Last week, Bloomberg reported that Unilever, fresh from spinning off its ice-cream division in December 2025, is now exploring separating its entire foods business. McCormick & Co., the American spice giant, is in active talks to acquire that division in a deal that could value it at over $30 billion.
For Hindustan Unilever Ltd. (HUL), the separation of the foods business could be more unsettling than the mere portfolio rationalisation it is being touted as. The global parent retreating from categories like tea, condiments, and basic nutrition that define everyday life for millions of Indian consumers and that are the Indian subsidiary’s backbone, must be quite disconcerting.
The move places in perspective a curious paradox. HUL commands around 50 times forward earnings on the BSE while its parent, Unilever, trades at roughly 15-17 times. Strip HUL out of Unilever’s consolidated books, and the rest of the business would be valued even lower. The India unit is propping up the global parent’s price-to-earnings ratio.
Unilever isn’t alone in this. Nestle India Ltd. typically trades at a significant premium of 70-80X, compared to Nestle SA, which trades around 20–25X, making the Indian subsidiary a disproportionate jewel in the Swiss group’s crown. Nor is this outperformance a recent blip: at its peak, Nestle India grew sales at nearly 16%, eight times the pace of the Swiss group’s European business. Similarly, between 2021 and 2023, HUL delivered double-digit growth, significantly outpacing Unilever’s developed markets, which grew in low single digits.
Despite that, the structure of the relationship has barely changed since the 1990s. Indian subsidiaries are obliged to remit royalties upward, await innovation pipelines designed in European headquarters, and seek boardroom permission from a distance. HUL increased its royalty and service fees from 2.65% to 3.45% of turnover in a staggered manner, which analysts estimated would have a modest negative impact on earnings. Nestle India too proposed raising its royalty from 4.5% to 5.25% of net sales. But a majority of minority shareholders rejected the proposal in May 2024, marking a rare instance of shareholder pushback against an MNC parent.
The royalty is the most visible symbol of a deeper problem: the 20th-century subsidiary model is at odds with 21st-century competitive realities. Indian D2C upstarts like Minimalist, the Jaipur-based skincare startup, can go from garage to national scale in months without paying royalties to overseas headquarters or waiting for global innovation cycles. They are eating into MNC margins in precisely the categories where these companies thought they were unassailable. This is why HUL eventually had to acquire Minimalist in early 2025 rather than outcompete it.
There is global precedent for what structural freedom can achieve. In 2016, Yum! Brands spun off its China business and listed it on the New York Stock Exchange as a fully-independent entity with its own board and capital structure, retaining only a commercial trademark licence. Yum China Holdings Inc. subsequently posted record revenues and operating profit.
So why hasn’t this happened in India? Two reasons. First, the India premium is a useful valuation prop: as long as HUL trades at 50 times on the BSE, Unilever can point to it in investor presentations. Spin it free, and that trump card vanishes. Second, delisting in India is expensive and adversarial. Regulations require the parent to let minority shareholders name their own exit price through a reverse book-building process. When UK-based chemicals group Ineos Styrolution tried to delist at ₹480 per share in 2020, the deal collapsed as shareholders bid the price up to ₹1,100.
However, changes in the business environment may drive MNCs to consider freeing the India business. The India growth engine is itself slowing: HUL’s underlying revenue grew just 6% in Q3 FY26, with core profit up only 1% year-on-year once the ice-cream demerger is stripped out. Nestle India has seen similar deceleration. The outperformance that made the subsidiary model attractive is under pressure precisely because subsidiaries lack the agility to fight local wars without global baggage.
Unilever’s proposed exit from foods in the West is, paradoxically, an argument for HUL to double down on those categories in India. But it can only do so if it has the freedom and capital to act, the kind of freedom that only a genuine structural separation, of the sort Yum! Brands gave its China business in 2016, can provide.
In Company Outsider, Sundeep Khanna distills more than three decades of his experience writing on India Inc. into a thousand words of context and insights that few can bring to the table. Want this newsletter delivered in your inbox? Subscribe here.