARE’ Consumer Products Business has been loss making at the EBITDA level (FY24/9MFY25 EBITDA loss of INR 125/139Mn) and has always been a drag on the core financials of HINDWARE. Separating the 2 businesses is a welcome development and would most likely rerate the Building Products Business. Additionally, Consumer Products Business, despite being loss making at EBITDA level, may be ascribed a positive value by the market as management’s focus on kitchen appliances sub segment may show path to profitability. Our proforma workings below show value unlocking of up to INR ~4,750Mn (INR 57/sh); half of it driven by rerating of Building Products Business and half of it from explicit value ascribed to loss-making Consumer Products Business.

Initiatives to turn around Building Products Business also underway under the new leadership

The Building Products Business of HINDWARE (86% of TTM revenues) has been struggling, with revenue growth volatility owing to internal restructuring over the past two years. However, turnaround initiatives are underway, led by newly appointed CEO Nirupam Sahay, who brings 30+ years of leadership experience in driving profitable growth across marquee companies. His strategy includes a refreshed go-tomarket approach, product portfolio revitalization, brand-strengthening efforts, and a focus on high-margin products, which would most likely start producing results (profitable growth) over the next 3-4 quarters

Our View:

We continue to maintain BUY rating on the stock with a TP of 253/sh (23x FY27E EPS). We have not revised our estimates and valuation as of now. We would factor in the benefits of the composite scheme of demerger i.e. 1) revising higher the valuation multiple of Building Products Business and 2) ascribing a positive value to the Consumer Products Business, as proposed demerger scheme receives the requisite regulatory approvals. Given the recent interest of large business conglomerates (Birla/Adani groups) in the building materials sector and adjacencies (paints, wires and cables, cement), we don’t rule out any consolidation in the industry

Event Update: Composite scheme of demerger announced - Consumer and Building products businesses to be separated

HINDWARE board approved a composite scheme of demerger on Mar 27, 2025, the contours of which are as follows: 1) Consumer Products Business (kitchen appliance, consumer appliance, fixtures and fitting, offline/online retail, water heaters) will be demerged into a newly formed subsidiary HHIL Ltd and 2) amalgamation of the remaining assets of HINDWARE into other subsidiary, Hindware Ltd, which is the Building Products Business entity (comprising of sanitaryware, faucets, tiles, other bath fittings, pipes and related building products).

As per the scheme, the Building Products Business will be hosted under Hindware Ltd, while the Consumer Products Business will be hosted under HHIL, both separate and distinct companies. Shares of Hindware Ltd and HHIL will be listed on the stock exchanges while HINDWARE and consequently its shares will cease to exist as a result of the amalgamation of its residual assets (after demerging the Consumer Products Business into HHIL) into Hindware Ltd. It could take 6+ months for all regulatory approvals to be completed.

For Detailed Report With Disclaimer Visit. https://choicebroking.in/disclaimer
SEBI Registration no.: INZ 000160131