Rupa & Co

Rupa & Company Limited reported Q2 FY26 revenue from operations at INR 320 crores, marking an 8% year-on-year growth, primarily driven by a robust 14% volume growth. However, profitability was significantly impacted, with EBITDA declining 21% YoY to INR 22 crores and EBITDA margin compressing by 260 basis points to 7%. Net profit after tax also saw a 21% YoY decline to INR 15 crores, reflecting the challenges in the competitive market.

Management attributed the margin compression primarily to an aggressive pricing approach, which led to a 140 basis point dip in gross margin, adopted to remain competitive in an intense market. This strategy is viewed as a short-term measure for a 'quarter or two' to secure volume-led growth and market share. The company plans to restore margins later through product mix optimization, operational efficiency, and new marketing initiatives once top-line growth is firmly established.

The economy segment was the primary driver of volume growth in Q2 FY26, while the mid-premium segment trailed, with management focusing on reigniting its momentum. Exports continued their strong performance, growing 28% YoY and contributing 4% to H1 revenues. Thermalware showed robust growth with a 23-24% volume increase, contributing 13% to Q2 revenue, and is expected to expand further in Q3, which typically offers better margins.

Modern trade, including e-commerce, contributed 8% to H1 FY26 revenues and is identified as a key growth driver. The company is implementing several initiatives to scale this channel, including appointing dedicated e-commerce and EBO heads, going live on Amazon.com through an aggregator, launching kiosks for its infant brand 'Peek-A-Boo', and strengthening presence in large retail chain format stores. The target is to achieve at least 20% growth in this area.

Rupa & Company Limited maintains a strong balance sheet, reporting a net cash surplus of INR 18 crores as of September 30, 2025, with gross cash and cash equivalents (including investments) standing at INR 258 crores. Operating cash flow for H1 FY26 was INR 23 crores. The company plans for routine capital expenditure of INR 12-15 crores for FY25-26, indicating a focus on operational maintenance rather than major expansion projects.

Working capital days for H1 FY26 stood at 235 days. Management expects to reduce this by 20-25 days to approximately 210-215 days by year-end, reflecting disciplined working capital management. Channel inventory levels are currently below normal, and the company is optimistic about higher primary sales as consumer demand revives, which should help manage inventory efficiently and mitigate risks of sales returns.