Good afternoon, and I welcome you all to the Q2 FY26 earnings call of Eureka Forbes Limited. I'm extremely pleased to share that quarter two was an important milestone quarter for us.

We delivered a strong revenue growth of 14.9%, driven by high teens growth both in our products and in our service business. For the first time ever, we added more than ₹100 crores of revenue year-on-year in a quarter.

This growth was not only in the context of a challenging external environment, but also on the high base of a 13.6% growth of last year. Our focus on building and expanding our product categories is playing out well.

In water purifiers, our 2-years range aimed at lowering the lifetime ownership cost for customers has expanded well and driven growth. In addition, our smart IoT range also began scaling up well.

We saw very, very encouraging traction to our products during the festive season, both in online and in offline channels. In cleaning, our focus on driving convenient cleaning continued and it gave us encouraging results in the quarter.

Our robotics range grew at a very strong pace on the back of the premium additions to the portfolio: the Forbes SmartClean Auto-Empty and the Forbes SmartClean fully automatic cleaning station. With the growth and the growing salience of robotics, which now contributes to nearly 60% of VC sales, the cleaning category has now emerged as a powerful growth engine for us.

With this quarter, our products business has delivered consistent and broad-based double-digit growth in every single quarter over the last 2 years. We expect this momentum to sustain in the periods ahead.

I'm also pleased to share that we have recently inaugurated our revamped R&D center in Bangalore, and this will add more muscle to our product innovation capabilities. Excuse me.

On the service side, the business turnaround continued, and indeed, gained momentum. After a double-digit growth in quarter one in our service AMC bookings, our growth trajectory accelerated in quarter two with overall service revenue, including AMC bookings, growing in high teens.

This growth came on the back of both growth in our AMC count, as also in an increase in ASP driven by a higher mix of multi-year AMCs, which, as you can imagine, lead to a better customer lock-in. Going forward, we have strong plans lined up for service, and we expect this momentum to continue without a shadow of doubt.

In addition, we strengthened our interventions aimed at improving customer experience. This in turn led to our customer service KPIs stepping up significantly and reaching an all-time high.

On the profitability front, quarter two adjusted EBITDA crossed ₹100 crores for the first time ever with a lifetime high margin of 13.1%. Our EBITDA margin expanded 162 basis points year-on-year during the quarter, even after a 21% increase in advertising and promotion spends.

It is clearly evident that operating leverage is playing out for us. Going forward, as we increase the scale of the business with gross margins remaining healthy, this will create a positive and virtuous cycle, giving us additional headroom for both growth investments and profitability improvement.

Our profit after tax in Q2 was ₹51.6 crores, at a PAT margin of 8%, growing 32% over last year. In summary, in a difficult market environment, we delivered a very strong quarter in Q2, with a very healthy growth in our product categories and in the service business along with a step-up in our profitability.

Looking ahead, our focus will remain on category creation and on driving growth through increased awareness, affordability, availability, and affinity for all our categories. In addition, we will deliver a significantly improved and best-in-class customer experience and also drive service revenue growth, both through AMCs and through filters.

We remain confident of driving sustained double-digit growth with a year-on-year margin expansion in the periods ahead. Finally, before I conclude, I just want to say that we are looking forward to hosting you at our upcoming Investor Day on November 27th in Mumbai, meeting you in person and sharing our plans for the next phase of our exciting transformation journey.

With that, I now hand you over to Gaurav to give some more flavor on our performance. Gaurav?

Thank you, Pratik, and good afternoon, everyone. Starting off with the Q2 headline numbers.

Our revenues at ₹773 crores grew by 14.9% on a year-on-year basis. Products business continued its momentum and registered high teens growth.

This growth was volume and mix led, and we saw strong growth in both the economy and the premium segments. On the service side, we continued to witness good traction, which began from Q1 this year.

AMC bookings growth accelerated and grew by strong double digits in value. This was driven by both volumes and ASPs.

Within that, the multi-year AMC mix improved, which helps in driving customer retention. While the reflection of service bookings in financials will come with a lag due to service amortization, this provides a healthy revenue stream for the quarters ahead.

Our transformation interventions have taken us to a place where we believe that we will be able to drive double-digit bookings growth in service in the quarters ahead as well. As we have communicated previously, while the revenue is amortized over the tenure of the AMC, the cost is recorded upfront.

After absorbing this higher upfront cost and a year-on-year increase of 21% in growth investments, adjusted EBITDA for Q2 crossed 100 crores with a lifetime margin of 13.1%, up 162 basis points year-on-year. Moving to gross margins.

Our Q2 gross margins at 56.5% were range-bound versus 56.3% last year and 25 basis points higher on a year-on-year basis. While on a sequential basis you may see a 322 bps contraction, it is important to clarify that this has been the trend where Q2 margins tend to be lower due to seasonality-led product mix changes.

We believe that our structural advantages and guardrails on gross margin in the form of a healthy product and service mix, portfolio straddling various price points, and effective cost management give us several levers on gross margin. Gross margins from Q3 onwards will go up again.

Profit after tax for the quarter grew 32% on a year-on-year basis. I will now cover H1 in summary.

Revenue at ₹1,381 crores was a growth of 12.7%. Adjusted EBITDA for H1 was ₹168.5 crores, resulting in a growth of 20% year-on-year.

Our margins are up 70 basis points on a year-on-year basis. Our strong cost management program has helped deliver COGS savings, and this is reflected in our gross margins being range-bound.

Reported PAT for H1 was at 100.1 crore, with a growth of nearly 29%. Cash flow in H1 was impacted due to working capital deployment.

This pattern is consistent with previous years. Within working capital, debtors increased due to three main reasons.

Number one, Q2 is always a spillover quarter due to monsoons and pre-festive billing. Within that, the revenue mix is biased towards channels like e-com and modern trade where standard terms of trade are given.

87% of the increase in debtors that you see is attributable to these two channels alone. Lastly, ahead of the GST 2.0 rollout, customer orders were back-ended and more closer to the GST 2.0 applicable dates, and this also impacted working capital cycles.

These will unwind in H2, as has happened in the past. On the inventory front, besides the impact of seasonal buildup, we've also consciously increased the stock levels of the import portfolio to ensure supply security.

As we progressively move to more indigenization, this will go down. On that note, I would once again like to extend to you a warm invitation for the upcoming Investor Day, and we look forward to hosting you there.

Thank you.

Yeah. Congrats to the entire team for a really excellent set of numbers in this quarter despite having a very strong base.

Two, three questions. One, the vision is mentioned in the PPT as D2C healthtech company.

Eureka Forbes is already doing extremely well in general trade. Why do we want to become a more D2C company or the understanding about direct context?

Just need one clarification on that. Secondly, it is also about some loss of revenues due to GST shift period.

What would be probably the loss of revenues during the anticipation of GST changes? That is second.

Third, in terms of if you can update on the pet care products that we had introduced around three or four quarters back. Thanks.

Thank you, Aniruddha. Thank you for the wishes.

Let me take your first question first on our vision to to to be a D2C health and hygiene company, and how does that play out given our historical strength or our historical legacy. Actually, if you take a step back, Aniruddha, we believe that Eureka Forbes was actually India's first D2C company 40 years back through our direct sales channel, albeit in a very, very physical and a brick-and-mortar way.

We have, as we speak now, first-party data of nearly 15 million customers. We reach our customers through both a direct sales channel and through our service network.

We are probably the only durables brand that has privileged access to customers' homes. More recently, we built on that that legacy using our digital platform to build our own app.

Our app now has more than a million and a half monthly active users who come to us who come to us for transacting, who come to us for looking at products, and of course, for service interactions. We believe that this this strength that we have of being able to reach customers directly, both physically and digitally, gives us a tremendous advantage.

As a case in point, at this time of the year, where there is a lot of discussion around air quality and air pollution, we have mounted an aggressive campaign targeted at our installed base, our existing customers, to using this D2C channels to drive cross-selling of air purifiers, and we've seen some encouraging results. We believe this is a sign of things to come.

Our vision of transforming into a D2C company is merely a logical, but digital extension of where our legacy lies. I hope I was able to answer that question, but happy to talk in more detail at the Investor Day.

On the second question—

Sure, sir.

Yeah. On the second question, I'll request Gaurav to just chip in here.

Excuse me.

Yeah. I think quarter two was an interesting quarter because there were two factors at play.

First was the GST rollout, because what it led to was a situation that ordering for nearly a 30-day period is something which had slowed down quite a bit. That was a negative factor which played out.

Equally, there was an element of a positive factor as well, which was a relatively earlier festive period compared to last year. Between the two, it kind of canceled each other out.

Hence, during the quarter, I wouldn't call out any meaningful impact on a net basis. I think from our perspective, the key metric which is looking quite good is the tertiary and secondary sales growth.

That is what we've been focusing on, and that is moving in the right direction.

If I can take the third question, Aniruddha, about pet care, you're right. We had launched our pet care range as part of our first set of innovations about two and a half years back.

It met with, I think, reasonably good response from pet owners, and it was actively being sold until about a couple of quarters ago. Our learning from the sales of our pet care cleaner was that while consumers liked the pet care vacuum cleaner, I think they're looking for slightly more comprehensive solutions.

We have now brought the pet cleaning and pet grooming functionality using our robotics range. If you see our robotics range, one of the use cases for robotics is the cleaning of pet hair that's shed.

We are seeing the use case of pet care and cleaning of pet hair as a big driver of robotics adoption. As we've talked about also in earnings presentation, robotics was a big driver of growth for us last quarter.

Like I said, one of the drivers of that also was pet care.

Yeah. Sure, sir.

Sure. That's very helpful.

Thanks.

Thank you.

Hi. Thank you for the opportunity.

Firstly, congratulations on strong set of numbers. I want to understand one thing, as you highlighted, Gaurav sir, key it has netted off.

One was the festive and second was the GST thing. It would be a fair understanding possibly Q3 at least because of early festive there won't be a loss because of GST sales?

Secondly, in Q1 call you highlighted because of working capital Q1 sales was impacted. Has because of better working capital at dealer level led to better sales in Q2?

Or should we see more like now 15% is kind of a sustainable growth rate, possibly can speed up because of pickup in service business?

Yeah. On your first question, Keshav, I think we don't see any meaningful impact happening in quarter three.

Your understanding of that is right. I think from our perspective what we are seeing is that the product momentum that is there is quite good.

It remains quite strong. I think what is now adding to it is the service turnaround.

We don't expect any meaningful impact to come through there because of GST or festive in quarter three. I think the only call out that I would have is that, as you would have noticed, the consumer sentiment does continue to remain mixed.

That is still getting reflected in various sectors and parts of the economy. That's the bit that, to what extent that plays out is there.

I think outside of that, we don't see any impact coming through. From a working capital standpoint, yes, in quarter one in the initial parts of the quarter, as we have mentioned, trade working capital was blocked because summer products were there.

Towards the end of the quarter, that had kind of evened out. That is something which kind of in quarter two, we don't see any impact of that playing out, and nor do we see the impact of that playing out in quarter three as well.

If I can just add to that, Keshav, a couple of points that I want to underline. I think the demand environment continues to remain challenging.

Notwithstanding that, we have a strong set of plans to drive growth both in products and in our service business. In products, you've seen sustained growth for many quarters now.

We grew by high teens last quarter. The good news now is that we have not just one growth engine, but multiple growth engines.

We have a strong growth engine in, of course, water. Robotics and cleaning is a big growth engine now, as are the other smaller categories of softeners and air purifiers.

We have multiple engines firing on growth. We also have renewed momentum in our service business.

We talked about an acceleration in quarter two, and we also said that we expect this to be sustained. We are confident about the growth prospects going forward.

How that will show up in terms of, given the service revenue accounting, etc., that time will tell. In terms of our growth vectors and our confidence in the growth that lies ahead, I think we have a high degree of confidence.

Understood. Got it.

My second question would be as I see the margin have expanded quite by 160 bps this quarter. When we see the brand spend is high, margin is expanding.

Is it fair to assume this year we'll see a strong expansion in margin? How should we see in upcoming quarters?

Keshav, our view on margins is that we always look at it on a full-year basis. Given the performance that we've had in H1, we will continue to aim for a full-year margin improvement.

That is something that we'll aim for. I think very clearly what's come across is that, and you made a very good point, that this is after a very high growth investment.

Even the 162 bps improvement is after the 58 bps increase in A&P spends. I think there are two main things I would call out.

One, clearly the impact of operating leverage. Number two, our cost programs are giving us very, very good outcomes.

We will continue aiming for a full-year margin improvement, whether it would be similar to last year where it was nearly 120, 125 basis points higher. Perhaps not, because that may mean that maybe we are holding back on growth investments.

You can expect a margin expansion to come through.

Okay. I'll have a follow-up—

Sure.

Yeah. Hi, good afternoon and congrats team for the strong performance.

My first question is, can you highlight how has been the mix of your product to services portfolio for the first half of the financial year? Within the product mix, have we seen a material change in the share given that robotics has been growing at a much faster pace, the cleaning portfolio having increased in the mix?

Thank you, Renu. Let me talk about your first question.

I think, as we mentioned earlier, we have seen a strong momentum in our products and in our service business last quarter, and indeed, in the first half of this year. Products grew by a high teens last quarter on the back of both strong volume growth as also an increase in ASP on the back of our premium products launch.

We also saw a high-teens growth in our service business coming, like I said, both from AMC as also from filters. Within AMCs, it was both a volume growth as also growth in multi-year AMC.

Given the strong momentum that we've seen in service and product, there has been no material mix change in the first half between services and product. That remains pretty much in the same range.

Within the product categories, you talked about cleaning and robotics. Robotics, off a smaller base, has shown very strong growth, as we've mentioned.

We've built a strong portfolio of products in robotics. We've built a very detailed playbook which works off our strengths across multiple channels, our strength in D2C, our strength in service, and it's really helped grow the portfolio.

The robotics growth and the cleaning growth, therefore, has been ahead of the other categories last quarter. The mix did move in favor of robotics and cleaning last quarter.

I think, that said, it's important to also underline the fact that our gross margins in this category are healthy and they're not going to be dilutive to overall P&L as we go forward.

Sure. Second—

Sorry to interrupt you, but if I may just complete the answer. Just one more point to add.

In robotics, our growth has come also from a premium end of our portfolio: the fully automatic cleaning station as also the Auto-Empty station, which come at higher gross margins and which are, therefore, more P&L accretive. In water as well, we've seen strong growth coming from the premium end of the portfolio, along with economy range.

Between the growth that we see in various parts of the category, we do not expect to see any margin dilution going forward. Sorry, over to you.

Sure. Just in continuation to that, typically our volume tends to see a much better acceleration in the second half of the financial year.

If that is to happen along with sustenance of this premium portfolio mix supporting gross margins, do we see operating margins actually heading better than first half in the second half, given operating leverage as well as sustenance of the mix that you've seen?

Renu, that could be a possibility. I think the only call out that I would have is that, what we are what we are seeing is and and our that all our product segments are growing.

Whether it is water, whether it is VC, whether it is air, whether it is softener. I think hence, equally, the key consideration for us is also the fact that, how do we kind of keep pushing this growth higher and higher, and whether it it makes sense to, make slightly ahead-of-time investments as an as an example, if you look at quarter one, in quarter one our our margins were down year-on-year, but we had made ahead-of-time investments, which have played out now.

We will keep that consideration in mind when we look at when we look at margin expansion. Yes, I think with with our gross margin profile, the operating leverage possibility is there.

I think at this stage to say whether it will be better than H1 may be a bit too early. You can expect our year-on-year margin expansion to be healthy, given the fact that H1 itself has clocked in at 70 basis points.

Sure. Lastly, Pratik did mention that overall the demand environment continues to remain challenging.

We have now seen almost 20, 25 days post the festive season through. Have we seen a meaningful tapering down of the volume momentum at tertiary and secondary level, or it was just a timing issue and business demand is not that weak as it was initially at the start of 2Q?

No, Renu, like I said, the overall demand environment remains challenging. That said, post festive, while the demand environment hasn't changed materially, we see the off-takes and the tertiary sales momentum being reasonable and in line with what happens after a typical festive peak.

Right. Got it.

That's number one. Number two, in that difficult demand environment, as I mentioned earlier in my comments, we have a very powerful set of initiatives to drive growth in water, in cleaning, in air, and in the other parts of the business, including in service.

Let me talk about water purifiers first. In water, we have scaled up during the quarter our 2-years filter life range.

That, as you can imagine, lowers the cost of ownership significantly. When we did a dipstick check to look at the profile of the new users, we were extremely reassured to see, and we were very pleased to see, that almost 70% of users who are buying the 2-years purifiers are first-time category entrants.

It's ticking the box and playing to the thesis of growing penetration. Equally, our premium portfolio did well in quarter two and continues to do well in this quarter as well.

While we see that demand being a little soft, and indeed, it was last quarter, and you saw our number delivery, we expect our numbers to be reasonably good and strong and healthy, notwithstanding what we see in the environment outside.

Got it. Perfect.

Thanks much and best wishes team. Thank you.

Thank you, Renu.

Hi. Thank you and congratulations on a good set of numbers, both Pratik and Gaurav.

My first question was on competition. While your numbers are quite robust, we've seen a couple of new entrants kind of talk about very kind of healthy initial traction which they've got in their water purifier portfolio.

Any increase in competitive intensity that you're picking up, and does it concern us in terms of our trajectory, or is the market big enough for accommodate these new entrants? That's first.

Thank you, Umang. Thank you for the wishes, and I think it's a great question.

I think first of all, before I respond to it specifically, I think it's important to sort of recognize that increasing competition and the arrival of new entrants is a very clear signal that this category has promise and has potential. All new entrants, when they come in, they create new news, they create excitement, they create awareness of the category, and they end up driving category growth.

We welcome all competition, because we believe it's going to be creating this virtuous cycle of higher growth. We are the strongest brand, unequivocally the strongest brand in this category.

We are synonymous with trust, with service, with care. As the category grows, we will stand to benefit.

Our growth last quarter was healthy across all categories, including in water. In water, we are sustaining our investments in growing penetration, in growing the category.

Now, you just heard my answer earlier about the 2-year filter life products, which are drawing a lot of new users into the category. We also will keep investing in driving premiumization and driving faster replacement cycle.

Some of the new entrants, working off a very small base, may have higher growth. I think clearly, what we see as market leaders is that there is no impact on our market share.

Indeed, in e-commerce, where there was some early competitive activity couple of years ago, we've managed to recover and grow share to highest ever across both our leading com platforms. While we see competition, we see more activity, as the leading brand in this category, we're not impacted right now.

We see only help for the category.

Rightly. The second one was on service.

I heard you mention high-teens growth in service revenues. Is it because of spares or if you can share some more color.

If we take high-teens growth in products, then implied revenues for service would have been lower, right, growth-wise?

Just to clarify, the high-teens growth that was there is a combination of the revenue growth in filter and the bookings in AMC. Yeah?

Since it is the bookings in AMC, that will come with a lag. Otherwise, you rightly pointed out, a high-teens growth in product and a high-teens growth in service would logically lead to high-teens growth on an overall basis.

It is just that the service amortization would come in with a lag. The good news is that we are seeing growth both in our AMC bookings, which will get reflected in the quarters ahead, and also in our filter business.

If I may add, Umang, to what Gaurav said, our service AMC booking growth, just the AMC bookings without the filter part, actually accelerated over last quarter. Therefore, both parts of the service business, both our filters portfolio as also our AMC bookings, have shown very healthy growth.

Understood. Very encouraging.

Thank you so much and all the best.

Thank you, Umang.

Thank you.

Yeah. Good afternoon, team.

Congratulations for the great set of numbers. Just the first question, in terms of premium, how do we define premium in the water purifier?

If you could just talk a little bit about the mix. What was it like 3 years back?

What is it now? What potential it has?

I think that would be helpful.

Thank you, Achal. In water purifier category, the premium segment is defined as products which are above ₹20,000 price point in the RO segment, which, as you can imagine, is the bulk of the water purifier category, almost 90%.

Over the last two or three years, we've driven innovations, we've driven growth across the spectrum of the water purifier portfolio. In the beginning, our growth was on the back of Aquaguard Sure, which is the entry-level water purifier, which led to significant volume growth and an increase in the economy part of the mix.

Thereafter, we've invested in building a premium portfolio, and we saw strong growth come to us last year through the premium business. On a 3-year basis, if I zoom out, our mix of economy has remained the same, increased marginally.

Our mix of premium has increased, and the mix of the mid-price segment has shrunk a little bit, because people have upgraded to premium.

Okay. Understood.

Second, similarly, if you could call out in terms of the distribution mix, the channel mix in terms of the D2C, general trade, and modern trade stroke e-com?

Achal, I think as you're aware, I think we have a strong omnichannel presence, and all our channels contribute roughly symmetrically to our sales and to our revenues. Between the channels, last quarter we saw very strong growth in modern trade.

We saw very strong growth coming from e-commerce, and we saw strong growth coming also from a direct sales channel. The channel that has been under pressure for some time now, and this is not just for us, for the entire category, indeed for the entire space of appliances and durables, is traditional trade, which is under pressure from the organized trade channel.

The general trade channel grew, but it grew less than the other channels. The engines of growth were both modern trade and e-commerce.

Would you be able to give the mix?

Our revenue is by and large evenly spread out between the four channels, give or take 300 to 400 basis points between each other. Having said that, progressively if I were to step back and take let's say a 3-year view of the business, the share of modern trade and e-com has gone up, and the share of direct and GT has gone down.

We are by and large even. In some ways, that also provides us a hedge.

Because at any point in time if there's a particular channel under pressure, there are other levers that are available which help in kind of driving growth.

Understood. Just last question, just a clarification—

Yeah. Thanks for the opportunity and congrats for a great set of numbers to the Eureka team.

A couple of questions. Just wanted to check, what's the status on the rental model that we were looking to launch in the water purifier segment?

Is it on cards? Second, on product side, just wanted to know, have we still now crossed the 50% market share in water purifier for the organized segment for Aquaguard?

Third is on the service side. Has large part of the growth come through conversion of non-Eureka filter customers to Eureka filter customers, or has it been completely more new booking that we have seen growth?

That's the third question. Thank you.

Thank you for the wishes, Harshit. Let me respond to your first question first.

On subscription or rental, as you're aware, we had looked at the rental subs model a couple of years ago. We had tried a pilot in Chennai.

Performed reasonably well. We had just some learnings from the pilot.

We have all the capabilities ready now to do a scale rental play where we want to. However, given what we are seeing as the growth opportunity and the growth runway in the conventional product business, as of now, we do not intend to get into subscription.

It's a readiness that we've got, and that we keep on standby, and activate if and when required. On the second question that you asked, I wasn't entirely sure of the question, but let me try and respond to it, and then in case there is any clarification, happy to respond.

As we said earlier, the organized trade channel has been a big driver of growth for us not just in the last quarter, but over the last two or three years. The organized trade and the modern trade channel comprises the national modern trade players like Croma, like Vijay Sales, like Reliance Digital, as also regional modern trade chains.

All of these players have grown strongly over the last two or three years, and have grown geographically and using the same-store growth as well. In each of these partners, we have a strong presence, and we are market leaders in the modern trade channel across the country.

Our share position has, if anything, grown even stronger. Your third question on filters and our service revenue, I think our service revenue has grown, as we mentioned earlier, on the back of both AMC bookings and with filter growth.

We have a large base of our Aquaguard customers who are not in our AMCs, and for whom filter replacement becomes a monetization opportunity. Our filter growth has come from tapping into the base of out-of-warranty, out-of-contract customers who otherwise would have gone to the local filters market.

That will remain a big source of growth for us going forward. Just to take a step back and remind us, Eureka Forbes has historically focused mostly, in fact, solely on the AMC business.

It's only the last 1 year that we've begun building out a playbook for participating in the filters opportunity. You'll see more of that coming along over the next two or three quarters.

Fine enough, sir. Wishing you all the best and thanks for answering all the questions.

Thank you.

Good afternoon, sir. Thank you so much for the opportunity.

Sir, the 2-year filter life I think it's a key innovations and it will reduce the cost of ownership for customers. Is there any risk of cannibalizing the high-margin recurring revenue from filter replacement sales and associated service assets?

Secondly, service business is growing double-digit AMC booking growth. The growth is coming from the existing installed base, or it's heavily reliant on new product sales?

What is the retention rate for AMC after the first year?

Thank you, Bala. On your first question, you're absolutely right in that the 2-year filter life products address a fundamental barrier, which is the high cost, perceived high cost of ownership.

By addressing that barrier, they end up driving growth for us. The 2-year filter life products make the category more affordable, more accessible, and we've seen the impact of that play out.

We've seen growth coming from the adoption of the 2-year filter life products. As I mentioned earlier on the call, more than 70% of customers who bought these products are first-time category entrants.

Indeed, they are helping and they are serving the objective of driving category expansion. If you if you recall, we had what 2 years ago launched, 2.5 years ago launched an affordable Aquaguard, Aquaguard Sure, to drive category growth.

That too has seen strong growth, and this therefore is the second step in driving category penetration. From a from a service revenue perspective, I think, as we've said earlier as well, only a small proportion of our large installed base of users are in our AMC offering.

We see immense potential to grow our service revenue by tapping into this base of customers who are outside our AMC purview right now, by driving filters and by driving access to them through the through the network of market technicians which are out out there in the ecosystem. Between between growing our AMC revenue and tapping into this into this filters opportunity, we do not expect to see any meaningful risk on our service revenues going forward.

On the retention rate that you that you asked, I think given given the fact that we have record levels of customer sat and customer service, our retention rates remain very healthy. We would not be able to share and divulge the number for competitive reasons.

Sir. Sir, that's small question beyond water, air, and cleaning.

What are the specific new healthtech product categories you are exploring, and when we can expect to see first launches from this new initiative?

Bala, all our current categories are in the space of health and healthtech. As you may be aware, we've transformed a meaningful part of our portfolio in water to being smart and being connected.

All our robotics products are smart and are connected. Two of our top-selling air purifiers are also smart and connected.

Therefore, it is our objective to weave these products together and create a network which is D2C, which allows customers to know exactly what the consumption is of water, their air quality, etc. To your second part of the question, we remain open to looking at new category entries.

For the moment, we believe that we have an abundant runway to grow in our current categories themselves. You're aware the penetration of water purifiers is merely about 6 6.5%.

Cleaning is even lower. Air hasn't even got started.

Just between these three categories, we see a lot of headroom to grow before we start exploring other categories.

Got it, sir. Thank you.

Hi. Thank you for the opportunity and congratulations on a great set of numbers, guys.

I just have two questions. First is actually the question.

The second is just an observation. The observation, let me just say first, is are you guys planning on giving out dividends or some kind of share buyback now because you're generating enough money, unless there is an acquisition that you have something in your sights, why not give it back?

The question I wanted to ask was on the services part, which was that historically we have been discussing about how there are edge cases in our services that create horrendous experiences for the customers and that has a massive overhang on the overall feel or the perception of our services, quality of our service. What incremental steps have you guys taken in that space to improve and reduce the number of edge cases?

Specifically, if you can comment on one of the issues that I have raised in the past, which is the tenants issue.

Took the tenant issue, we got it. Gaurav, you want to answer the first question first?

Yes. I think on the dividend and share buyback option, I think you're right that it's a healthy cash position and this will only improve going ahead.

I think that remains an option. Having said that, our bias at this stage of the transformation would be towards looking at growth opportunities.

That is an ongoing process. Yes, at an appropriate point in time if the board feels that it has to be in the form of rewarding shareholders through dividend or share buyback, we would be open to it.

As I mentioned, our bias would be towards growth investments.

Thanks, GK. Parikshit, if I may turn to your second question on how we are handling edge cases, I think first of all, I think we are acutely aware and cognizant of the importance and the need to contain and to mitigate the impact of edge cases.

Like I said earlier, our customer sat scores on an average have improved both in the last quarter and more longer-term as well. Like I said, our customer sat scores for installation or indeed for complaints, etc., have reached all-time highs.

I think on managing the edge cases, we are now beginning to make a meaningful improvement in addressing the edge cases and extreme service failures. We have set up a special desk both here at a central level, as also in the regions at managing escalations.

Our escalation TATs, whether there is noise on social media or whether there's other kind of escalations, TATs have improved meaningfully over the last three months. We have put in a small team to proactively preempt escalations when we see that there is a pattern emerging of a customer complaining repeatedly or a complaint open for more than x number of hours, x number of days.

We have a team which moves proactively to reach out to the customers and address and resolve the complaint before it becomes an escalation. We've also put in a small team which is focused only on social media escalations and closing the loop with them very quickly.

We've also moved to align our partner and our technician incentives, as also the incentives for our team members based on how fast we resolve escalations. In addition, we've also put in place a dedicated work stream to improve the spares availability at our business partner points.

Because as you can imagine, sometimes lack of spares becomes the reason why there's an escalation. I'm happy to report that our spares availability has improved meaningfully again in the last two or three months.

We also have strengthened our digital assets to make sure that a complaint cannot be parked unless and until it's resolved. That prevents a technician from sometimes gaming the system.

Equally, if there are technicians who a customer does not want, we've found a way digitally to make sure we assign technicians who are effective and who are able to resolve the customer's issue. A lot of small things we've done and I could go on.

All of them are helping us materially improve the edge case resolution. You will see that play out, I think, much more visibly in the next three to six months.

Anything on the tenants?

Parikshit, on the bit around tenancy related number changes and asset tagging, we did try out a few pilots. I think, however, one large part of the learning that came was that it was susceptible to gaming and leakage.

That is something which kind of we've gone a bit back to the drawing board to see what is the other way. Because as you can imagine, this is an area where a technician could game, and we've seen that happen.

We're just very mindful of that implication.

We're looking to resolve that through other solutions which have better governance, but are also effective in addressing the very real pain point of tenants that you are mentioning. That's work in progress, and you'll see something coming out in fact, in the next two or three months.

All right. Great.

Thank you, guys.

Thank you.

Thank you for the opportunity. Firstly, I wanted to know where we are in the journey of negotiating our contracts with the vendors wherein we had some levers to expand our gross margins.

Got it. Gaurav?

Sure. Thanks, Shri Narayan, for your question.

I think that process has already started, and I would say it started nearly a year back. The key trigger for that was the fact that the business had seen and continues to see good volume growth.

That is something which gives us a very, very important lever in negotiating costs. That is something which is already an ongoing process.

I don't think at any point in time we can say that activity is over, because constantly new opportunities come up, new things come up, new ideas come up. That's an ongoing feature.

At a principal level, one important change that we've done is that we now discuss with our vendors the forward plan for the year and are able to give them visibility of the volume and the growth ahead, and hence able to extract and negotiate prices from them in a win-win manner. That is an ongoing process.

I think one of the key reasons that you see our gross margins to be very, very stable is the fact that there are cost efficiencies which are flowing in. If you were to step back and take a 3-year view of the business, on a 3-year period, we've been able to drive a penetration strategy, we've driven volume growth, our service business has lagged the product business, we've been able to expand into newer categories, and yet you see our gross margin impact every year to be a 50 basis point and no more.

One big part is the efficiency benefits that have come on the COGS side. This is an ongoing process, and where we stand today, we feel quite comfortable with how the program is structured.

It's got institutionalized within the organization, and we expect this to be a source of savings going ahead as well.

No, sir. If you can highlight more in terms of quantification, maybe let's say the percentage of vendors with whom you have already renegotiated, or the total value of purchases wherein this has been done, how much is pending.

That will help in forecasting future gross.

Sure. I think two or three parts to it.

One, if I just start off with your last bit in terms of what you should assume for the gross margin going ahead, I think our gross margins will remain range-bound. I think a good reference point is the journey that you've seen over the last 3 years, and that could be one way to kind of see the gross margin stability.

That's point number one. In terms of what percentage of our vendors we've addressed, for the high-value items, we've reached out to 100% of the vendors.

I think the important point to say is that it's an ongoing recurring process. It's not that once you negotiate once and then there is no other negotiation, because constantly we are also working on changing our product design, bringing in newer specs, removing features which maybe are not needed.

There are a bulk of things that keep happening. It's an ongoing process that is there.

All our vendors, all the high-value vendors have been touched by the program. In terms of that quantification or the value, as you can imagine, that is something which we would not be in a position to share.

Suffice it to say that it is making a very meaningful impact as far as our gross margins are concerned.

Similarly on the IT spends?

IT spends again, if I were to draw your attention, if you look at again the last three-year trend, the IT spends have been stable, which effectively means that operating leverage is playing out. I would also draw your attention to the fact that during this period, the extent of digitization in the organization has also gone up substantially.

You see a reasonably stable spend profile, but with a much higher degree of digitization, which then indicates that there are efficiencies being driven there as well. We will continue to remain focused on that.

You would have it in the annual report as well, FY23, our spends were ₹53 crores. FY24, it was ₹54 crores.

FY25, it was ₹48 crores. On a 3-year basis, spends are flat to marginally down for a business which is much larger in size and which is far more digitized.

Got it. Lastly, on the demand side, you said we are facing some challenges.

Basically, are these challenges on the customer side or because of competition, let's say, from unorganized or private labels of few companies? What is impacting the most?

No, I think when we said that the challenging demand environment, it was more in the macro context that we are talking about. As you would have seen, in quite a few sectors and parts of the economy, the demand environment, as reflected in the numbers, have been relatively muted.

That's the reference that we were making to. It was not in the context of either competition or unorganized players.

Just to kind of reiterate, as far as competition is concerned, our shares remain stable, and we believe competition is helping the category expand, and we don't see any risk on that front. Number two, unorganized players, I think the more this category innovates and it is going down that path, the more organized players come in, the more there is consumer awareness about health and hygiene, unorganized segment will get a lesser salience.

Our reference was in the context of the larger macro demand environment and nothing specific to us or any factor attributable to the company.

Okay. Thank you so much and all the best.

Thank you.

Thank you for joining the call today, and I hope that we were able to address the questions to your satisfaction. In case there are any queries that remain unanswered or should you need any more clarifications, please feel free to reach out to us and we'll be happy to respond.

Look forward to seeing you all in Mumbai next fortnight. Thank you so much and have a great evening.

Thank you.