Mumbai: Eureka Forbes Ltd is set to expand distribution network and launch new products, as the water purifier maker overhauls its portfolio, said a top executive at the Advent-backed home appliances company.
Over the last two years, the company has trimmed its portfolio, reduced costs and lowered headcount after years of stagnant market share.
“We would aim to at least double the distribution. We are present in over 22,000 outlets (general trade). The game of penetration expansion is more to do with general trade. We have a modern trade presence in over 3,000 outlets,” Pratik Pota, managing director and chief executive officer, EurekaForbes Limited said in an interview with Mint at the company’s head-office in Mumbai.
Modern trade refers to large-format retail stores vending products of different brands, while general trade refers to traditional retail sector, which includes standalone stores selling electronics and home appliances, as well as neighbourhood shops.
In 2021, global private equity firm Advent International acquired a majority stake in Eureka Forbes from Shapoorji Pallonji Group. The transaction then valued Eureka Forbes at ₹4,400 crore.
It sells water purifiers under the Aquaguard brand, apart from vacuum cleaners and air purifiers.
Pota was hired in July 2022 to transform the legacy business that had seen market share dwindle amid greater competition.
“While the business had foundational capabilities, it clearly needed reinvention and needed to be turned around. It wasn’t a mere ‘turn it around, get growth back or margin improvement’. It was a chance to completely reinterpret, reimagine, rethink the business,” Pota said.
Revamped Strategy Amid Market Growth
As part of the overhaul, Pota hired a new team and launched new products, both on the premium and lower end of the water purifier market. For instance, 80% of the company’s top two management levels are new hires. The company also undertook a 36% reduction in headcount between 31 March 2022 and 31 March 2024; and fully re-invested in capability creation, as part of the phase one of transformation, per the company’s investor day presentation released in June this year. It trimmed other expenses last fiscal and doubled capital expenditure in FY24. It also reduced water purifier models from 200 to now over 80.
“Last year, we dialled up our capex to almost two-and-a-half times of what we’re doing historically; in FY25 it will remain more or less the same,” he added. ”This goes into funding innovations and in digital technology. Now that we are in positive cash it gives us the headroom to invest in anything that drives growth,” he added.
In FY24, the company’s revenue from operations increased 5.2% to ₹2,189.2 crore. Profit after tax jumped more than fivefold to ₹91.5 crore from ₹17.1 crore in FY23. The company turned net cash positive with a surplus of ₹108 crore, versus a net debt of ₹50 crore in FY23, driven by cash generation of ₹194 crore during the year.
India’s water purifier market was estimated at ₹4,350 crore in FY23 – it is expected to swell to ₹10,200 core by FY30. However, category penetration remains low at 6% compared to refrigerators that stands at 43%.
Eureka Forbes Eyes Growth Opportunities
Eureka Forbes has a roughly 40% market share in the water purifier market, a business it once dominated in India. The company entered the water purifier market in 1984.
“One big part of growing penetration is to obviously also do distribution, expansion and drive distribution presence. So going much deeper into small towns, appointing distributors there, increasing distribution infrastructure, getting more outlet coverage going, that’s one part of it,” he said. The company drives similar sales from retail, online and direct sales. “We are now a balanced omni-channel company,” he added. Eureka Forbes competes with the likes of Kent Ro Systems Ltd and A.O. Smith in the Indian market.
For the near term, the company will continue to operate in the categories it is currently present in but “will be open” to new opportunities. “For the immediate future I think we are quite excited by the current categories that we operate in. All of them have a very high headroom for growth. We’ve got very exciting plans for each of these categories. We are laying the foundation, whether in terms of research, digital capabilities or distribution—all these would allow us to leverage these trends over a much larger portfolio in the future,” he added.
Pota said the company would be open to both organic and inorganic opportunities. “We are very, very hungry to grow, so anything that allows us to grow, organically or otherwise, we are okay,” he added.