Hindustan Unilever Limited — Q2 FY26 earnings call

Call held 23 Oct 2025

Management summary

Hindustan Unilever Limited reported a turnover of ₹16,061 crores with 2% USG for Q2 FY26, navigating challenges from GST reforms and monsoon disruptions. Gross margins improved sequentially, but EBITDA margin saw a 90 bps dilution due to increased A&P investments. PAT grew 4% due to a one-off tax benefit, while PAT before exceptional items declined 4%. The company remains focused on volume-led growth and strategic priorities despite short-term headwinds.

Highlights

  • Turnover of ₹16,061 crores, delivering 2% Underlying Sales Growth (USG) in a challenging environment.

  • Gross Margin stood at 50.9%, an improvement of 130 bps sequentially as transitory price versus cost gap moderated.

  • Profit After Tax (PAT) grew 4% year-on-year, primarily due to a one-off positive impact from the resolution of prior years' tax matters.

  • Home Care segment delivered mid-single digit Underlying Volume Growth (UVG) on a strong base.

  • Health & Wellbeing segment maintained strong triple-digit growth trajectory, fueled by superior, science-backed products.

Concerns

  • EBITDA margin diluted by 90 bps year-on-year to 23.2% due to stepped-up investments in brands and business.

  • PAT before exceptional items declined 4%, reflecting lower EBITDA and a decline in net finance income.

  • Prolonged and intense monsoon conditions disrupted supply chains and temporarily dampened demand.

  • GST rate reforms led to transitory disruptions across trade channels and delayed consumer pantry replenishment, impacting sales during the quarter.

Key financials

  1. Turnover ₹16,061 Cr
  2. Underlying Sales Growth 2%
  3. Gross Margin 50.9%
  4. EBITDA Margin 23.2% -0.9%YoY
  5. PAT before exceptional — -4%YoY
  6. PAT — +4%YoY

What they filed

Q1 FY27: revenue up 10.1%, net profit down 3.2% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue15,926 15,556 15,190 15,757 15,919 −0%16,441 +6%16,351 +8%17,341 +10%
EBITDA3,787 3,689 3,618 3,639 3,782 −0%3,781 +2%3,837 +6%3,947 +8%
Net profit2,595 2,989 2,475 2,768 2,694 +4%6,603 +121%2,994 +21%2,680 −3%
How to read this

₹ crore, as filed. The percentage beside a figure is the change against the same quarter a year earlier — never the quarter before, which would make every seasonal business look like it collapses and booms each year.

Segment breakdown

  • Home Care
    — Underlying Volume Growth0% Underlying Sales Growth
  • Beauty & Wellbeing
    5% Underlying Sales Growth
  • Hair Care
    — Turnover Growth
  • Skin Care including Colour Cosmetics
    — Growth
  • Health & Wellbeing
    — Growth
  • Personal Care (overall)
    0% Turnover Growth
  • Skin Cleansing
    0% Turnover Growth
  • Oral Care
    — Turnover Growth
  • Foods
    3% Underlying Sales Growth— Underlying Volume Growth
  • Beverages
    — Growth
  • Tea
    — Growth
  • Coffee
    — Growth
  • Lifestyle Nutrition
    — Underlying Volume Growth
  • Packaged Foods
    — Performance
  • Ice Cream
    — Performance

Capital allocation

high confidence
  • Dividend ₹19/share (interim)
    Considering our performance in the first half of the year, the Board of Directors have declared an interim dividend of Rs 19 per share for the year ending 31st March 2026, translating to a total payout of Rs. 4,464 crores.
  • M&A Minimalist Acquisition · Integrated

    Contributing to overall scale and growth.

    Minimalist brand has delivered strong double-digit growth for the period.

    Minimalist, it will not come in USG, but it is contributing to overall, let's say the scale of the company.
  • M&A OZiva Acquisition · Integrated

    Helping grow and contribute meaningfully, especially in Health & Wellbeing.

    OZiva has delivered triple-digit growth this quarter.

    Acquisition of OZiva, a couple of years back, that's helping us grow and contribute very meaningfully.
  • Liquidity Liquidity disclosed Cash reserves reduced post special dividend payout and Minimalist acquisition.
    The year-on-year moderation in other income primarily reflects reduced cash reserves post special dividend payout and Minimalist acquisition, alongside softer interest rate trends.

Guidance & targets

Profitability

  • EBITDA Margin Profitability · near to mid-term · High confidence 22-23%
    Our current near to mid-term guidance is 22-23%, hence everything else being equal, Ice Cream demerger adds 50-60 bps to this guidance.

    — Ritesh Tiwari

  • EBITDA Margin (post Ice Cream demerger) Profitability · once Ice Cream demerger happens · High confidence 50-60 bps improvement
    Ice Cream demerger is expected to result in an improvement of 50-60 bps to the reported margin as Ice Cream business operates at a margin lower than HUL average.

    — Ritesh Tiwari

Market Conditions

  • Trading Conditions Market Conditions · starting early November · High confidence normal
    We anticipate normal trading conditions starting early November, once prices stabilise, paving the way for a gradual and sustained market recovery

    — Ritesh Tiwari

Demand

  • Disposable Income Benefits Demand · gradually · Medium confidence manifest gradually
    While the increase in disposable income is a positive structural driver, we expect its benefits to manifest gradually in the demand trajectory, rather than through an immediate acceleration.

    — Ritesh Tiwari

Pricing

  • Price Growth Pricing · if commodity prices remain stable · Medium confidence low-single digit
    If commodity prices remain where they are, we expect a low-single digit price growth.

    — Ritesh Tiwari

Growth

  • Growth of second half of financial year Growth · second half of this financial year · High confidence better than the first half
    Overall, we expect growth of second half of this financial year to be better than the first half.

    — Ritesh Tiwari

Volume Growth

  • Volume Growth Volume Growth · second half of the financial year · High confidence better outcome
    I can tell you that, A, we will see better outcome of volume growth because that's a single- minded focus.

    — Ritesh Tiwari

Demerger

  • Ice Cream Demerger Completion Demerger · Q3 FY26 · High confidence by December
    We expect to complete the demerger by December, with the listing anticipated in Quarter 4 of Financial Year 2026, subject to necessary regulatory approvals

    — Ritesh Tiwari

What to watch in Q3 FY26

GST impact normalization and market stability

early November
Current Impact continues through October, with price volatility and trade destocking.
Target Normal trading conditions and price stabilization.

Why it matters

Normalization of market conditions post-GST reforms is crucial for demand recovery and stable sales.

We anticipate normal trading conditions starting early November, once prices stabilise, paving the way for a gradual and sustained market recovery

Risks & concerns

  • Monsoon impact on supply chains and demand

    medium

    Prolonged and intense monsoon conditions across several regions disrupted supply chains and temporarily dampened demand.

    Management acknowledged

  • Transitory disruptions from GST rate reforms

    medium

    Changes led to transitory disruptions across trade channels, postponement of orders, and delayed consumer pantry replenishment.

    Management acknowledged

  • Commodity price volatility

    medium

    Commodity trends remained divergent, with inflationary pressures in Palm Oil and SMP, while Tea and Crude Oil prices trended downward.

    Management acknowledged

  • Impact of weather patterns (winter season)

    medium

    Company remains vigilant about the evolving impact of weather patterns, particularly as the winter season approaches and the effects of a prolonged monsoon play out.

    Management acknowledged

Q&A highlights

7 direct
GST impact normalization and trade support margins Direct
Going forward, we don't expect further margin impact, Vivek, coming in from GST transition. Of course, the entire GST rate reduction is cost neutral to us. It's something which Government has given change and hence, no cost implications on us.

Clarifies that while trade support impacted Q2, no further margin impact from GST transition is expected, and the rate reduction is cost-neutral.

Asked by Vivek from Jefferies

Impact of GST stimulus and populist programs on FMCG consumption Direct
Now both of these elements will be supported by this GST transformation, which Government has done. So, in our view, this will absolutely augur well for consumption. This will incentivize further our journey towards making the portfolio more premium.

Management confirms that GST reforms and increased disposable income are positive for consumption and premiumization, while populist programs are transitory.

Asked by Abneesh Roy from Nuvama

Trade-off between growth and margins for HUL's future Direct
So, as we mentioned that our outlook for margin and guidance is a range of 22 to 23. As we do the demerger of Ice Cream, everything else equal, 50 to 60 bps gets added to this number once we start reporting ex Ice Cream results. And we're very clear that as Priya mentioned that, when a choice comes between top line and bottom line, it's always competitive volume growth. That's always the first protocol.

Management prioritizes competitive volume growth over short-term margin preservation, indicating a willingness to invest, while reiterating the 22-23% margin guidance with an uplift post-demerger.

Asked by Arnab Mitra from Goldman Sachs

Reimagining core portfolio and 'fewer big bets' strategy Direct
When I was referencing fewer bigger bets, what I'm referencing is that we have the opportunity now to call out and scale a few of these bets to really develop markets. This will be based on market readiness, consumer readiness in the choices we will make of where we invest disproportionately for scale.

Explains the strategic shift towards scaling a select few high-growth opportunities to develop markets, rather than spreading investments too thin.

Asked by Mihir Shah from Nomura

Underlying volume growth if not for GST transition impact Partial
Now coming to your question on the GST impact. We estimate that this quarter, we saw overall at an aggregate HUL level, up to 2% impact, largely volume of GST transition.

Quantifies the estimated volume impact of GST transition at up to 2% for the quarter, providing context for the reported growth.

Asked by Latika from JPMorgan

E-commerce margins and strategy for highly penetrated categories Direct
We have maintained in the past as well that when modern trade came and became bigger and one of the reasons why we, as modern trade has now become bigger, we have advantage with our portfolio there because we sell a more premium portfolio in modern trade. That's what has helped us to grow modern trade pretty well over the last couple of decades. E-commerce is no different. At this stage, there's much higher amount of fragmentation on the channel.

Management acknowledges e-commerce as an investment phase, emphasizing channel-specific product design to manage profitability and reduce channel conflict, similar to their approach with modern trade.

Asked by Siddharth from CWC

Ice Cream demerger timeline and margin impact Direct
So yes, currently, where we are with the Ice Cream plans, Abneesh, we expect the demerger to happen in December quarter. And when I say demerger, which means if everything goes as per plan and with all regulatory approvals, when we declare our results for December quarter, it will be excluding Ice Cream and Ice Cream business will be shown as a discontinued business.

Provides a clear timeline for the Ice Cream demerger (December quarter) and clarifies that its exclusion will be reflected in Q3 FY26 results, with listing in Q4 FY26, impacting reported margins positively.

Asked by Abneesh Roy from Nuvama

Beauty & Wellbeing portfolio strategy (existing brands vs M&A) Direct
The team has actually done an excellent job both organically, as you mentioned, in adding innovations across the brands, both in Hair Care and in Skin Care. And we'll continue to look at appropriate bolt-on acquisitions as relevant to keep adding to our portfolio.

Confirms a dual strategy of organic innovation within existing brands and opportunistic bolt-on acquisitions to strengthen the Beauty & Wellbeing portfolio.

Asked by Nihar Jham from HSBC

2 min read 6 chapters

Detailed narrative

Q2 FY26 Performance Overview

Hindustan Unilever Limited reported a turnover of ₹16,061 crores for Q2 FY26, achieving a 2% Underlying Sales Growth. The growth was primarily price-led, influenced by carry-forward pricing in Skin Cleansing, Beverages, and Skin Care. Gross Margin stood at 50.9%, reflecting a 130 bps sequential improvement as the transitory price-versus-cost gap moderated. EBITDA margin, however, saw a 90 bps year-on-year dilution to 23.2% due to increased investments in brands and business. PAT grew 4% due to a one-off tax benefit, while PAT before exceptional items declined 4%.

Impact of GST Reforms and Market Dynamics

The recent GST rate reforms directly benefited 40% of HUL's portfolio, moving to the 5% GST slab. The company promptly passed on the entire benefit to consumers through pricing and grammage interventions across over 1,200 SKUs. However, these changes led to short-term transitory disruptions in trade channels, including destocking and delayed consumer pantry replenishment, impacting sales during the quarter. Management estimates an overall volume impact of up to 2% due to GST transition.

Segmental Performance Highlights

Home Care, the largest segment, delivered a competitive performance with mid-single digit volume growth, though USG was flat due to prior price reductions. Beauty & Wellbeing achieved 5% USG, driven by strong performance in Skin Care (high-single digit growth) and Health & Wellbeing (triple-digit growth). Hair Care, however, saw a decline in turnover due to GST rate rationalization. Foods delivered 3% USG with low-single digit UVG, with Beverages showing double-digit growth.

Strategic Priorities Under New Leadership

The new CEO, Priya Nair, outlined four key priorities: radical consumer segmentation (Power Spenders, Premiumizers, Democratizers), elevating brand desirability through modernization and premiumization, accelerating future-proofing of capabilities (social-first demand generation, d-commerce expansion), and reshaping the portfolio by investing disproportionately in high-growth demand spaces. These priorities aim to drive volume-led profitable growth and market development.

Outlook and Demerger Update

HUL anticipates normal trading conditions to resume by early November as prices stabilize post-GST impact. The benefits of increased disposable income are expected to manifest gradually. Management projects low-single digit price growth if commodity prices remain stable. Overall growth for the second half of the financial year is expected to be better than the first half, with a better outcome for volume growth. The Ice Cream demerger is expected to be completed by December, with listing in Q4 FY26, which will add 50-60 bps to the reported EBITDA margin guidance of 22-23%.

E-commerce and Penetrated Categories Strategy

E-commerce, including quick commerce, continues to be a focus area, with the business doubling year-on-year. HUL designs channel-specific packs to ensure profitability and minimize channel conflict in this investment phase. For highly penetrated categories like Skin Cleansing and Hair Care, the strategy involves driving premiumization and market development, moving consumers from basic products to liquids, and expanding into new formats and offerings to unlock further growth.

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