EPACK Durable Q4 FY26: A Transition Year, With Diversification Doing the Heavy Lifting

EPACK Durable Limited closed Q4 FY26 with operating revenue of INR 591.0 crore, down 8.1% year on year, while EBITDA fell sharply to INR 25.8 crore, translating into a 4.37% margin. Net profit for the quarter was near zero at INR 0.024 crore. For the full year FY26, operating revenue declined 12.7% to INR 1,894.5 crore. EBITDA reduced to INR 113.9 crore and PAT came in at INR 3.3 crore, bringing PAT margin down to 0.17%.

Management described FY26 as a temporary, industry-wide transition year. Weather-led demand disruption, the shift to revised BEE norms, and channel inventory recalibration weighed on room air conditioner volumes and pricing. The company also faced commodity inflation and forex volatility. The reported profitability was further affected by a one-time government incentive adjustment, as EPACK reversed PLI income recognized earlier in the year.

What stands out, however, is that EPACK’s diversification strategy continued to show visible traction. While RAC weakened materially, the SDA and LDA businesses grew and the Components business scaled meaningfully. This mix shift is now central to the company’s medium-term narrative.

Segment mix: RAC softness, non-RAC momentum

EPACK’s FY26 product mix shows how quickly the business is evolving. Air conditioners remained the largest segment but declined steeply, while SDA, LDA and Components grew strongly.

In FY26, AC revenue fell 33.2% year on year to INR 1,046.1 crore. SDA and LDA grew 34.8% to INR 388.9 crore, supported by healthy order inflow across existing products and newly launched categories. Components rose 102.7% to INR 366.3 crore, supported by demand for heat exchangers, plastic moulding parts, copper parts and PCBs.

This shift is also reflected in the company’s commentary on resilience. The presentation highlights that non-AC portfolio contribution increased from 20% in FY23 to 42% in FY26. The company also highlighted that product business contributed 76% of total operating revenue in FY26.

Incentives: RIPS benefit, PLI reversal, and a conservative stance

A key element behind the weak headline profitability was the incentive impact. In Q4 FY26, EPACK recognized INR 21.774 crore of incentive income under the Rajasthan Investment Promotion Scheme (RIPS) 2024, based on management’s assessment of compliance with eligibility conditions. This included INR 4.957 crore pertaining to FY25-26 and INR 16.817 crore pertaining to earlier periods.

At the same time, the company reversed previously recognized PLI income of INR 32.42 crore, which had been accrued during the nine months ended December 31, 2025. Management stated this reversal was linked to commitments under the PLI incentive, including investment commitments and a requirement around incremental revenue growth, where a sales shortfall created uncertainty around eligibility.

On the earnings call, management also clarified that while the FY25-26 PLI eligibility was about INR 56.5 crore, it chose not to recognize it given the evolving assessment and ongoing procedural review. The broader message was that management prefers investors to evaluate the business excluding incentives and will be cautious before recognizing such income.

Capex, working capital, and the near-term trade-offs

FY26 was positioned as an investment-led year, with capex directed towards localization, backward integration and capacity creation. The presentation’s capex table shows cumulative FY26 capex of INR 297.1 crore across Dehradun, Bhiwadi and Sri City, including investments under the subsidiary EPACK Manufacturing Technologies Limited.

On the conference call, management stated that an earlier capex plan of about INR 470 crore over 18 to 24 months remains the base framework, with roughly INR 300 crore capitalized by March 2026. It also indicated a remaining INR 170 to 200 crore is planned over the next 9 to 12 months, primarily for ramp-up at Bhiwadi and Sri City and for newer product categories.

The trade-off has been visible in working capital and leverage. FY26 inventory rose to INR 836.6 crore, with inventory days increasing to 161 from 98 in FY25. Trade receivable days rose to 68 from 50, and cash conversion cycle increased to 91 days from 57. Net debt to equity increased to 0.72 from 0.37.

Management explained that inventories were built in anticipation of the summer season and also due to compressor-related planning, and said that inventories were getting depleted as order execution strengthened in early FY27. Still, the FY26 balance sheet shows that the capex cycle and softer RAC volumes together created near-term strain on return metrics.

Execution updates: customer diversification and the Hisense facility

EPACK continues to highlight customer base expansion and reduced concentration risk. The presentation notes that the company added 17 new customers in FY26, taking the customer base to 72. Top two customer concentration declined from 72% in FY23 to 37% in FY26.

Another milestone is the operationalization of the Hisense dedicated facility through the wholly owned subsidiary EPACK Manufacturing Technologies Limited at Sri City. Management stated on the call that the facility started operations in the last week of March 2026 and is scaling up AC production for Hisense design products. The company expects that as operations scale over coming quarters, the subsidiary will gradually contribute to revenues and product mix.

The company also continues to expand its SDA portfolio. The presentation lists FY26 launches such as infrared cooktop, nutri blender and dry vacuum cleaner, with upcoming FY27 products including tower fan, hair dryer, air purifier and coffee maker.

What to track into FY27

Management indicated that early FY27 demand conditions appear more encouraging than FY26, supported by improved summer conditions and normalized channel inventory. It also reiterated an aspiration to reach INR 5,000 crore revenue in the next two to three years, while noting that FY26 represented a disruption year.

For investors, the key near-term monitorables are clear from the documents. First is whether RAC utilization and margins normalize as the industry returns to a healthier demand environment. Second is whether the expanded capacity and localization initiatives translate into higher asset turns, especially as components and SDA/LDA scale. Third is the impact of incentives, where management has signaled a conservative recognition approach after the PLI reversal.

The FY26 numbers show a tough year for profitability and balance sheet metrics. But they also show a business that is actively building a broader revenue base beyond RAC, backed by capex and a growing customer set. FY27 will likely be judged on how quickly operating leverage comes through and whether the diversification engine keeps compounding.