Eureka Forbes Ltd Q4 FY2026 Concall Summary

Key Takeaways

• Record profitability in a tough quarter: Adjusted EBITDA margin hit 13.2%, the highest ever, even as input cost inflation intensified and the West Asia crisis added currency pressure.
• Price increase landed without visible damage: A 6–7% price hike taken in April shows no early impact on sellouts or down-trading, but management is watching carefully and the situation is evolving.
• Service transformation is the next unlock: Multi-year AMC mix rose sharply to lock in customers, and a major filter aftermarket push has begun, but changing decades-old consumer behavior requires sustained investment and patience.
• Balance sheet completely reset: The company moved from ₹193 cr net debt in June 2022 to a ₹443 cr net cash surplus, giving strategic flexibility including for inorganic opportunities.
• What to watch next quarter: Whether the 6–7% price hike continues to stick without volume damage, the pace of filter aftermarket adoption, and any gross margin headwinds if input cost inflation sustains.

Margin & Cost Management

• Three-year margin transformation: Adjusted EBITDA margin expanded from 6.3% in FY23 to 12.2% in FY26, the third consecutive year of expansion, achieved while stepping up growth investments.
• Gross margin stability: Gross margins have been range-bound at 58%–60% over three years, reflecting balanced portfolio management, mix management and the COGS program.
• Operating leverage captured: Employee cost as a percentage of revenue dropped from 12.6% to 12.1%, and total operating expenses excluding A&SP declined 27 bps to 35.7% of revenue.
• Input cost inflation is real and broad: Cost pressures span polymers, metals and foreign currency, with different impacts on different parts of the business, making a single quantification difficult. The 6–7% price increase addressed the overall impact to a very large extent but did not mitigate it in full.
• Efficiency interventions lined up: Beyond pricing, management is scaling up the COGS program and extracting efficiencies and removing leakages to offset cost headwinds.
• FY27 margin aim: Management believes the portfolio mix, price lag and efficiency interventions support aiming for at least a margin hold on a full-year basis, though the situation is evolving.

Gaurav Khandelwal: "All this in our mind, we believe takes us to a place where with the portfolio that we have, there's a service product business, there is a price lag that we have in the portfolio and with the efficiency interventions, etc., we believe that we should be aiming for at least a margin hold."

Service Business Transformation

• AMC bookings momentum: AMC bookings grew double digits in FY26, and the multi-year mix increased significantly as a conscious choice to lock in customers longer and elbow out gray market operators.
• Revenue recognition lag: The impact of FY26 bookings growth will flow into FY27 revenue, with some revenue potentially arriving only in FY28. Service revenue growth is expected to step up versus FY25.
• Q4 service revenue dynamics: Low-single-digit growth in Q4 reflected two offsetting forces: charges from bookings rising, and payouts for call charges declining as digital controls removed leakages, providing enduring benefits.
• Filters as the key growth unlock: The step-up to double-digit service growth lies in unlocking the filter opportunity, which addresses a large TAM of AquaGuard users not in the AMC offer who replace filters in the open market.
• Behavior change is the bottleneck: Filter investment began meaningfully only in Q3/Q4 of FY26. The category is purchased infrequently, and changing decades of established channel and consumer behavior will take time, though early evidence is encouraging.
• Filter interventions deployed: A simplified filter assortment, new distribution system, influencer-led marketing campaign generating over 100 crore views, and consumer education have all been launched.
• Service KPIs at all-time highs: FY26 marked a turning point in customer experience, with response turnaround times improved, escalations reduced sharply, and extreme outliers materially reduced.
• Service promise tightening: The company moved from a 24-hour TAT to a specific 2-hour slot promise and is working on a 4-hour service promise from the point of purchase or service request, with new models in pilot mode before scaling.
• Technology platform build: A multi-tenant, multi-category technology platform for service is being built and will be largely completed in FY27, enabling possibilities beyond current categories in the longer run.

Pratik Pota: "We recognize that this involves changing many, many years of established channel and consumer behavior. And for this behavior, this is a category which gets purchased infrequently. So this behavior change will take time, but what we are seeing as early evidence is encouraging."

Product Business & Demand

• Water purifier resilience: Revenue grew double digits in Q4, with a sequential pickup in momentum despite inflation and cost pressures. Growing consumer awareness due to health incidents and risks of untreated water is driving prioritization of water purifiers over other durables.
• Three-year growth track: Water purifiers delivered a 3-year CAGR over 12%, driven by both volume growth and mix-led ASP increases. Going forward, volume growth is expected to be a meaningful driver given low penetration.
• Market share tailwinds: Despite new entrants including Urban Company, Eureka Forbes has not lost market share and exited the year with market share tailwinds behind it, driven by brand strength, innovation and market aggression.
• E-commerce normalization: The channel disruption from last quarter normalized towards the end of Q4 and will not be a drag going forward.
• Price increase landing: The 6–7% price increase taken in April has landed well, with early indicators showing no impact on sellouts or tertiary sales and no indication of consumers down-trading. Competition has also responded with price hikes given the strong inflationary environment.
• Potential drought impact: A potential drought is not expected to materially impact the water purifier business given low penetration and rising awareness.
• Dixon manufacturing migration: With the BIS quality control order pushed to September 2026, manufacturing and assembly will migrate to Dixon over the next 3–4 months, with localization a progressive journey starting in the next couple of quarters.

Pratik Pota: "I'm happy to share with you also that given the sheer strength of our brands, the innovation that we've rolled out and the aggression we brought to bear in the market, all driven by our very capable teams, we have not lost market share. If anything, as we exited the year, we had market share tailwinds behind us."

Emerging Categories

• Robotics on a strong trajectory: Robotics has been growing strongly and consistently for three years, driven by product innovation, distribution expansion across retail, organized trade and general trade, and growing consumer awareness including the Shraddha Kapoor campaign. The category is expected to reach more than ₹1,000 crores by FY30 and is well on track.
• Air purifiers scaling fast: The category grew 2.7x in FY26 on a low base, with strong growth even in Q4 despite seasonality. Quick commerce was a big source of work in Q3. Management has strong plans to grow the category and conviction it can become a very large and meaningful business, expanding beyond North India and beyond winter usage.
• Water softeners gaining momentum: Strong double-digit growth has been sustained for three years in a very large but highly fragmented market. A complete portfolio including IoT products has been built, and the company intends to continue incubating and growing the portfolio.
• All incubated categories at meaningful scale: Robotics, air purifiers, softeners and filters have all acquired strong momentum and meaningful scale, positioning the company for choice across growth vectors.

Pratik Pota: "And therefore, all put together, in response to your question, may I say that in some ways, in some good ways, we're almost poised for choice."

Balance Sheet & Capital Allocation

• Net cash surplus achieved: The company moved from net debt of ₹193 cr in June 2022 to a net cash surplus of ₹443 cr, completing a full balance sheet reset.
• Strategic flexibility: The net cash surplus provides flexibility including for inorganic growth opportunities.
• Growth investment bias: Management's bias remains towards higher growth investments and will continue to invest behind growth.
• AMC liability mix shift: The increase in non-current deferred income liability reflects a conscious choice to increase the proportion of longer-duration multi-year AMCs, not a volume signal. This locks in customers longer and elbows out gray market operators.

Guidance & Commitments

Key Metrics