EPACK Durable Q4 FY26: A transition year tests margins, while diversification gains ground

EPACK Durable Limited closed Q4 FY26 with operating revenue of INR 5,910 million, down 8.1 percent year on year, as the room air conditioner cycle stayed weak and channel inventory reset continued. Profitability fell harder than revenue. EBITDA came in at INR 258 million, down 64.2 percent year on year, and EBITDA margin compressed to 4.37 percent from 11.21 percent a year ago. Net profit was nearly flat at INR 0.24 million, and diluted EPS dropped to INR 0.003.

For the full year, the picture was similar but clearer in context. FY26 operating revenue declined 12.7 percent to INR 18,945 million. EBITDA fell 27.7 percent to INR 1,139 million and margin reduced to 6.01 percent. PAT declined to INR 33 million from INR 551 million in FY25, pulling PAT margin down to 0.17 percent.

Management framed FY26 as a temporary industry transition year shaped by weather-led demand disruption, GST rationalization, and a near-term reset in the RAC value chain as the market moved to revised BEF norms and channels recalibrated inventory. Despite that moderation, EPACK kept investing in capacity, localization, and diversification. That decision weighed on near-term ratios, but it also explains why non-RAC categories and components expanded even in a soft year.

Mixed demand, but the portfolio is doing more of the heavy lifting

The operating revenue decline was driven primarily by RAC. AC revenue in FY26 was INR 10,461 million versus INR 15,663 million in FY25, a 33.2 percent decline. In Q4 FY26, AC revenue declined 24.7 percent year on year to INR 3,081 million.

At the same time, the non-RAC engine kept turning. SDA and LDA revenue grew 34.8 percent year on year in FY26 to INR 3,889 million, and grew 32.1 percent in Q4 FY26 to INR 1,247 million. Components grew even faster. FY26 components revenue was INR 3,663 million, up 102.7 percent year on year. Q4 components revenue rose 50.1 percent to INR 1,393 million.

This mix shift matters because it signals a more balanced platform. EPACK’s investor deck highlights that non-AC portfolio contribution has increased from 20 percent in FY23 to 42 percent in FY26. Alongside category diversification, customer diversification is also moving in the right direction. Top two customer concentration reduced from 72 percent in FY23 to 37 percent in FY26, and the company added 17 new customers during the year, taking the base to 72.

Financial snapshot

Incentives, one-time reversals, and what they mean for comparability

A major reason headline profitability looks extreme is incentives accounting. During Q4 FY26, the company recognized incentive income of INR 217.74 million under the Rajasthan Investment Promotion Scheme 2024, based on management’s assessment of meeting eligibility conditions. Of this, INR 49.57 million pertains to FY25-26 and INR 168.17 million pertains to earlier periods.

At the same time, EPACK reversed previously recognized PLI income of INR 324.20 million that had been accrued during the nine months ended December 31, 2025. The reversal was linked to an evolving assessment and ongoing procedural review, and management called out the one-time material impact on reported Q4 and FY26 profitability.

For investors, the practical takeaway is that FY26 margins are not just a function of volume and cost. They also reflect an incentives line that moved both ways in a single year. That can make quarter-on-quarter comparisons noisy, especially when the underlying demand cycle is also in transition.

Strategy in a soft RAC year: invest through the cycle

EPACK’s strategy through FY26 was not defensive cost cutting. It was capacity build-out and localization. Strategic capex in FY26 totaled INR 2,971 million across four hubs: Dehradun, Bhiwadi, Sri City, and EMPTL Sri City. Investments were concentrated in Bhiwadi and Sri City, where the company’s manufacturing ecosystem appears to be scaling toward deeper integration.

The company positions itself as a leading living appliance ODM, the largest induction cooktop ODM and OEM, a leading RAC ODM, and a leading air fryer ODM. It operates five pan-India manufacturing locations, supported by three NABL certified R and D labs. It also manufactures key components in-house including heat exchangers, copper tubing, and PCBAs, alongside capabilities like plastic molding and sheet metal.

That operating design ties directly to the fastest-growing part of the FY26 revenue mix. Components growth of 102.8 percent year on year suggests that backward integration is not only a margin lever in the long run, but also a revenue growth lever when OEM and ODM customers push for localization and supply chain reliability.

There are also clear signs of a broader product roadmap. In SDA, the company lists an existing range that includes induction stoves, water dispensers, mixer grinders, and air fryers. FY26 launches included infrared cooktop, nutri blender, and dry vacuum cleaner. FY27 upcoming products include tower fan, hair dryer, air purifier, and coffee maker. This pipeline supports the management message that SDA, LDA, and components are core growth catalysts, while RAC remains a large base business expected to normalize as inventory and weather conditions improve.

Working capital and leverage: the cost of scaling

While the deck emphasizes future operating leverage, FY26 shows the near-term financial trade-offs of scaling. Working capital cycle days increased to 91 days in FY26 versus 57 days in FY25. Key drivers were higher inventory days and receivable days. Inventory days rose to 161 from 98, and receivable days increased to 68 from 50. Payable days also increased to 138 from 91, which partly offsets the working capital build but also reflects higher procurement volume and vendor financing dynamics.

Balance sheet data shows a step-up in debt alongside capex and working capital. Gross debt increased to INR 7,070 million in FY26 from INR 3,697 million in FY25. Net debt increased to INR 6,912 million from INR 3,555 million, and net debt to equity rose to 0.72 from 0.37. Cash and cash equivalents were INR 158 million at year-end.

Asset intensity is also rising. Net fixed assets increased to INR 9,091 million from INR 6,909 million, and net fixed asset turns reduced to 2.4 from 3.2. This is typical when capacity is added ahead of full utilization. The investment case rests on whether demand recovery and product mix gains can translate into better utilization and margin normalization.

Segment performance table: the shape of the mix shift

What to watch in FY27: normalization plus operating leverage

Management’s FY27 outlook is built on improved summer conditions, normalized inventory, and operating leverage potential from investments already made. The stated growth framework centers on New Customer New Product, New Customer Existing Product, and Existing Customer New Product strategies, with targeted expansion in the ODM domain for washing machines, mixer grinders, air fryers, infrared induction cooktops, and nutri blenders.

The deck also notes a new client addition in the energy meter segment, Genus, which fits the broader theme of customer and segment diversification. If this diversification continues, EPACK’s revenue profile could become less dependent on RAC cycles over time, with components acting as both a stabilizer and a scale engine.

The core theme of FY26 is disciplined execution through a transition year. Revenue declined, margins compressed, and working capital expanded. But underneath the headline numbers, the business added customers, expanded its product roadmap, and scaled components sharply. The next phase is about converting that groundwork into utilization, cash conversion improvement, and cleaner profitability once incentives and demand normalize.