EPACK Durable Navigates Headwinds with Strategic Diversification and Future-Focused Investments

EPACK Durable Limited, a prominent player in India's consumer durables manufacturing sector, recently announced its Q2 and H1 FY26 financial results, revealing a period of mixed performance. While the company faced significant headwinds in its core Room Air Conditioner (RAC) segment, its strategic diversification into Small Domestic Appliances (SDA), Large Domestic Appliances (LDA), and Components demonstrated robust growth, offering a glimpse into its future trajectory. For Q2 FY26, the company reported an operating revenue of INR 213.3 crore, a decline of 43.4% quarter-on-quarter. The half-year performance for H1 FY26 saw an operating revenue of INR 875.7 crore, a 23.9% year-on-year decrease. Profitability was notably impacted, with a net loss of INR 22.2 crore in Q2 FY26, reflecting the challenging market conditions.

The RAC segment, which traditionally forms the bulk of EPACK Durable's revenue, experienced a substantial 76% quarter-on-quarter contraction. This downturn was primarily attributed to unseasonal rains and a time lag between the announcement and implementation of GST rate reductions on air conditioners, leading to a surplus inventory carried over from Q1 FY26. However, the latter half of Q2 saw some inventory liquidation, aided by festive season sales and improved channel movement. In contrast, the diversification strategy proved to be a significant growth driver. The SDA segment recorded a strong 45% quarter-on-quarter growth, fueled by healthy order inflows for both existing and newly launched products, particularly air fryers. The Component segment reported a remarkable 73% QoQ growth, supported by a robust order pipeline for PCBs, copper parts, and plastic molding components. The LDA segment also witnessed exceptional growth of 466% QoQ, driven by an expanding customer base.

Strategic Initiatives and Future Outlook

EPACK Durable is actively pursuing several strategic initiatives to bolster its growth and market position. The company has established a strategic partnership with Hisense, a global leader in consumer electronics, to manufacture air conditioners and other appliances in India. This collaboration is expected to generate an incremental revenue of $1 billion over five years, with production at the new Sri City facility targeted to commence by the end of Q3 FY26. Furthermore, the company has formed a 50:50 joint venture, EPAVO Electricals Private Limited, with Ram Ratna Group to strengthen backward integration in AC manufacturing by producing Brushless DC (BLDC) motors and HVAC products. The Bhiwadi greenfield facility for EPAVO commenced production in Q2 FY26.

In a significant move, EPACK Durable is entering the Electronic Manufacturing Services (EMS) business, focusing on critical components like PCBA controllers and copper parts for RACs, leveraging tie-ups with industry leaders like Panasonic and Daikin. This initiative aims to capitalize on the benefits of the PLI scheme and diversify its component supply business beyond consumer durables, including the energy meter sector. The company's product diversification continues with new launches in SDA, such as air fryers, nutri blenders, infrared cooktops, and coffee makers, alongside an expansion in LDA with washing machines.

Financial Health and Management Commentary

Despite the challenging quarter, management remains optimistic about the future. They anticipate the overall AC industry to be flattish for FY25-26 but expect a strong rebound in calendar year '26, driven by new BEE-rated products and sustained demand. The company is undertaking a strategic capital expenditure of INR 450-500 crore, to be completed by Q1 FY26-27, to ramp up capacities and introduce new products. While this has led to an increase in net debt and working capital days in the short term, management views these investments as crucial for long-term growth and market leadership.

The dependency on RAC business is reducing, with new products in SDA, LDA, and components showing increasing trends. This strategic shift is vital for mitigating risks associated with seasonal and market-specific fluctuations in the AC segment. The company's focus on in-house manufacturing of critical components, coupled with its strong client relationships, positions it favorably for future growth. EPACK Durable is committed to leveraging its advanced manufacturing capabilities and diversified product portfolio to achieve sustainable, balanced growth and enhance its competitive standing in the Indian consumer durables market.

Conclusion

EPACK Durable Limited is navigating a period of transition, marked by a challenging AC market but strong growth in its diversified segments. The company's proactive strategic initiatives, including partnerships, new ventures, and product launches, underscore its commitment to long-term value creation. With a clear roadmap for capacity expansion and market penetration, EPACK Durable aims to solidify its position as a leading ODM player, powering brands and defining excellence in the consumer durables industry.