Detailed Rationale

Crisil Ratings has reaffirmed its ‘Crisil AAA/Stable’ rating on the long-term bank facilities of Hindustan Unilever Ltd (HUL). Crisil Ratings has also assigned its ‘Crisil A1+’ rating to the short-term bank facilities of the company.

 

The ratings continue to reflect the market leadership of HUL across segments in the fast-moving consumer goods (FMCG) industry, and its diversified revenue profile, supported by an extensive distribution network. The financial risk profile remains healthy, driven by strong cash accrual, negligible debt and robust liquidity. These strengths are partially offset by intensifying competition and susceptibility to volatility in raw material prices in the FMCG industry.

 

HUL should sustain its healthy operating performance, led by strong market position across product segments and market share gains supported by performance across the core domestic portfolios. Operating revenue grew at modest levels of ~2% on-year in fiscal 2025, driven by growth in the home care and beauty and wellbeing segments. Overall growth was modest due to subdued urban market demand, especially for mass category on account of high inflation, while rural market saw recovery with normal monsoons and increased disposable income. In fiscal 2026, growth is to be led by volumes with projected gradual recovery in urban demand, while rural shall remain steady with above-normal monsoon expectations. Pricing growth will remain modest given easing commodity price inflation. Further, the growth shall be supported by various measures such as repo rate cuts, income tax relief and goods and services tax rationalisation measures undertaken by the government providing more disposable income in the hands of customers. Strong product portfolio, distribution channel and market share gains should help HUL sustain its industry leading performance over the medium term. Consolidated operating margin was 23.5% in fiscal 2025 and is expected to see modest expansion in the mid-to-long term with lower crude-linked commodity prices, resulting in healthy net cash accrual. These strengths are partially offset by susceptibility to intense competition and fluctuations in raw material prices.

 

Crisil Ratings believes HUL will sustain its healthy business and financial risk profiles because of its focused effort on brand strengthening and building premium offerings, increased advertising, product innovation and distribution expansion. The business risk profile is also backed by robust distribution network, healthy product mix with over 50 brands and strong supply chain efficiencies.

Analytical Approach

Crisil Ratings has combined the business and financial risk profiles of HUL and all its direct and wholly owned subsidiaries, collectively referred to as HUL, as they are all involved in the same business. Crisil Ratings has also amortised the goodwill and other intangible assets arising from the mergers or acquisitions made in fiscal 2021 over a period of 10 fiscals starting 2021.

 

Please refer Annexure - List of Entities Consolidated, which captures the list of entities considered and their analytical treatment of consolidation.

Key Rating Drivers - Strengths 

Leading market position across categories in the FMCG industry: HUL is the largest FMCG company in India, with market leadership across product segments. The company has over 19 brands with above Rs 1,000 crore in annual sales. In terms of market share, its brands hold the top two spots in most categories where they operate. The consolidated product portfolio includes home care (36% revenue contribution in fiscal 2025), beauty and wellbeing (21%), personal care (15%), foods and refreshments (24%) and others (3%). The brands have high visibility and maintained leadership over decades, backed by an extensive distribution network and strong advertising and marketing support. HUL has been leveraging its distribution strengths to adapt its channel strategy for its products and market segments.

 

The synergies from the GlaxoSmithKline Consumer Healthcare Ltd (GSKCH) merger (assets of the Horlicks brand and intellectual property rights of brands such as Boost, Maltova and Viva) continue to enhance the market position of HUL in the foods and refreshment segment and will increase revenue diversity over the medium term. Furthermore, to bring more focus to its portfolio in the beauty and personal care business, the company has transitioned to two separate businesses – beauty and wellbeing and personal care from April 1, 2024. Acquisition of 90.5% in Uprising Science Pvt Ltd (Minimalist brand) involved in the business of hair care and skin care products is another step in the company’s efforts towards striving for higher growth.

 

Strong innovation and premiumisation strategy along with benefit of inorganic growth through acquisitions will drive healthy growth and sustenance of market position over the medium term.

 

Robust financial risk profile: On a consolidated basis, the financial risk profile is robust, supported by strong operating cash flow, nil gearing, largely unutilised bank lines and strong networth. Liquidity is ample with cash and bank balance and investments of over Rs 11,300 crore as on March 31, 2025. Dividend payout has typically been high, which increased to 117% of profit in fiscal 2025 (including special dividend), and averaged around 103% of profit (including special dividend) in the past five years. Any substantial payout remains a key monitorable.

 

Healthy operating efficiency: HUL has high operating efficiency because of its strong distribution network, geographically diversified production facilities and strong linkages with the parent, Unilever Plc (Unilever; rated ‘A+/Stable/A-1' by S&P Global Ratings). Owing to a healthy mix of owned factories and outsourced production facilities across the country, HUL saves significantly on freight costs. The supply chain has been strengthened through cost saving and inventory management using artificial intelligence and other digital initiatives. The company has handheld-based selling systems across distributors.

 

Crisil Ratings believes strong pricing power, cost saving, significant focus on new distribution channel, digitalisation and asset-light business model will help HUL sustain its industry-leading operating margin and return on capital employed over the medium term.

Key Rating Drivers - Weaknesses 

Susceptibility to intense competition and fluctuations in raw material prices: The FMCG industry in India has organised as well as unorganised players across segments and products. HUL continues to face intense competition with the entry of players, including multinationals, in segments such as soaps and detergents, personal care products and packaged foods. Further, the margin remains susceptible to change in prices of raw materials such as palm oil, lineary alkyl benzene, crude and its derivatives, wheat, sugar, amongst others, which remain volatile.

Liquidity: Superior

Liquidity should remain robust, supported by healthy cash accrual. As on March 31, 2025, cash in hand/bank and investments in marketable securities stood over Rs 11,300 crore along with negligibly utilised fund-based bank limit. Net cash accrual (post dividend payout) is expected to be sufficient for working capital, capital expenditure (capex) and inorganic growth requirements.

 

ESG profile

HUL’s environmental, social, and governance (ESG) profile supports its strong credit risk profile.

 

The FMCG sector has moderate environmental and social impact, driven by its raw material sourcing strategies, waste-intensive process, and direct impact on the health and wellbeing of its customers. HUL has continuously focused on mitigating its environmental and social risks.

 

Key ESG highlights:

• In line with its target to achieve net-zero GHG emissions across its value chain by 2039, aligned with the Science Based Targets initiative, the company’s scope 1 and 2 emissions and energy consumption intensities demonstrated a declining trend in fiscal 2025
• To support its climate transition objectives, HUL undertook several initiatives to increase renewable energy usage, including procurement through onsite solar power plants, purchase of International Renewable Energy Certificates (IRECs), and investments in offsite wind projects. Notably, in fiscal 2025, renewables accounted for ~97% of the company’s total energy mix, the highest among its listed peers, and nearly 50% of its manufacturing units were fully powered by renewable energy
• The company has also set a target to achieve 100% sustainable sourcing for its key agricultural inputs. In fiscal 2025, ~58% of its key agricultural inputs were sourced sustainably
• On the social front, the share of female employees continued to remain higher-than-the-peer-average at ~30%. %. Further, the company had ~42% gender diversity in managerial positions
• HUL has implemented several initiatives to enhance employee well-being and retention, including mental well-being programs, dynamic talent allocation, cross-functional mobility, and flexible work arrangements. These efforts are reflected in a decline in the company’s attrition rate among the permanent workforce, which fell from ~13% in fiscal 2023 to ~9% in fiscal 2025, lower than the peer average
• With respect to workplace safety, no fatalities were reported among the workforce in fiscal 2025 (a trend that has remained consistent over the past three fiscal years). Additionally, a relatively high share of workforce had been trained on health and safety measures (~79% employees and ~86% workers) as compared to peers
• HUL’s governance structure is characterized by 56% of its Board comprising of independent directors, a ~100% investor complaint redressal rate, and extensive financial disclosures. Further, it has also formed an ESG committee of the Board to oversee and monitor ESG priorities

 

There is growing importance of ESG among investors and lenders. HUL’s commitment to ESG will play a key role in enhancing stakeholder confidence, given the high shareholding by foreign portfolio investors and access to both domestic and foreign capital markets.

Outlook: Stable

HUL will maintain its leading market position in various product categories and healthy operating efficiency. The financial risk profile should remain healthy, supported by adequate cash flow and healthy capital structure.

Rating sensitivity factors

Downward factors:

• Erosion in market share by 10% in key product segments and operating margin dropping below 15%.
• Large, debt-funded capex or acquisition weakening the financial risk profile.

About the Company

HUL is India’s largest FMCG company and has a diverse product portfolio, including soaps and detergents, personal care products and food and beverages. The company owns factories and has many outsourced production facilities across the country.

 

In the 1990s, HUL opted for growth through acquisitions. In 1998, the group company Pond's India Ltd was merged with HUL. The company also acquired the Lakme brand, its factories and 50% stake of Lakme Ltd in Lakme Lever Ltd in 2008. In April 2016, HUL acquired Kerala-based hair oil brand, Indulekha, which has a strong presence in Kerala, Tamil Nadu, Karnataka and Maharashtra. HUL has bridged the gap in its product portfolio through a series of acquisitions in the past, such as Aditya Milk (2018), GSKCH (2020), and VWash (2020). In January 2023, HUL acquired 51% stake (on a fully diluted basis) of Zywie Ventures (OZiva) and 19.8% stake (on a fully diluted basis) in Nutrionalab (Wellbeing Nutrition) to enter the health and wellbeing direct to consumer space. In January 2024, HUL entered transaction documents to acquire 27.73% stake in Transition Sustainable Energy Services One Pvt Ltd (special purpose vehicle) incorporated by Brookfield to enhance renewable based power consumption and meet the net zero emissions commitment by 2030. In April 2025, it acquired 90.5% stake in Minimalist.

Key financials (consolidated)^

As on/for the period ended March 31		2025	2024
Operating income	Rs crore	63,121	61,896
Reported profit after tax (PAT)	Rs crore	10,671	10,282
PAT margin	%	16.9	16.6
Debt/tangible networth*	Times	0	0
Adjusted interest coverage*	Times	58.74	67.4

^Reported numbers

*Crisil Ratings-adjusted numbers

Above calculations exclude lease liabilities from debt figures

Any other information: Not Applicable

Annexure – List of entities consolidated

Names of entities consolidated	Extent of consolidation	Rationale for consolidation
Hindustan Unilever Ltd	100.00%	Parent company
Unilever India Exports Ltd	100.00%	Wholly owned subsidiary
Lakme Lever Pvt Ltd	100.00%	Wholly owned subsidiary
Unilever Nepal Ltd	80.00%	Subsidiary
Darfasha Estates Pvt Ltd	100.00%	Wholly owned subsidiary
Levers Associated Trust Ltd	100.00%	Wholly owned subsidiary
Levindra Trust Ltd	100.00%	Wholly owned subsidiary
HindleverTrust Ltd	100.00%	Wholly owned subsidiary
Hindustan Unilever Foundation#	76.0%	Wholly owned subsidiary
Unilever India Ltd	100.00%	Wholly owned subsidiary
KwalityWall's (India) Ltd@	100.0%	Wholly owned subsidiary
Zywie Ventures Pvt Ltd*	51.0%	Subsidiary
Uprising Science Private Limited$	90.5%	Subsidiary
Nutritionalab Pvt Ltd*	19.8%	Joint Venture

# 24% shareholding of Hindustan Unilever Foundation is held by Unilever India Exports Ltd

*On a fully diluted basis

@ On January 10, 2025, the company has incorporated a wholly-owned subsidiary, Kwality Wall’s (India) Ltd (KWIL). HUL has decided to demerge its ice cream business into a separate listed entity through KWIL, which will have an authorised share capital of Rs 250 crore and will handle the manufacture, marketing, distribution and sale of ice creams, frozen desserts and other frozen foods, in line with Securities and Exchange Board of India regulations, with HUL owning 100% of KWIL at the time of incorporation

$ On 21st April, 2025 Hindustan Unilever Limited acquired 90.5% stake in Uprising Science Private Limited