Here's why Whirlpool India shares surged 11% on Friday

Shares of Whirlpool of India Ltd. surged as much as 11% after the company announced a series of strategic licensing and service agreements with its parent company.

The company has entered into five key agreements, including a long-term 30-year brand license agreement with Whirlpool Properties.

The deal grants Whirlpool India exclusive rights to use the ‘Whirlpool’ brand in India and neighbouring countries, with an option to extend it by another 10 years.

Royalty rates are set at 1%-1.5% for major domestic appliances and 3% for small domestic appliances.

The agreements include guaranteed minimum royalty payments ranging from $6-12 million, while actual royalties are expected to exceed FY2025 levels (royalty paid in FY2025: $8.2 million).

According to Kotak Institutional Equities, these royalty rates are reasonable compared with peers.

In addition, the company has signed:
2. A 10-year exclusive technology license agreement, with royalty rates of 0.60%, rising to 0.65% from April 2029.
3. A services agreement that includes an 18% markup on engineering and technical support costs until March 2029.
4. A transitional services agreement with Whirlpool Corporation.
5. An intellectual property assignment deed with Whirlpool Corporation.

Kotak’s view

These agreements will ensure long-term business continuity following the parent company’s planned stake sale.

The brokerage finds the terms reasonable and expects a smooth business transition.

Kotak has cut its EPS estimates by 6-10%, factoring in continued weakness in cooling categories and some market share loss.

It has revised its fair value to ₹1,415 (valuing the stock at 33x Dec 2027E PE) and maintains an ‘ADD’ rating.

Near-term trigger

Whirlpool Corporation has announced plans to reduce its stake in Whirlpool India from 51% to 20% through a stake sale, expected in late CY2025.
The parent company plans to use the proceeds to reduce its debt.