Mumbai: Packaged consumer goods company Hindustan Unilever Ltd (HUL) on Monday announced the sale of its water purification business Pureit in India to A. O. Smith Corp. at an enterprise value of $72 million or ₹601 crore.
This is part of a larger deal that saw A.O. Smith purchase the Pureit business in south Asia from HUL parent Unilever for approximately $120 million.
Pureit was first launched in Chennai in 2004—it offers a broad range of residential water purification solutions, primarily in India.
The acquisition of Pureit is projected to close by the end of 2024. The transaction is subject to customary closing conditions, and HUL will continue to manage the business until the completion of the transaction, the consumer goods major said in a filing with the exchanges Monday.
In FY24, HUL said the water purification business reported a turnover of ₹293 crore, less than 1% of HUL’s turnover in the same period. The water purification business of the company is part of the overall homecare business and its net worth is not separately tracked by the company, HUL said in its filing.
“A. O. Smith India Water Products Pvt. Ltd is the buyer entity involved in the transaction. It is a subsidiary of A. O. Smith Corp., USA. The proposed transaction is to be undertaken by way of a slump sale through a business transfer agreement between the company and A. O. Smith India Water Products Pvt. Ltd,” according to HUL’s filing.
‘Move in line with company’s strategic intent to focus on core categories’
Meanwhile, Rohit Jawa, CEO & managing director of HUL, said the move is in line with the company’s “strategic intent” to focus sharply on its core categories. “Pureit provides essential water purification solutions to millions of loyal consumers, and I am confident the brand will thrive further under the ownership of A. O. Smith,” Jawa said.
The move follow’s HUL’s decision to undertake sale of its non-core brands and businesses to focus on categories such as beauty and personal care, food and refreshment and home care products.
In February last year, Hindustan Unilever Ltd announced the sale of its atta and salt business sold under brands ‘Annapurna’ and ‘Captain Cook’ to Uma Global Foods Pte Ltd, and Uma Consumer Products Pvt. Ltd subsidiaries of Reactivate Brands International, a Singapore-headquartered company and an affiliate of CSAW Aqbator Pte Ltd (Singapore).
In fiscal 2024, the company reported a turnover of ₹59,579 crore with a profit of ₹10,114 crore. In fiscal 2024, its home care business reported segment revenue of ₹21,900 crore.
Those tracking the sector said the water purification business is highly competitive with dominant players such as Eureka Forbes and Kent already in the market.
“In our view, water purification business is hyper competitive and very different from a typical FMCG kind of business; it is much more of a consumer durable kind of business,” said Abneesh Roy, Executive Director & Head of Research Committee, Nuvama Institutional Equities. “Also product differentiation is not easy and pricing is a key disruptor here. This move is in line with HUL’s strategic intent to focus sharply on core categories,” he said.
A.O. Smith India Water Products Pvt, the buyer entity involved in the transaction, is a subsidiary of A. O. Smith Corp., US, with headquarters in Milwaukee, Wisconsin and listed on the New York Stock Exchange.
The Pureit brand complements A. O. Smith’s geographic and channel presence, said Parag Kulkarni, president of A. O. Smith India Water Products Pvt Ltd.
“The Pureit team’s deep understanding of consumer needs and water treatment expertise adds tremendous strength to A. O. Smith in India, and we look forward to welcoming the Pureit team to the A. O. Smith family,” he added.
Pureit was first launched in Chennai in 2004 with the introduction of Pureit Classic. It entered the electric water purification segment in 2011.
India’s water purifier market has expanded post-pandemic. However, the category has low household penetration. “A lower penetration rate within the water purifier market suggests a promising avenue for industry stakeholders to tap into a significant segment of the population that has yet to adopt these systems,” according to the 2023 annual report of Eureka Forbes. “This untapped market potential could stem from factors like limited awareness, affordability constraints, or regional variations.”
In 2021, private equity firm Advent International signed an agreement with Shapoorji Pallonji Group to acquire a majority stake in Eureka Forbes Ltd valuing Eureka Forbes Ltd at an enterprise value of ₹4,400 crore.