Eureka Forbes Limited — Q1 FY26 earnings call

Call held 12 Aug 2025

Management summary

Eureka Forbes reported a challenging Q1 FY26 with 9.9% revenue growth, driven by double-digit product business growth and a 52% surge in robotics. Despite softness in consumer demand and pressure on trade working capital, the company achieved 24.1% PAT growth and a turnaround in its service business with double-digit booking growth. Gross margins saw a slight dip due to tactical promotions, but management aims for full-year margin improvement.

Highlights

  • Overall revenues grew by 9.9% to ₹607.7 crores in Q1 FY26.

  • Products business achieved double-digit growth, with double-digit volume growth in both EWPs and VCs.

  • Robotics segment within vacuum cleaners grew by 52%.

  • Profit after tax grew by 24.1% to ₹38.5 crores over last year.

  • Healthy double-digit growth was observed in fresh service bookings, indicating a turnaround in the service business.

Concerns

  • Q1 was a difficult and challenging period with continuing softness in consumer demand.

  • Pressure on trade working capital was observed due to a slowdown in cooling products in April and May.

  • Gross margins at 59.7% were lower than 60.5% last year, attributed to tactical promotions.

  • Adjusted EBITDA margins at 11% were impacted by higher service charge payouts and increased growth investments.

Key financials

  1. Revenue ₹607.7 Cr +9.9%YoY
  2. PAT ₹38.5 Cr +24.1%YoY
  3. Adjusted EBITDA Margin 11%
  4. Gross Margin 59.7%
  5. Employee Expenses Growth — +7%YoY
  6. Other Expenses Growth — +6.1%YoY
  7. Service Charge Increase — +17.6%YoY
  8. Non-cash ESOP Charges ₹5.6 Cr
  9. Adjusted PBT Growth — +14.2%YoY
  10. Depreciation ₹8.3 Cr

What they filed

Q1 FY27: revenue up 15.3%, net profit up 41.0% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue673 598 613 608 773 +15%645 +8%684 +12%701 +15%
EBITDA72 59 78 61 96 +33%67 +14%85 +9%67 +10%
Net profit47 35 51 39 62 +32%9 −74%51 +0%55 +41%
How to read this

₹ crore, as filed. The percentage beside a figure is the change against the same quarter a year earlier — never the quarter before, which would make every seasonal business look like it collapses and booms each year.

Guidance & targets

Service Business

  • Service bookings growth Service Business · FY26 · High confidence double-digit growth
    we feel very confident that we will see double-digit growth in service bookings sustained and all the efforts that we've made and that we continue to put in, in service transformation, picking up pace and helping us drive growth.

    — Pratik Pota

  • Service revenue reflection in reported numbers Service Business · Q4 FY26 · High confidence show up in reported numbers
    In terms of impact in the P&L, you can expect to see the numbers show up in the reported numbers by Q4 of this year.

    — Pratik Pota

  • Service business booking terms growth Service Business · FY26 · High confidence double-digit basis
    the service business will grow in booking terms in value on a double-digit basis.

    — Gaurav Khandelwal

Profitability

  • Gross margin Profitability · FY26 · Medium confidence range bound
    our view on gross margin is that it will be range bound.

    — Gaurav Khandelwal

  • Full year margin improvement Profitability · FY26 · High confidence improvement
    we continue to be growth focused and aim for margin improvement on a full year basis.

    — Gaurav Khandelwal

What to watch in Q2 FY26

Service revenue reflection in reported numbers

Q4 FY26
Current Lagging overall growth
Target Showing up in reported numbers

Why it matters

This will indicate the successful translation of strong service bookings into financial results.

you can expect to see the numbers show up in the reported numbers by Q4 of this year.

Risks & concerns

  • Soft consumer demand

    high

    Q1 was a difficult period with continuing softness in consumer demand.

    Management acknowledged

  • Trade working capital pressure

    medium

    Aggravated by slowdown in cooling products in April and May, impacting velocity across categories.

    Management acknowledged

  • Increased competitive activity

    medium

    Management noted increased competition but stated market share remained unchanged due to aggressive response.

    Management acknowledged, responded to

  • Gross margin compression due to tactical promotions

    medium

    Gross margins dropped from 60.5% to 59.7% due to tactical promotions in a challenging market, but expected to be range bound.

    Management acknowledged, manageable

Q&A highlights

7 direct
Service business revenue acceleration and gross margin outlook Direct
you can expect to see the numbers show up in the reported numbers by Q4 of this year.

Clarifies the timeline for service booking growth to translate into reported revenue and provides outlook on gross margins remaining range-bound.

Asked by Umang Mehta

TAM for 2-year filter life products and accounting for multi-year AMC plans Direct
If you think about the current market and the penetration being only 6%, you can do the math. As the penetration increases, as we address this fundamental category barrier, we will see the category grow

Highlights the large untapped market potential for water purifiers, especially with new products addressing cost of ownership, and clarifies AMC revenue recognition over time.

Asked by Aniruddha Joshi

Product category growth across segments and service portfolio management Direct
we saw very strong volume and value growth in the economy segment... we saw a very, very strong growth in our premium portfolio as well.

Confirms balanced growth across economy and premium segments and addresses the company's strategy for managing service network expansion and filter innovation.

Asked by Harshit

EBITDA margin outlook and operating leverage Direct
we continue to aim for growth and margin expansion on a full year basis.

Management reiterates commitment to full-year margin improvement despite Q1 pressures and explains the role of operating leverage and cost efficiencies.

Asked by Mehul Desai

Competitive landscape, market share, and service revenue accounting Direct
notwithstanding the increased competitive activity, our market share has not gone down. It's remained absolutely unchanged, and we feel confident about that going forward as well.

Reassures investors that market share is stable despite increased competition and clarifies the complexities of service revenue recognition.

Asked by Anupam Goswami

Penetration of service offerings within the installed base Direct
out of this installed base that we have, the large installed base of Aquaguard, only a very small proportion of these customers, avail of our AMCs and avail of our organized services.

Reveals significant untapped potential within the existing customer base for service offerings, indicating a large growth runway for the company.

Asked by Achal Lohade

Timeline for service revenue growth to catch up with product business growth Direct
the reflection of the bookings will start coming in from Q4 and I think from that period onwards, we expect the service business, which currently creates a lag on the overall growth, for that gap to start getting lower and lower. So, you will start seeing the impact of growth coming in from Q4.

Provides a clear timeline for when the strong service booking growth will start to materially impact reported revenues and narrow the gap with product growth.

Asked by Keshav Lahoti

2 min read 6 chapters

Detailed narrative

Q1 FY26 Performance Overview

Despite a challenging external environment with soft consumer demand and trade working capital pressure, Eureka Forbes delivered a 9.9% revenue growth in Q1 FY26, reaching ₹607.7 crores. This growth was primarily driven by a double-digit increase in the products business, with PAT growing by 24.1% year-over-year to ₹38.5 crores. Adjusted EBITDA margins stood at 11%, reflecting higher service charge payouts and growth investments, while adjusted PBT grew by 14.2%.

Product Business Momentum

The company achieved double-digit volume growth in both its key categories, EWPs (Water Purifiers) and VCs (Vacuum Cleaners). The economy range of EWPs continued strong growth, and innovations like 2-year filter life products are expected to drive penetration by lowering lifetime ownership costs. The robotics segment within vacuum cleaners saw significant growth of 52%, contributing to the overall strong double-digit growth in the VC category, with new products like SmartClean Home Mapping Turbo being rolled out.

Service Business Turnaround

A significant turnaround was observed in the service business, with healthy double-digit growth in fresh service bookings, both in volume and value. This was supported by initiatives such as segmented AMC offerings, a strong D2C engine for AMCs (nearly 2/3rd bought digitally), and strengthened engagement with technicians. The company expects this momentum in service bookings to sustain, with the impact on reported revenues anticipated from Q4 FY26 as the lag due to service amortization reduces.

Gross Margin and Profitability Dynamics

Gross margins for Q1 FY26 were 59.7%, a slight decrease from 60.5% in the previous year, attributed to tactical promotions in a competitive market. Despite this, management aims to maintain gross margins within a range and achieve full-year margin improvement. The adjusted EBITDA margin of 11% was achieved after accounting for higher service charge payouts (up 17.6%) and increased growth investments, with employee expenses growing 7% and other expenses 6.1%.

Market Penetration and Growth Potential

The water purifier category in India has a low penetration of about 6%, with urban penetration at 12% and rural at 3%. Management believes that by addressing barriers like high upfront cost and high cost of ownership (through products like the 2-year filter life purifiers), the market can significantly expand. The company's installed base for water purifiers is approximately 14 million customers, with a large untapped potential for service offerings within this base, as only a small proportion currently avail organized services.

Competitive Landscape and Market Share

The market has seen increased competitive activity with new players and scaled-up presences, which Eureka Forbes views as a positive development for category awareness. Despite the heightened competition, the company stated that its market share has remained unchanged, and it continues to be aggressive in its response through activation and innovation efforts across all channels. Management emphasized its balanced portfolio across price points and propositions to maintain its competitive edge.

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