Eureka Forbes Q1 FY27: Strong Topline, Margins Manage Inflation Headwinds

Eureka Forbes Limited opened FY27 with a strong revenue print, reporting standalone revenue of Rs 700.8 crore in Q1 FY27, up 15.3% year on year. Management described this as the highest revenue growth in its transformation journey, supported by broad-based momentum across categories and channels. Adjusted EBITDA grew 10.5% year on year to Rs 73.9 crore, while adjusted EBITDA margin moderated by 46 basis points to 10.5%.

Profitability at the reported level looked stronger than the underlying run rate. Reported PAT rose 43.9% year on year to Rs 55.4 crore, aided by a one-time pre-tax gain of Rs 19.5 crore from reversal of gratuity expense. PAT before exceptional items grew 6.1% year on year to Rs 40.9 crore.

Growth engine: Water acceleration and emerging categories

The quarter’s key driver was the product portfolio. Management said the overall product business grew in high teens, led by a significant step-up in water purifier growth. In the earnings call, the company attributed water purifier acceleration to a combination of double-digit volume growth and calibrated price increases taken at the start of the quarter. Growth was described as broad-based across channels, with retail, direct, and e-commerce all delivering strong double-digit growth.

Emerging categories continued to add momentum. Robotics delivered strong growth, supported by premiumization and a shift toward fully automatic models. The company also highlighted steps to strengthen category adoption through marketing investments, including a new campaign for robotics. Water softeners delivered strong double-digit growth, reflecting what management described as increasing relevance and potential for the category.

Financial summary (standalone)

Note: Reported PAT includes a one-time pre-tax gain of Rs 19.5 crore due to reversal of gratuity expense.

Margins: resilient gross margin, higher growth investments

Eureka Forbes reported gross margin of 58.4% in Q1 FY27, down 131 basis points year on year. The company attributed this decline to commodity inflation and adverse currency movements, and noted that meaningful reduction in input costs was yet to be seen.

Operating costs reflected a deliberate push to invest behind growth. Employee benefit expenses rose 10.7% year on year to Rs 90.0 crore, which management linked largely to annual increments. Other expenses rose 21.4% year on year to Rs 162.0 crore, with management indicating that almost the entire increase could be attributed to higher advertisement and sales promotion investments, especially to strengthen in-store presence in modern retail.

The net result was an adjusted EBITDA margin of 10.5%, with management emphasizing that the underlying profitability drivers remain intact. In the call, management stated an expectation that full-year EBITDA margins would be broadly in line with last year, supported by operating leverage, productivity initiatives, and cost efficiencies.

Service business: bookings impacted by AMC price hike, filters in focus

Service remained a key area of attention in Q1 FY27. Management said service revenue growth tracked at levels seen in recent quarters. However, AMC bookings showed some moderation after AMC price increases, with management stating that customers postponed renewals following hikes of roughly 3% to 12% depending on single-year versus multi-year AMCs.

Alongside AMCs, the company continues to push growth in filters and spares. In Q1, Eureka Forbes launched an aggressive multimedia campaign to raise awareness of genuine Aquaguard filters, aiming to accelerate adoption and influence customer behaviour. Management also described ongoing digital interventions to improve customer experience and service KPIs, including an emphasis on 24-hour turnaround performance.

Strategy: penetration, premiumization, and a D2C platform

The company’s transformation strategy continues to be framed around reimagining Eureka Forbes as a D2C health and hygiene tech leader. The stated pillars include growing water penetration and premiumization, expanding the portfolio into convenient cleaning and air, excelling in service to improve customer lifetime value, and building a D2C platform around convenience and commerce.

In the earnings call, management linked water category growth to efforts that reduce total cost of ownership. The company discussed prior launches of two-year filter life products and noted that about 45 days before the call it launched two e-commerce water purifiers with four-year life, Glow 4X and Ritz Pro 4X, which it said were receiving a positive response.

Balance sheet strength provides flexibility for this playbook. The company ended Q1 FY27 with a net cash surplus of Rs 425 crore and reiterated a focus on maintaining a strong balance sheet while investing selectively to support long-term growth.

Takeaways from Q1 FY27

Q1 FY27 showed a clear acceleration in the topline, with water purifiers stepping up and emerging categories sustaining momentum. The trade-off was a modest margin decline, driven by lower gross margin from inflation and currency depreciation and higher growth investments, particularly in-store execution.

Management’s near-term stance is to keep investing behind growth while using cost programs and operating leverage to protect profitability. The key monitorables for the rest of FY27 are the trajectory of gross margins in a volatile cost environment, the pace at which service bookings normalize after AMC price increases, and whether filter and spares growth scales as awareness efforts intensify.