Detailed Rationale

Crisil Ratings has revised its outlook on the corporate credit rating of Eureka Forbes Limited (EFL) to ‘Positive’ from ‘Stable’ while reaffirming the rating at  ‘Crisil AA-'.

 

The revision in the outlook reflects the expected strengthening of business risk profile of the group driven by sustained growth in scale and improving profitability. While revenues have grown by 11.3-12.5% in fiscal 2025 as well as H1 fiscal 2026 backed healthy volume and realization growth, overall operating margins have also improved to ~11.5% in H1 of fiscal 2026 as compared to 10.88% in fiscal 2025. This improvement has been driven by various measures taken by the management which include cost rationalization and improving operating leverage along with steady revenue from service segment. The operating margins are expected to improve on a year-on-year basis in fiscal 2026 as compared to fiscal 2025, hence sustenance of healthy operating margins amid steady growth in scale of operations remains a key monitorable.

 

Overall business risk profile remains supported by healthy market share in its core product categories, strong supply chain network, focus on innovation and premiumization. Nevertheless, EFL operates in highly competitive home appliance sector where continuous investment in product innovation and brand-building to defend market share and sustain healthy revenue growth while also protecting its healthy margins remains monitorable. Financial risk profile remains strong, with healthy capital structure and ample liquidity.

 

The rating reflects the group’s healthy market position in domestic health and hygiene segment, its strong distribution network, healthy financial risk profile and its efficient working capital management. These rating strengths are partially offset by its susceptibility to fluctuations in raw material prices and Intense competition in the consumer home appliances sector in India.

Analytical Approach

For arriving at the ratings, Crisil Ratings has combined the business and financial risk profiles of EFL along with its subsidiaries, i.e., Infinite Water Solutions Private Limited, Forbes Aquatech Limited, and Euro Forbes Limited.

 

To arrive at the tangible networth, goodwill amounting to Rs 2,394 crore as well as other intangible assets, excluding brand value amounting to Rs 2911 crore, have been netted off against the reported networth.

 

Please refer Annexure - List of Entities Consolidated, which captures the list of entities considered and their analytical treatment of consolidation

Key Rating Drivers - Strengths 

Healthy market position in domestic health and hygiene segment and strong distribution network: EFL benefits from its strong market position in the health and hygiene segment. It has a long track record of selling of Water purifiers, Air purifiers, Vacuum cleaners, water softeners among others. EFL is a market leader in water purifier and vacuum cleaner segments with dominant market share supported by strong brand recognition by its flagship brands such as Aqua guard and Forbes. Additionally, the diversified revenue streams with electric water purifiers contributing ~44%, services related to products with ~33%, and vacuum cleaners ~14% of total sales should support the business risk profile of the group. Furthermore, the professional line of management with extensive experience in consumer durables and focused R&D team for product innovations, support the steady growth in scale of operations over the medium term. This is also reflected in the steady double-digit growth in revenues for last two fiscal years ended FY 2025.

 

The business risk profile is further supported by its strong distribution network and omni channel presence catering to both business-to-consumer (B2C) and business-to-business (B2B) customers. While the group has presence across channels including E-Commerce, Modern trade, and General Trade, its presence in more than 19,500 pin codes in India along with more than 8000 service technicians on ground should continue to help sustain healthy market share.

 

Crisil Ratings believes the healthy market share, strong distribution network coupled with omni channel presence and a strongly experienced & well-qualified management team will continue to support the overall business risk profile of the company.

 

Healthy Financial Risk Profile: Group’s financial risk profile remains strong as reflected in the tangible net worth of Rs 2159 crores as on March 31, 2025 (Rs 1963 crores a year ago). The limited reliance on the outside debt has led to the comfortable capital structure as reflected in the gearing and TOLANW of 0.01 times and 0.88 times respectively as on March 31, 2025 (0.02 times and 0.95 times a year ago). With the growing scale and healthy profitability leading to steady accretion to reserves, the capital structure will continue to remain at comfortable levels. The debt protection measures continue to be robust with interest cover of more than 10 times and net cash accruals to adjusted total debt of 8.70 times for fiscal 2025 on account of healthy operating profitability and low interest cost and is estimated to remain strong in fiscal 2026 led by the moderate interest cost and improving operating profitability. In the absence of any large debt funded capex or dividend outflows, the financial risk profile of the group shall continue to remain at comfortable levels over the medium term.

 

Efficient Working Capital Cycle and healthy operating cash flows: The company’s working capital cycle has remained efficient reflected in its gross current asset (GCA, net of cash) of around 70-90 days supported by moderate debtors and inventory levels of 20-30 days and 40-50 days respectively. The group deals with both B2B as well as B2C customers, while B2C customer sales are largely on a cash and carry basis, the group offers a moderate credit period to B2B business of around 30 days. The payments are received on time and there is no large stretch seen in the same. The company maintains an inventory of around 60 days on average. Furthermore, the company benefits from its business model where a significant portion of its service revenue is received in advance through Annual Maintenance Contracts (AMCs). These advances, recorded as contract liabilities (deferred revenues), provide a steady source of funds supporting overall business operations, especially working capital requirements. This structural advantage, coupled with the group’s healthy profitability, leads to healthy operating cash flow generation and a lower dependence on the bank lines for its working capital requirements. The working capital cycle remains further supported by the credit received from the suppliers. Overall, working capital cycle will continue to remain efficient with no change in the credit offered or inventory holding policies of the group and a steady improvement in Annual Maintenance Contracts (AMCs).

Key Rating Drivers - Weaknesses 

Susceptibility to fluctuations in raw material prices and Intense competition in the consumer home appliances sector in India: The company operates in the intensely competitive and fragmented Indian home appliance sector. The market is characterized by the presence of several large, well-established multinational corporations (MNCs), alongside strong, diversified domestic players with extensive distribution networks. This structure results in constant pressure on pricing, market share, Research and Development and advertising expenditure.

 

While the EFL group maintains market leadership in its core product categories, the larger players in the market benefit from their larger scale, superior bargaining power and the ability to bundle products across multiple home appliance categories. Furthermore, the industry is marked by low brand loyalty in certain product segments and high price sensitivity, particularly in Tier-2 and Tier-3 markets. Consequently, the necessity for continuous investment in product innovation and brand-building to defend market share while maintaining healthy margins remains a key challenge for the entities in the segment. Significant competition or delay in responding to competition or changing consumer preferences may impact on market share and volume growth of the EFL group given its dependence on a relatively lower product basket as compared to a well-diversified player in the segment.

 

Additionally, while the raw material price fluctuations accentuate the pressure on profitability because of the players’ inability to pass on such cost increases to their customers this risk is offset by its strong & well-known brand, strong market position and distribution network with a very vast D2C reach. This has helped the group sustain healthy gross margins. Though historically (prior to 2022) operating margins of the group have been sub 7%, it has demonstrated a steady improvement to ~11.5% in H1 of fiscal 2026 (10.17% in Q1 FY 26 and 12.65% in Q2 FY 26 as compared to 10.17% and 10.86% respectively for Q1 and Q2 of FY 25) supported by various factors. However, RoCE levels continue to remain modest due to large net worth. Thus, sustained improvement in operating profitability and RoCE while maintaining steady double-digit revenue growth thus maintaining its market share in core product categories remains a key monitorable.

Liquidity Strong

Bank limit utilization is low at around 5 percent for on average for the past twelve months ending September 2025. Net cash accrual is expected to be over Rs 260 crores over the medium term which is sufficient against lease liability obligation of ~ Rs 13 crore as the group does not have any long-term debt repayments. The group further has cash and cash equivalents of ~Rs 249 crores as of Sept 2025 which remains unencumbered. Additionally, group also has mutual funds investment of Rs 58.94 crores as on March 31, 2025, which further supports the overall liquidity. Current ratio is low at 0.86 times on March 31, 2025 (largely on account of higher contract liability). Low gearing and strong net worth support its financial flexibility and provides the financial cushion available in case of any adverse conditions or downturn in the business.

Outlook Positive

Crisil Ratings believes that the group’s credit profile will continue to benefit from its improving operating profitability, strong market position and healthy financial risk profile.

Rating Sensitivity Factors

Upward factor

• Sustained double digit revenue growth on the back of the higher volume sales while maintaining operating margins above 11% on a sustained basis leading to improvement RoCE
• Sustenance of efficient working capital management and its strong financial risk profile

 

Downward factor

• Decline in operating profitability below 8% or decline in the overall revenue performance leading to lower than anticipated net cash accruals.
• Large debt-funded capital expenditure or dividend payout weakening the capital structure thereby impacting the financial risk profile and liquidity profile

About the Group

EFL along with its subsidiaries & step-down subsidiaries is engaged in manufacturing, selling, & servicing vacuum cleaners, water filters cum purifiers, air purifier, etc. The group market its water purifiers under the flagship brands named ‘Aquaguard’, and ‘Forbes’

 

EFL is listed at Bombay Stock Exchange Limited (BSE) and National Stock Exchange (NSE). Lunolux Limited, Cyprus (an Advent International Corporation entity, Holding Company) acquired majority stake in EFL in July 2022.  EFL is currently headed by Mr. Arvind Uppal (Chairman) and Mr. Pratik Pota (Managing Director & Chief Executive Officer).

Any other information: Not Applicable