Hindustan Unilever Navigates GST Shifts and Monsoon Challenges in Q2 FY26

Hindustan Unilever Limited (HUL), India's FMCG behemoth, recently unveiled its performance for the September Quarter of 2025 (Q2 FY26), reflecting a period of strategic adjustments amidst external headwinds. The company reported a consolidated Underlying Sales Growth (USG) of 2% and a flat Underlying Volume Growth (UVG). Turnover for the quarter stood at ₹16,061 crore, with Profit After Tax (PAT) growing by 4% to ₹2,694 crore. However, PAT before exceptional items (PAT bei) saw a 4% decline, and the EBITDA margin compressed by 90 basis points year-on-year to 23.2% due to increased investments.

The quarter's narrative was significantly shaped by the government's GST reforms, which saw approximately 40% of HUL's portfolio transition to the 5% GST slab. While these reforms are viewed as a long-term positive, expected to boost disposable income and consumer sentiment, they introduced transitory disruptions. Trade de-stocking, delayed consumer buying, and pricing volatility impacted sales. Additionally, prolonged and intense monsoon conditions across several regions disrupted supply chains and dampened demand, particularly affecting the Ice Cream business. Despite these challenges, HUL demonstrated agility by implementing pricing and grammage interventions across over 1,200 SKUs, ensuring the full GST benefit was passed on to consumers.

Segment-wise, Home Care, HUL's largest segment, delivered a mid-single-digit volume growth, primarily driven by its liquids portfolio, though USG remained flat due to price reductions from previous quarters. Beauty & Wellbeing recorded a 5% USG, buoyed by strong performances in Skin Care and Health & Wellbeing, with OZiva showing triple-digit growth. However, Hair Care's turnover declined year-on-year due to the GST rate rationalisation. Personal Care's turnover was flat, impacted by GST changes, despite competitive performance in premium soaps. The Foods segment delivered a 3% USG with low-single-digit UVG, with Beverages showing double-digit growth, while Ice Cream turnover declined due to monsoons and GST transition.

Management outlined four key priorities to drive volume-led profitable growth: radical segmentation of consumers, creating modern and desirable brands, accelerating the future-proofing of marketing and sales capabilities, and focusing on fewer, bigger bets in high-growth demand spaces. The company is also progressing with the demerger of its Ice Cream business, expected to be completed by December 2025, with listing by Q4 FY26. This move is anticipated to improve the reported EBITDA margin by 50-60 basis points, as the Ice Cream segment typically operates at lower margins than the company average.

Looking ahead, HUL anticipates normal trading conditions to resume by early November, post the GST-related disruptions. The management expects the second half of FY'26 to outperform the first half, with low-single-digit price growth if commodity prices remain stable. The company's commitment to strategic investments and market development, coupled with a supportive macroeconomic environment, positions it for sustained volume-led growth in the mid-to-long term. The interim dividend of ₹19 per share declared by the Board underscores confidence in future performance and shareholder returns.