Shares of Kwality Wall are down 5% after a tepid debut on Monday; drops 30% in two sessions

Shares of Kwality Wall (India) fell 5% to hit the day’s low of Rs 27.95 on the NSE on the second day of listing on the stock exchanges. The stock is now down 30% from its debut price of Rs 40.20 post-split.The shares were sold relentlessly, with over 3 crore shares changing hands on the NSE around 1.40 pm.

Kwality Wall, which was demerged from FMCG giant Hindustan Unilever Ltd (HUL), was quoted at Rs 29.80 on Monday, implying a 26% discount to its ex-demerger price of Rs 40.20. Also read: Infosys, Tata Steel among 11 stocks with EPS CAGR potential of up to 106%

Kwality Wall operated HUL’s ice cream business and was spun off to unlock the value of that business. The listing comes after HUL received approval from both BSE and NSE for 2,34,95,91,262 shares of the standalone entity, marking the formal culmination of one of the company’s most significant portfolio restructurings in recent years.

The divestiture became effective on December 1 last year, with December 5 set as the record date to determine eligible shareholders. Under the approved scheme, investors who owned HUL shares as of that date received one share of Kwality Wall’s for every share held, paving the way for India’s first pure-play listed ice cream company to enter the public markets.

Also read: Mutual funds cut stakes in 9 out of 10 IT stocks, but Rs 4 lakh crore still in play. In a separate stock exchange filing earlier today, the company said The Magnum Ice Cream Company HoldCo 1 Netherlands BV has launched an open offer to acquire up to 26% of the company’s voting share capital. The offer price has been fixed at Rs 21.33 per share, with Kotak Mahindra Capital Company Limited appointed as manager of the open offer.

Institutional investor Life Insurance Corporation of India (LIC) has acquired a 6.62% stake (Rs 15.56 crore) in the company.

Domestic brokerage estimates had earlier indicated a potential valuation of Rs 50-55 per share, reflecting the seasonal nature of the category and relatively lower margin profile. While a reduction in VAT on ice cream from 18% to 5% is expected to support affordability and demand, the company continues to face challenges related to seasonality and profitability.

SBI Securities remains ‘neutral’ on the stock.

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