Eureka Forbes Ltd Q2 FY2026 Concall Summary

Key Takeaways

• Strong quarter, broad-based growth: Revenue grew 14.9% YoY on a high base, with both products and services delivering high-teens growth, while EBITDA margin expanded 162 bps despite a 21% increase in advertising and sales promotion spends.
• Service business turnaround is real: After accelerating AMC bookings, overall service revenue grew in the high teens, driven by both AMC count growth and ASP increases from a higher mix of multiyear contracts.
• Cleaning and robotics is now a powerful second engine: The robotics range grew at a very strong pace on premium additions, and the cleaning category has emerged as a material growth driver with healthy, P&L-accretive gross margins.
• Competition is welcomed as a category builder: Management sees new entrants as validation of the category's promise, and the company has recovered and grown e-commerce share to its highest ever despite earlier competitive activity.
• What to watch next quarter: Whether the service AMC booking acceleration converts into sustained revenue growth, the pace of gross margin recovery from Q3 onwards, and any update on the tenant-issue solution expected in the next 2-3 months.

Growth Engines & Product Performance

• Water purifiers drove growth through affordability and innovation: The 2-year filter life range, aimed at lowering lifetime ownership cost, scaled up significantly and brought in nearly 70% first-time category buyers, confirming a penetration-led growth thesis. The Smart IoT range also began scaling.
• Cleaning and robotics emerged as a powerful second engine: Premium additions like the Forbes SmartClean Auto Bin and Fully Automatic Cleaning Station drove very strong growth. Pet hair cleaning functionality has become a big driver of robotics preference after learnings from the standalone pet care range.
• Multiple categories are firing simultaneously: Beyond water and robotics, softeners and air purifiers are contributing to growth, giving the company a diversified product portfolio with multiple growth engines.
• Product mix is shifting toward premium, accretive categories: Within products, robotics and cleaning grew ahead of other categories, and growth came from the premium end which carries higher gross margins and is not dilutive to overall P&L.
• The D2C vision is a digital extension of the legacy direct-sales model: The company has mounted an aggressive campaign targeting its installed base through D2C channels to cross-sell air purifiers, with encouraging early results.

Pratik Pota: "Actually, if you take a step back, Aniruddha, we believe that Eureka Forbes was actually India's first D2C company 40 years back through our direct sales channel, albeit in a very, very physical and a brick-and-mortar way."

Service Business Turnaround

• Service revenue growth accelerated to high teens: This was driven by both AMC count growth and ASP increases from a higher mix of multiyear AMCs, after interventions to improve customer experience pushed service KPIs to an all-time high.
• AMC booking growth accelerated sequentially: Service AMC booking growth, excluding filter revenue, actually accelerated over the previous quarter, and management believes it can drive double-digit bookings growth in the quarters ahead.
• The large non-AMC installed base is a service revenue opportunity: Only a small proportion of the large installed base is in the AMC offering, and the company sees immense potential to grow service revenue by tapping customers outside the AMC purview through filters and its network of market technicians.
• Edge-case management infrastructure has been overhauled: A special desk at central and regional levels, a proactive pre-emption team, a dedicated social media escalations team, and realigned partner and technician incentives have meaningfully improved escalation TATs over the last 3 months. A dedicated work stream now focuses on improving spares availability at business partner points.

Margins & Cost Management

• EBITDA margin expanded 162 bps YoY despite higher spending: Operating leverage and cost management programs delivering COGS savings offset a 21% increase in advertising and sales promotion spends.
• Gross margins were range-bound at 56.5% with a seasonal dip: The 322 bps sequential contraction was due to seasonality-led product changes, and management expects gross margins to rise again from Q3 onwards. Over a 3-year view, gross margins have remained range bound.
• Vendor contract renegotiation is an ongoing margin lever: The process started nearly a year back, triggered by good volume growth which provides negotiating leverage. Management did not quantify the proportion of vendors renegotiated, but stated gross margins will remain range bound with the last 3 years as a reference.
• IT spends have been stable while digitization has increased: Over the last 3 years, IT spends have remained stable even as the extent of digitization has gone up substantially, indicating operating leverage and efficiency gains are playing out.
• H2 operating margins could improve over H1: Operating leverage and mix could drive better margins in H2, but the key consideration is whether to push growth higher and make ahead-of-time investments.

Gaurav Khandelwal: "I think there are two main things I would call out. One, clearly the impact of operating leverage and number two, our cost programs are giving us very, very good outcome."

Channel Dynamics & Demand Environment

• All channels except traditional trade saw very strong growth: Organized trade, modern trade, e-commerce, and the direct sales channel all contributed roughly symmetrically. Traditional trade grew but less than other channels. Over a 3-year view, the share of modern trade and e-commerce has risen while direct and GT share has declined.
• The "challenging demand environment" is a macro call, not a competitive one: Management clarified the reference was to muted numbers across sectors and parts of the economy, not to competition or unorganized players. Shares remain stable.
• GST rollout and festive timing cancelled each other out: The GST 2.0 transition slowed ordering for nearly 30 days, while an earlier festive period compared to last year was a positive. There was no meaningful net impact.
• Post-festive demand is tracking normally: Offtakes and tertiary sales momentum are reasonable and in line with what happens after a typical festive peak, with no material change in the demand environment.
• Working capital deployment was seasonal and will unwind: Debtors increased due to monsoon seasonality, pre-festive billing, and a revenue mix biased toward e-commerce and modern trade with standard terms; 87% of the increase is attributable to these two channels. Inventory rose from a conscious decision to secure import supply, and will decline as indigenization progresses. Both are expected to unwind in H2.

Competition & Market Position

• Competition is welcomed as a category-growth catalyst: Management sees increasing competition and new entrants as a clear signal the category has promise. New entrants create news, excitement, awareness and drive category growth.
• E-commerce share has recovered to its highest ever: In e-commerce, where there was early competitive activity a couple of years ago, the company has recovered and grown share to the highest ever across both platforms. There is no impact on market share.
• The brand remains the strongest in the category: Management positions Eureka Forbes as unequivocally the strongest brand, synonymous with trust, service and care.

Pratik Pota: "we welcome all competition because we believe it's going to be creating this virtuous cycle of higher growth. We are the strongest brand, unequivocally the strongest brand in this category."

Capital Allocation & Strategic Optionality

• The bias is toward growth investments over shareholder returns: The company has a healthy cash position that will only improve, and dividends or share buybacks remain an option. However, at this stage of transformation, the bias is toward looking at growth opportunities.
• A rental or subscription model is on standby, not active: All capabilities are ready for a scaled rental play, but given the growth runway in the conventional product business, the company does not intend to enter subscription now. It is a readiness kept on standby to activate if and when required.
• New category entries are possible but not a priority: The company remains open to looking at new categories, but believes there is abundant runway to grow in current categories: water, cleaning, and air.
• The tenant-issue solution is being redesigned: Pilots on tenancy-related number changes and asset tagging were susceptible to gaming and leakages. The company has gone back to the drawing board and expects a solution with better governance in the next 2 or 3 months.

Gaurav Khandelwal: "our bias at this stage of the transformation would be towards looking at growth opportunities, and that is an ongoing process. But yes, at an appropriate point in time, if the Board feels that it has to be in the form of rewarding shareholders through dividend or share buyback, we would be open to it."

Guidance & Commitments

Key Metrics