An annual maintenance contract (AMC) starting at Rs 699 offered by Eureka Forbes. A new sales initiative and consumer campaign yielded results for Eureka Forbes, maker of Aquaguard in Q2FY24. The company reported double-digit volume growth for its water purifier category for the second successive quarter. Eureka Forbes reported revenues of Rs 592 crore in Q2FY24 compared to Rs 572 crore in the same period previous year.
Operating margins came in at 8.65% in September Quarter 2023, a jump of eight percentage points YoY and net profit of Rs 25.5 crore compared to loss of Rs 27 crore in the corresponding quarter previous year. Speaking on Q2FY24 results, Gaurav Kandelewal, Chief Financial Officer at Eureka Forbes said, “Given the nature of this category where today’s product volume is tomorrow’s service revenue, continuing volume growth for the second successive quarter in both water purifiers and vacuum cleaners bodes well for the future.” In addition to sales of products, the company also earns revenue through annual maintenance contracts (AMC) or after sales service for its water purifiers.
Eureka Forbes launches affordable AMCs
Market leader in water purifiers and vaccum cleaners, Eureka Forbes is India’s leading health and hygiene brand. With over four decades of existence, Eureka Forbes’ product portfolio encompasses water purification, vacuum cleaning & air purification. Aquaguard is the flagship water purifier brand of Eureka Forbes. The company’s direct sales force is over 10,000 strong and operates from more than 150 customer response centers in over 120 cities and towns across the country.
Eureka Forbes made two interventions to improve its revenue growth. The first was the launch of tiered AMC aimed at improving service affordability and getting non-users of service into the fold. AMC with the price point of Rs 4500-5000 was seen as an entry barrier which was reworked to make it affordable and appealing to customers belonging to the economy segment. Thus, Eureka Forbes launched AMC with a starting price of Rs 699. The second initiative was the launch of a Water Purifier, called the Slim UV Bar or the Aquaguard Slimtech.The UV storage water purifier has cutting-edge fifth generation UV LED technology and premium toughened glass.
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“Our launch of the tiered or segmented AMC is launched to make our service a lot more affordable and a lot more accessible” said Pratik Pota, Managing Director and Chief Executive Officer at Eureka Forbes. The company has a customer base of eight million, but only a small proportion avails its service offerings. Speaking on the new AMC campaign, Pota said, “The initial feedback that we’ve got both in the pilot markets and after scale up has been encouraging. It allows customers with differing levels of service needs to tap into the different segmented offers and go for one which meets their requirements.” A major hindrance for the company is the prevalence of a parallel grey market. Through segmented or tiered AMCs, Eureka Forbes aims to combat spurious service providers targeting price sensitive customers. So in addition to competing with the grey market, the company also has to create awareness among customers against using subpar filters and other poor quality spare-parts of water filters.
Another strategic play is the rental model being piloted by Eureka Forbes to remove the hindrance of high cost of ownership. “We’ve begun piloting our rental model down south in Chennai”, said Pota. He further added, “Our initial response and feedback in Chennai has been encouraging, but we still intend to finetune and debug the model before we scale up. But rental will be an important part of our play as we go forward.” For the water purifier category with very low penetration, almost a universal need, this is a good step forward.
