Eureka Forbes Ltd Management Discussions

We are pleased that you have engaged with our first Integrated Annual Report and trust that you have found it insightful. As you delve into the MD&A section, we aim to provide a comprehensive analysis of how Eureka Forbes is driving value for its stakeholders through strategic initiatives and operational excellence. This section has been crafted with meticulous care to provide a detailed analysis of our performance and future outlook, reflecting our commitment to transparency and stakeholder value

ECONOMIC OVERVIEW Global Economy

The global economy is navigating a dynamic landscape, influenced by geopolitical conflicts, higher interest rates, and volatility in energy prices and food markets. According to the International Monetary Fund (IMF), the global economy achieved a modest growth rate of 3.3% in 2023. Inflation has eased from last years peaks and is expected to continue its downward trend.

The global economy presents a mixed outlook, shaped by geopolitical conflicts, high debt levels, and extreme weather events. Despite its resilience, global growth faces risks from rising interest rates, potential price surges due to geopolitical tensions, and increased instability from upcoming elections

in various regions. Despite these uncertainties, the global economy is projected to grow at 3.2% in 2024 and 3.3% in 2025. Advanced Economies (AEs) are expected to grow at 1.7% in 2024 and 1.8% in 2025. Emerging Markets and Developing Economies (EMDEs) are projected to maintain a steady growth of 4.3% in both 2024 and 2025. Global inflation is expected to decrease from 6.8% in 2023 to 5.9% in 2024 and 4.5% in 2025.

Source: World Economic Outlook-IMF, April and July 2024

India Economy

The Indian economy maintained a steady growth trajectory in FY 2023-24 and remains the fastest-growing major economy. According to the National Statistical Office (NSO), the Indian GDP grew by 8.2% in FY 2023-24, up from 7% in FY 2022-23. This growth is aided by robust private consumption, increased investments, and a stable interest rate environment. Inflation softened to 5.4% from 6.7% last year, staying within the RBIs target, while the Index of Industrial Production (IIP) averaged a healthy 146.7, reflecting 5.9% YoY growth. Furthermore, the governments focus on infrastructure development, digitalisation, ease of doing business, and inclusive growth has enhanced overall business conditions.

Outlook

As per RBI estimates, the Indian economy is projected to grow at 7.2% in FY 2024-25. Indias economic activity continues to sustain its momentum on the back of investment demand, steady urban consumption, improving rural consumption and strong consumer and government spending. While geopolitical tensions, volatility in global commodity prices, and geo-economic fragmentation pose risks, financial conditions in India remain accommodative. Expectations of a favourable monsoon and continued infrastructure development are expected to bolster the agriculture and manufacturing sectors, respectively. Improved banking sector health is likely to enhance credit growth, further driving economic expansion.

Source: NSO, RBI

INDUSTRY OVERVIEW

Trends Shaping the Industry

Our categories address health needs and in a relatively short period of time, there is a convergence of several category specific factors that provide tail winds to the categories in which we operate. Over and above these are factors associated with Indias growth story, demographic profile, urbanisation etc which provide further momentum.

Growing incomes:

Middle class, the fastest-growing segment of the population, is projected to reach 1 billion by 2047. (Source: PRICE ICE Survey)

Urbanisation:

40% of Indians are expected to reside in towns and cities by 2036, up from 31% in 2011. (Source: World Bank)

Increased female workforce participation

Female labour force participation rate increased from 33% in 2022 to 37% in 2023. (Source: PLFS and MoSPI)

Piped water access:

Households with piped water rose from 16.8% in 2019 to 77.2% in 2024. (Source:

Jal Jeevan Mission Dashboard)

Water purifier industry

The water purifier market in India has witnessed substantial expansion in recent years, driven by several factors, including the increasing prevalence of water-borne diseases, government initiatives such as the Jal Jeevan Mission aimed at enhancing access to safe drinking water, and advancements in purification technology that effectively address inorganic contaminants. As Indias population continues to expand and its geographical diversity presents unique challenges, ensuring comprehensive access to safe drinking water remains a critical issue.

The water purifier market is poised for further growth, propelled by various macroeconomic factors. Rising income level is a major catalyst, with the rapidly expanding middle class, projected to reach 1 billion by 2047, substantially increasing demand for water purification solutions. Urbanisation and modern lifestyle shifts have driven a significant surge in demand for water purifiers, leading to a considerable increase in market size. The World Bank estimates that by 2036, 40% of Indians will reside in urban areas, up from 31% in 2011, which will further boost the demand for water purification solutions. Additionally, the rising participation of women in the workforce, with the female labour force participation rate climbing from 33% in 2022 to 37% in 2023, is contributing to greater household purchasing power. Other factors fuelling the growth of the water purifier market include significant improvements in infrastructure, evidenced by the rise in piped water access from 16.8% in 2019 to 77.2% in 2024, and high electrification rates of 96.7%, which support the efficient use of modern water purifiers. Furthermore, heightened awareness of health and hygiene post-pandemic is also contributing to the surge in demand for water purifiers, significantly expanding the market.

Under Jal Jeevan Mission, out of the total target of over 19 crore households, ~76% have been provided with tap water connections. The success of this mission, coupled with the Pradhan Mantri Sahaj Bijli Har Ghar Yojana (SAUBHAGYA) initiative providing electricity to every Indian household, significantly bolsters the water purifier market. Government campaigns promoting clean drinking water also contribute to raising awareness about the importance of water hygiene, further expanding market potential.

Electrification:

96.7% of Indian households are now electrified. (Source: IRES)

Unpredictable domestic help:

There is an increasing need for reliable and convenient backup solutions due to the variability in domestic help availability

Heightened focus on health & hygiene:

There has been a marked increase in the frequency and intensity of home cleaning and hygiene practices post Covid

Despite the strong market growth, water purifier penetration in India remains significantly lower compared to other Asian countries, with only 6% per capita penetration. Limited awareness and affordability constraints are the primary factors contributing to the low penetration of water purifiers in India. In contrast, China boasts a 21% penetration rate, South Korea leads with 60%, and Thailand stands at 20%. This disparity highlights substantial growth opportunities for the Indian market.

to grow at a robust CAGR of 14% over the same period. Additionally, the water softener segment is expected to experience a CAGR of 10%.

The Companys robust brand strength and enduring customer relationships, evidenced by its 62% first preference among consumers, and its extensive customer database of over 14+ million, provide a strong foundation for capturing a growing market share. With an omni-channel go-to-market strategy supported by a 4,200-strong frontline team and a service network that covers more than 19,500 pin codes, Eureka Forbes is well-positioned to reach a wide audience and address diverse consumer needs. Its focus on innovation and superior products across various price points aligns perfectly with the expanding market for water purifiers. Its ability to communicate effectively across different market segments and its ongoing efforts to penetrate underserved regions offer substantial growth potential. Moreover, the robust replacement market for water purifiers represents a significant opportunity for continued expansion. With these strategic advantages, Eureka Forbes is well-placed to leverage the growing demand and secure a leading position in the evolving water purifier landscape.

India presents a vast total addressable market for both water purifier products and services due to a large base of nonusers who still rely on traditional purification methods such as boiling, cloth, and sieves. Currently, urban penetration for water jars stands at 11%, while electric water purifiers have a slightly higher penetration rate of 12%. This indicates significant untapped potential for modern water purification solutions as more consumers transition from conventional methods to advanced technologies.

Vacuum cleaner industry

The vacuum cleaner market in India has been growing significantly. Several key factors are driving the market growth including favourable demographics, increasing female workforce participation and rising disposable incomes, which are driving higher purchasing power and, consequently, greater demand for home appliances. Rapid urbanisation is also a significant contributor, as a substantial portion of the population migrates to cities, leading to smaller living spaces that require efficient and convenient cleaning solutions. In this context, vacuum cleaners have emerged as a popular choice for urban households. The unpredictability of domestic help further highlights the need for reliable and convenient cleaning solutions, enhancing the appeal of vacuum cleaners in the Indian market. Furthermore, there is a growing awareness of the benefits of technology in making household tasks more efficient, leading to increased adoption of vacuum cleaners to access difficult-to-reach areas. This trend extends beyond homes with domestic help, as vacuum cleaners are increasingly used to improve chore management. In industrial and commercial settings, such as malls, the integration of manual labour with advanced technology boosts cleaning efficiency while maintaining aesthetic standards.

The water purifier market in India is poised for impressive growth. According to Technopak, the water purifier product segment is projected to expand at a compound annual growth rate (CAGR) of 13% from FY 2022-23 to FY 202930, while the water purifier service segment is anticipated

Indias vacuum cleaner penetration is considerably lowe compared to its Asian counterparts, with a mere 2% pe capita. In contrast, Japan dominates with a staggering 90% penetration rate, followed by Hong Kong at 80% and Chin; at 20%. This significant gap highlights the vast potential fo market growth in India. As awareness of cleanliness anc health intensifies, demand for vacuum cleaners is expected to rise across residential, industrial, and commercia sectors, indicating a promising opportunity for marke expansion and development. The Indian vacuum cleane market is projected to grow at 17% CAGR during FY 2022 23- FY 2029-30. This growth is anticipated to be driven b growing awareness of hygiene in the post-pandemic era coupled with the various benefits of vacuum cleaners.

Air purifier industry

Air quality in India has significantly deteriorated in recent years, impacting not only the northern regions or winter months but the entire country. The situation has been exacerbated by adverse winter conditions, contributing to worsening air quality indexes. India is home to 83 of the worlds 100 most polluted cities, underscoring the severity of the problem.

The rising levels of air pollution and air-borne diseases have propelled the demand for air purifiers, which are increasingly seen as essential for maintaining healthier indoor environments. The growing awareness of health issues and the pursuit of cleaner living spaces have led to a surge in the use of air purifiers in homes. Additionally, their application in industrial and commercial settings has become widespread, as they effectively combat construction dust, asbestos, weld smoke, and other pollutants, as well as eliminate odours and smoke particles. The air purifier market is projected to expand at a robust CAGR of 18% from FY 2022-23 to FY 2029-30, driven by the increasing need for effective air purification solutions across various sectors.

Vacuum cleaners equipped with HEPA filters are particularly effective at removing household allergens such as pollen, dust, and pet dander. While deep-cleaning models remain popular, the rise in dust allergies has led to increased use of handheld vacuums for daily cleaning, mitigating risks of eye allergies and respiratory issues. Furthermore, government initiatives like the Swachh Bharat Mission, which promote cleanliness and sanitation, are also driving vacuum cleaner adoption across industrial, commercial, and residential sectors. These efforts are enhancing market opportunities for leading players by encouraging cleaner environments and supporting the growth of the vacuum cleaner industry.

BUSINESS DIVISIONS

Our business has a healthy spread of revenues across the product business and services business. Even within the respective portfolio, our offerings span various price segments. The same balanced revenue profile is also reflected in our channel split.

STRENGTHENING EUREKA FORBES

EFL has demonstrated formidable marketing strength by effectively addressing key category barriers to drive market penetration. It tackled affordability issues with the launch of Aquaguard Sure and Aquaguard Delight, priced at 6,499, making advanced water purification solutions more accessible to a broader audience. To enhance relevance, the Company initiated a category- creating campaign specifically targeting users of cloth filters, resulting in 70% of new economy SKU buyers being new entrants to the category. Additionally, its distribution strategy expanded accessibility by establishing over 7,000 new category outlets, further broadening its market reach and strengthening its competitive position.

The Companys marketing strategy further excels through its premium innovations designed to drive product upgrades and faster replacement cycles. By focusing on elevating customer experience to best-in-class standards, it has made substantial investments in fortifying its service network, digitising the service experience, and enhancing the speed and quality of service delivery. These efforts have led to significant improvements in customer service, as evidenced by the highest-ever Net Promoter Scores (NPS) and over 70% of complaints being addressed within one hour.

Despite having a large installed base, the Company recognises that there is an opportunity to increase service uptake among its own customers. To address this, it has launched several initiatives, such as increasing awareness through targeted service campaigns and implementing authentication measures like QR codes on filters to combat the prevalence of counterfeit products. The introduction of tiered AMCs aims to make genuine service more affordable, while improved service access, including the commitment to one-hour response times, ensures greater convenience for customers. These comprehensive strategies are designed to capture a larger share of the service market and reinforce

the Companys position as a leader in customer satisfaction and service excellence.

EFL is strategically positioned to excel as a strong Direct 2 Consumer (D2C) business by focusing on the 3Cs: Convenience, Customisation, and Commerce. It enhances convenience through streamlined complaint management and tracking systems, while customisation is achieved by offering personalised AMCs. The commerce aspect is driven by effective cross-selling and replacement selling strategies.

Leveraging a rich dataset of 14 million customers and maintaining long-standing relationships across various life stages, EFL benefits from direct access to customers through physical channels. The Companys D2C strategy is already showing promising results. Its app, which boasts over 1 million active installations, facilitates digital interactions with over 76% of complaints booked online. The introduction of new, convenient UI/UX and personalised offers further enhances the customer experience, making it easier for users to engage with the Companys products and services. This approach not only strengthens customer relationships but also drives increased engagement and sales through its D2C channels.

BUSINESS PERFORMANCE

The execution of the transformation strategy has been planned in different phases keeping in mind business priorities. In FY24, the focus of the business was on restarting volume growth, building an innovation pipeline, achieving threshold profitability, making investments for the future and cash generation. FY 24 was the 1st full financial year of the transformation.

Our interventions restored volume growth and the latter part of the year witnessed several launches which added momentum. Our key launches for FY 24 include:

• Water Purifiers: Aquaguard SlimTech Glass, Aquaguard Blaze Insta, Aquaguard Designo Nxt, Aquaguard Aura 2X Life, Aquaguard Ritz, Aquaguard Marvel Nxt, Aquaguard Delight Nxt, Aquaguard Vector RO, RO UV Alkaline, Nova UV+UF+SS

• Vacuum Cleaners: Forbes Robotic Vacuum Cleaners, Forbes Uprights Vacuum Cleaners, Forbes Zerobend, Forbes Robo LVac Voice Nuo, Forbes Buddy Pet Grooming Kit

• Air Purifiers: Forbes Air Purifier 355 Surround 360?, Forbes Air Purifier 150 Surround 360

Cost optimisation program was initiated and resulted in significant savings in discretionary spends. The program is on going and will continue for further opportunities.

Significant investments were made in several areas for capability building and these now provide the platform for the next phase of the transformation.

FINANCIAL PERFORMANCE

Our FY24 Performance indicates a clear break-out from long term historical trends.

The break-out has been witnessed on all 3 parameters of revenue, profitability and cash.

	Long-Term (FY12 - FY22)	FY 23	FY 24
Volume growth - Product*	Negative	Low single digit	Strong double digit
Revenue Growth	Low single digit	2.2% 6.1%**	5.2% 7.9%**
{Adj EBITDA %	3.8% (avg)	6.30%	10.30%
Net Surplus/ (Debt)	Net Debt	(50) cr	108 Cr
Market Share	Decline	Decline	Gain

Note: * Electric Water Purifier + Vacuum cleaner, ** Continuing Business

Adjusted (Adj.) EBITDA is defined as PBT (before exceptional items) + Finance cost + Depreciation + ESOP charge less other non-operating income. Full year market share basis internal estimates.

Phase I Transformation

The Companys Phase I of transformation has significantly strengthened its financial profile by restoring product growth, achieving profitability thresholds, creating headroom for growth investments, investing in future capabilities and initiating cash generation. This robust foundation supports EFLs continued growth and strategically positions the Company for future advancements.

Strategic Objectives	Key Initiatives	Outcomes
Restore Product Growth	Drive Volume growth and Innovation launches	12.7% Product revenue growth
Achieve Threshold Profitability create headroom for growth investments	Reduce non-consumer facing discretionary spends	17% other expense reduction vs FY23
Invest For Future Capabilities	Right size organisation & Invest in structural capabilities	36% Head Count reduction; fully re-invested in capability creation
Start Cash Generation	Operational efficiencies	307 Cr cash generation; from DEBT to SURPLUS

Notes:

1. Product Revenue growth is for FY24 and continuing business.

2. Other expense defines as Other expense less Advertisement and Sales promotion expense.

3. Headcount reduction as of 31st March 2024 vs as of 31st March 2022.

4. Capex increase in FY24 vs last 5 year average.

5. Cash generation since September 2022 to 31st March 2024.

KEY FINANCIAL METRICS

In FY 2023-24, EFL demonstrated robust financial performance, with revenue climbing to 2,189.23 Crores from 2,080.42 Crores in FY 2022-23. EBITDA increased to 191.87 Crores, up from 131.68 Crores in the previous year. Additionally, the Company achieved a significant boost in net profitability, recording a PAT of 91.57 Crores compared to 17.08 Crores in FY 2022-23.

1. Product Revenue growth is for FY24 and for continuing business.

2. Adjusted ( Adj) EBITDA is defined as PBT (before exceptional items) + Finance cost + Depreciation + ESOP charge less other non-operating income.

3. Adjusted (ADJ) PBT is defined as PBT (before exceptional items) + ESOP charge. Adjusted (Adj) PAT is defined as PAT reported + ESOP charges net of tax.

4. Working Capital equals to current assets minus current liabilities.

Key financial performance, operational highlights and ratio analysis financial performance

( Crores)

Particulars	Standalone		Consolidated
	FY24 ^	FY23	FY24	FY23
Revenue	2,189.23	2,080.42	2,189.25	2,084.51
Earning before interest, taxes, depreciation and amortisation (EBITDA)	191.87	131.68	198.64	145.02
Profit Before Tax (PBT)	122.40	26.94	128.47	38.51
Profit After Tax (PAT)	91.57	17.08	95.65	26.47
Fixed Asset	270.66	270.25	273.60	272.96
Total Comprehensive Income	89.21	12.35	93.52	21.49
Loan funds	24.92	120.80	24.92	121.02

Notes: Explanation for change in the ratio by more than 25%

a) Higher earning and repayment of borrowings during current year.

b) Repayment of borrowings during current year.

c) Higher net profit after tax during the current year due to increased operational revenue and effective cost management.

d) Higher net profit after tax during the current year with improved efficiency.

RISK MANAGEMENT

The Company has a robust risk management system covering all aspects of business including all essential operations, functional areas and business segments. The Risk Management framework ensures the safeguarding of the interests of all stakeholders led by thorough identification, analysis, and mitigation of foreseeable business risks. A bottoms-up approach ensures timely risk recognition which helps in undertaking appropriate risk mitigation measures. The flexible nature of the risk management framework allows it to accommodate shifting business requirements.

For more details please refer to the Risk Management section of the Integrated Annual Report.

Key Financial Ratio

Key ratio/indicator	Standalone		Consolidated		Refer Note
	FY 2023-24 :	FY 2022-23	FY 2023-24	FY 2022-23
Debtors turnover (in days)	22.00	24.00	22.00	24.00
Inventory turnover ratio	3.96	3.42	3.76	3.27
Interest coverage ratio	13.60	2.36	14.14	2.90	a
Current ratio	0.61	0.49	0.64	0.52
Debt equity ratio	0.01	0.03	0.01	0.03	b
Operation profit margin	4.51%	1.54%	4.70%	2.00%	c
Net profit margin	4.18%	0.82%	4.37%	1.27%	d
Return on the net worth	2.21%	0.42%	2.30%	0.65%	d
Basic EPS (?)	4.73	0.88	4.94	1.37	c

INTERNAL CONTROL SYSTEMS AND ADEQUACY

The Company has framed its Internal Financial Controls (IFC) in adherence to Section 134(5)(e) of the Companies Act, 2013 (Act). The IFC ensures organised and efficient business operations, safeguarding of assets, adherence to established policies, prevention of frauds and errors and thorough maintenance of accounting records. The internal controls are in accordance with the size and complexity of business operations providing reasonable assurance regarding all the aforementioned IFC elements.

HUMAN RESOURCES

Human capital is considered an essential pillar of organisational growth at EFL. The Company strongly believes that its people will be the key to the success of this transformation. Significant investments have been made in creating fresh capabilities while equally preserving our legacy strengths.

Our key focus is to foster a sense of ownership in our EuroChamps. We also recognise that we also need to reimagine our culture codes and have rolled out several learning and development interventions which in turn results in a robust team with an optimistic work environment. The Company fosters diversity and inclusivity. The HR team promotes a performance led work culture providing equal growth opportunities and a sense of ownership amongst all employees. The team ensures that employee goals are aligned with business goals. Employees are an integral part of the organisational growth creating sustainable value for all stakeholders. EFL continues to promote a performance- led work culture intertwined with high importance for teamwork. The Company constantly looks to strengthen its talent pool to further enhance efficiency and responsibility.

OUTLOOK

With the water purifier, vacuum cleaner, and air purifier industries on a double digit growth trajectory, Eureka Forbes is strategically positioned to emerge as a leading

beneficiary. With its robust product portfolio and innovative strategies, the Company is well-equipped to capitalise on the expanding market opportunities.

We are embarking on an ambitious re-imagination of our business model to ensure long-term success over the next forty years. Leveraging our deep, long-standing strengths, we are actively rebuilding our foundations to adapt to current and future market demands. Operating in categories that are currently under-penetrated, Eureka Forbes has a long runway for growth. We have an exciting transformation strategy designed to reposition the Company in the market and drive sustained, profitable growth. To lead this transformative journey and achieve our ambitious goals, we have assembled a high-caliber team. While the early results have been encouraging, the Company is confident that its best achievements are yet to come, signalling a bright future ahead.

AWARDS AND ACCOLADES

During the year, the Company won the following awards:

• Red Dot Quality Label Winner 2024 for the outstanding product quality and design

• EFFIE 2023, SILVER in the Home Furnishings and Appliances Category for the highly successful campaign - ‘Sar Ka Kapda Hatana hai toh pehle Nal ka Kapda Hatana Hoga

CAUTIONARY STATEMENT

Statements forming part of the Management Discussion and Analysis Report covered in this Report may be forwardlooking within the meaning of applicable securities laws and regulations. Actual results may differ materially from those expressed in the statement. Important factors that could influence the Companys operations include demand and supply conditions, changes in government regulations, exchange rates, tax laws, monsoons, natural hazards, national and global economic developments and other factors.