Eureka Forbes Ltd Q3 FY2026 Concall Summary

Key Takeaways

• Q3 growth slowed to 8% YoY, snapping 8 quarters of double-digit growth, but management calls it a one-off channel aberration driven by post-festive e-commerce inventory buildup.
• Gross margin surged 331 bps YoY to 60.8%, fueled by an institutionalized COGS program and a quarter-specific mix shift away from lower-margin e-commerce.
• Emerging categories broke out: Air Purifiers grew 3x (albeit on a low base), Robotics stayed very strong, and Water Softeners sustained healthy momentum.
• Service monetization is deepening: AMC bookings grew double-digit for the third straight quarter, and a new filter aftermarket program targets the non-AMC installed base starting Q2 FY27.
• What to watch next quarter: Whether Q4 growth actually exceeds the 11.1% YTD run-rate as guided, whether e-commerce inventory normalizes by quarter-end, and whether the COGS program keeps gross margins at the promised 58-60% band.

The Q3 Slowdown: One-Off or Warning Sign?

• Post-festive channel glut: Sell-out after the festive season fell short of projections, leaving elevated trade inventories, most acutely in the e-commerce channel and the Water Purifier category.
• One platform, not all platforms: The e-commerce pressure concentrated on one major platform that saw reduced traffic; the other platform delivered strong growth across all categories including Water.
• Combined Q2+Q3 tells a healthier story: The two quarters together delivered 11.7% growth, which management uses to argue the slowdown was a timing shift, not a demand collapse.
• Water Purifiers held up offline: Outside e-commerce, the Water Purifier segment posted strong double-digit sell-out growth and gained market share both sequentially and YoY.
• Category momentum has directionally softened: Compared to last year, Water Purifier category growth has slowed a little, attributed to broader macro and consumer sentiment headwinds, though it remains at double-digit levels.
• Management declined to quantify the inventory overhang, calling it "hard to quantify" and "misleading" because stock levels are defined by expected secondary and tertiary sell-out.

Pratik Pota: "Coming as it did after 8 quarters of double-digit growth, it is our firm conviction that the growth slowdown in the quarter was a one-off aberration, which came on account of very temporary channel-specific issues."

Gross Margin: The COGS Engine Is Working

• 331 bps YoY expansion to 60.8% came from two forces: the COGS program (institutionalized, creating headroom for growth investments) and quarter-specific factors like lower e-commerce mix and lower discounts.
• COGS program targets the lower-margin portfolio: The economy segment did well in the quarter, and the COGS program is directed more toward lower-margin parts of the portfolio, with impact becoming more pronounced as more projects are commissioned through the year.
• Range-bound promise: Management expects gross margins to remain range-bound around 58-60%, framing the Q3 spike as within that band rather than the start of a structural step-up.
• Other expenses rose on capability projects in supply chain and IT, not structural cost creep.
• Analyst asked whether the COGS program and e-com mix shift create a multi-quarter tailwind; management reframed the answer around whether margins would decline from category expansion, without quantifying the tailwind.

Gaurav Khandelwal: "I think stepping back and taking a 4-year view is... our gross margins have remained range bound at these levels, and we expect that to continue."

Emerging Categories: Small Base, Big Signal

• Air Purifiers broke out: 3x growth on a low base, supported by a meaningfully scaled-up advertising push for the first time in 3-4 years, a stronger product range, and POS activation programs. The company was out of stock at quarter-end, and demand is expected to stay strong and broaden geographically beyond North markets.
• Robotics stayed on track: Very strong growth continued, and momentum toward the Investor Day target of ₹1,000 crores by FY30 remains intact.
• Water Softeners sustained healthy growth, and like Robotics and Air Purifiers, momentum is expected to sustain into next year.
• Why emerging categories are less macro-sensitive: They are small and nascent with a very long runway, so they feel less drag from the consumer sentiment headwinds affecting the large legacy Water Purifier category.
• Premium push: Aquaguard Arctic Blaze launched at ₹79,999, the highest price point in the category, signaling intent to stretch the brand upward.

Service: The Quiet Compounder

• AMC bookings grew double-digit for the third consecutive quarter, building a recurring revenue base that outlasts device sales cycles.
• Filter aftermarket is the next unlock: A new program launched with simplified filter assortment, attractive pricing, and engagement programs for market service technicians and distributors. A separate comprehensive program targets the non-AMC filter market with a new go-to-market system and customer education on genuine filters.
• Non-AMC impact timeline: Management expects the filter aftermarket push to start having impact from Q2 of next year (FY27).
• Service KPIs hit all-time highs: Highest ever 24-hour complaints TAT resolution, high level of complaints met within 1 hour, leading to higher NPS. Digital interventions, training, spare availability improvements, and a revised incentive program drove the gains.
• Service charge growth disconnect explained: Service charge grew roughly 9% but has two components, one linked to revenue and one not (installations, mandatory visits), causing imperfect correlation with service bookings growth. Deferred income liability on the balance sheet is another indicator of service business growth.
• AMC cost recognition: The entire cost of acquiring an AMC customer, including technician payouts, is recorded as a service charge upfront at the time of sale.

Competitive Position & Market Share

• Market share gained in Water Purifiers across channels, both online and offline.
• New entrants hurt smaller brands, not Eureka Forbes: Management stated the impact of new brands launched over the last 12-18 months has been felt more by smaller brands than by the category leader.
• Aggressive defense posture: The company will not let its guard down and intends to grow market share with "absolute aggression."
• Category relevance remains a structural tailwind: Poor groundwater quality, contamination risks, and visible air quality challenges across metros keep the core categories relevant, though Water Purifier category momentum has directionally softened versus last year.
• Cost of ownership reduction is one lever to drive category growth, alongside affordability, awareness, and innovations; management says one size will never fit all.

Pratik Pota: "This market share gain has come across channels, online and offline. So, as the strongest brand in this category, the impact of the new brands that have launched over the last 12-18 months hasn't been felt by us as much as it has been felt by the smaller brands."

Capital Allocation & Long-Term Ambition

• 2x revenue and 3x EBITDA by FY30: Management has "complete conviction" and believes the company is well on track, with graded, progressive calibration toward that journey.
• Cash deployment priorities: First preference is to use cash for growth, organic or inorganic. The company is also looking at ways to reward shareholders, subject to Board approval, but the "strong and disproportionate focus and bias" is toward investing cash for growth.
• Inorganic growth: Management is very open to looking at inorganic opportunities, though they acknowledge such opportunities are hard to come by.
• Investment intensity will continue: A&SP spending for category expansion will persist, and the company will focus on driving profitability while investing in growth.
• One-time labor code charge: A pre-tax charge of ₹40.4 cr was taken from new labor codes; the company assessed the impact and will monitor developments, but does not expect a significant recurring impact.

Pratik Pota: "We have complete conviction. And we believe that we are well on track to deliver to the ambition that we've outlined, which is of 2x the Revenue and 3x of the EBITDA."

Guidance & Commitments

Key Metrics