Synopsis: Eureka Forbes is shifting beyond appliance sales by building a high-margin recurring revenue model through genuine Aquaguard filters, multi-year AMCs and enhanced customer service. Supported by double-digit growth, improving margins and strategic investments, the company aims to monetise its large installed base while strengthening customer retention and long-term profitability.
Eureka Forbes has long been associated with Aquaguard water purifiers, and for most of its existence, the business has been primarily appliance-driven. But as can be seen in the management commentary of FY26, the future growth story may not be entirely driven by more sales of purifiers but through monetisation of the huge installed base via genuine filter replacements, AMC agreements, and customer services.
The management often stressed the under-penetration in the aftermarket business whereby many of the Aquaguard customers tend to replace filters through the unorganised sector rather than buying genuine ones. Eureka Forbes has, therefore, been ramping up its efforts into what is termed the “filter opportunity” strategy that will not only provide a high-margin recurring revenue source but, at the same time, improve customer relations.
With a market cap of Rs 8,400 crore, the shares of Eureka Forbes Ltd are trading at Rs 436 and are trading at a PE of 44 compared to their industry’s PE of 52. The shares have given a return of more than 600% in the last 5 years.
This move comes as Eureka Forbes recorded another year of double-digit growth, posting an 11.3% revenue growth to Rs 2,710 crore, resulting in EBITDA of Rs 332 crore and EBITDA margins of 12.2%, its third consecutive year of margin improvement in FY26.
Why Genuine Filters Could Become the Next Growth Engine
The replacement filters, unlike the original sale of the water purifiers, offer repeated sales, as there is the need for changing them in order to ensure the purity of water and effective functioning of the purifier.
According to the management, it offers the company a huge revenue-earning potential which has not yet been tapped, as a large number of customers who have installed Aquaguard products buy their replacement filters from outside the company’s ecosystem.
During the earnings call, CEO Pratik Pota stated that filters were a great opportunity for the company, and it has made some simplifications by launching a range of genuine filters and filter kits, developing a totally new distribution channel and running consumer awareness campaigns aimed at making consumers purchase genuine products.
Filters, according to the management, cannot be considered just an ancillary business as they offer the company a great strategy pillar in generating revenues through services in the next few years.
Building an Ecosystem Instead of Selling Individual Products
The approach adopted by management goes way beyond the launch of new filters. Eureka Forbes aims to create an integrated ecosystem of water purifiers, AMCs, real filters and services. In FY26, the company launched a new distribution system for real filters while at the same time investing more into customer awareness.
An influencer-driven campaign reached over one billion video views, indicating management’s plan to inform customers about the need to use real Aquaguard filters instead of the much cheaper options offered on the grey market. The company also emphasized that the customer education process is as important as the product availability because the buying cycle of the filters is not frequent.
Thus, unlike a new appliance, which can be promoted in traditional retail stores, filters have to alter deeply rooted consumer behaviours. As per management, every step taken, from the redesigning of filter assortments to customer education campaigns, aimed to build customer confidence and capture more market share from the aftermarket purchases.
AMCs are creating predictable and recurring cash flows
Another essential revenue stream for the company comes from its Annual Maintenance Contracts (AMC). During FY26, the bookings under the AMCs witnessed double-digit growth, and it was the fourth consecutive quarter where the management had seen such growth. As per CFO Gaurav Khandelwal, these increased bookings have now translated into higher service revenue, and further such bookings are expected to positively impact the revenue going forward in FY27.
It needs to be noted that Eureka Forbes has deliberately moved away from short-term AMCs to multi-year AMCs, which ensure that the customers remain loyal to the company over the long term as well as prevent them from moving to grey-market operators. While this approach helps in retaining the customers and improving the lifetime value of their relationship, it means that the revenue will get recognised only after a few years.
The management stressed on several occasions that the combination of genuine filters with multi-year AMCs forms a more powerful recurring revenue generator than either of the initiatives individually.
Customer Experience Is Becoming the Competitive Advantage
Eureka Forbes’ strategy of recurring revenue is not based entirely on selling more filters and AMCs. According to management, customer experience in the end will play a role in determining if consumers stick to their ecosystem or not. In FY26, there have been a number of significant achievements in terms of several customer service KPIs, including a decrease in escalations and faster turnarounds.
As per management, FY26 was a pivotal year in terms of customer experience. Several service KPIs reached all-time highs, whereas extreme outliers decreased materiality. However, beyond improvements in the area of customer experience operations, Eureka Forbes started to redesign their service offering according to evolving consumer needs shaped by e-commerce and quick commerce.
Before, the company was providing service within 24 hours from complaint registration. This promise has been transformed into a guarantee of service within two hours, whereas management started piloting a revolutionary four-hour service model for some product categories.
The Filter Business Offers Attractive Margin Expansion Potential
One of the reasons for which management is placing a great deal of importance on the aftermarket ecosystem is the favorable economics. During FY26, Eureka Forbes managed to make the business more profitable despite increasing investment in growth programmes. Gross margins grew by 46 basis points to 58.8%; adjusted EBITDA was up by 16.4% to Rs 332 crore, and EBITDA margin grew to 12.2%.
It should be noted that the results were delivered amid the 13.2% increase in advertising and sales promotion expenses, increased costs related to the customer acquisition process and increased costs of service transformation. The management mentioned that service revenue also continues growing due to consistent double-digit AMC bookings.
Moreover, service fees increased much less than bookings as the company managed to implement various efficiency programmes that are aimed at the reduction of operational leakages through digital management.
Turning Investments Into Scalable Growth
FY26 has also been one of investments made by the company, which will help the company grow further in the coming years. The company has invested heavily in its advertisement and sales promotions, where it increased spending by 13.2%, and at the same time, it has invested in capital expenditure, which increased from Rs 55 crore to Rs 84 crore.
Eureka Forbes managed to maintain margins for the third year running, thereby showing that its growth strategy is being funded and not affecting its profitability. The management pointed out that the company had made progress in terms of its efficiency in operations and supply chain as well as service digitisation processes, which should help the company gain operating leverage as volume increases.
Outlook: Execution Will Be the Key Monitorable
With the accomplishment of three years of profitable growth in a row, management thinks that the company has built itself a strong foundation for moving forward in the future. Now, the key areas will be not developing capabilities but rather executing successfully in the areas of innovation in product lines, expansion in distribution, digitisation, and customer engagement.
It will be interesting to see how fast these efforts turn into increased category penetration, better customer retention, and operational leverage for the company. With a net cash position of Rs 443 crores and free cash flow of Rs 237 crores, Eureka Forbes will have enough cash flow to continue investments in these efforts amid economic uncertainty.
Provided that management executes successfully according to the plan presented for FY26, the company will improve its competitive position and build a more resilient business model to achieve sustainable profit.
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