Emerging Outlook of Water Purifier and Vacuum Cleaner Sectors

Published by Sharekhan Education | October 9, 2023

Amit Pathak | Sharekhan Education

Introduction :

The alarming levels of air and water pollution in Indian cities have reached a critical point.  Thus creating a fertile ground for long-term prospects in the water and air purifier industries. Currently, the penetration of water purifiers stands at just 5%, while air purifiers have a negligible market share in India. However, with the evident benefits of these products, increased investments from companies, and rising income levels among consumers, it is anticipated that their market penetration will steadily improve over the next decade.

The challenges posed by water contamination and declining air quality in major Indian cities call for India-specific solutions. Multinational Corporations (MNCs) have limited presence in specific sub-segments and price ranges within these markets, which leaves ample room for Indian companies to thrive.

Consider this:

A domestic helper charges approximately Rs. 1500 per month for house cleaning services, while an automatic vacuum cleaner costs around Rs. 15000. Factoring in electricity costs, consumers can achieve breakeven in less than 12 months. A discernible shift towards mechanization is taking place, expanding the Total Addressable Market for automated vacuum cleaners. The washing machine segment witnessed a parallel trend between 2000 and 2015.  Here, the cost of owning a washing machine became more economical than hiring housemaids. This resulted in robust growth in that sector.

Indian households have progressively embraced white goods and consumer durables over the years. Radios became commonplace in Indian households from 1975 to 1985 as a primary source of entertainment. Television penetration followed this trend from 1985 to 1995.  Mixers and washing machines gained popularity from 1995 to 2005. Looking ahead, we anticipate that the period from 2025 to 2035 will witness a surge in demand for products such as water purifiers, dishwashers, air purifiers, and vacuum cleaners. The improving affordability of these products further underscores their growth potential, with a diverse range of offerings targeting consumers across different income brackets.

About Eureka Forbes :

Now, let’s delve into the success story of Eureka Forbes within this context. Eureka Forbes emerged as a separate legal entity as part of the corporate restructuring of Forbes & Co. Over time, it has built strong brands like Aquaguard and Eureka Forbes, which have become synonymous with water purifiers and vacuum cleaners in India. The company has bolstered its senior management team by appointing Pratik Pota as the CEO, who brings substantial experience in managing consumer-oriented businesses, such as Jubilant Foodworks. Eureka Forbes, operating with limited capital expenditure and operating at negative working capital, is poised for promising growth. According to the latest brokerage report, analysts expect the company to achieve a 12% revenue growth and a remarkable 50% CAGR (Compound Annual Growth Rate) in Profit After Tax (PAT) from FY22 to FY26E. Furthermore, they anticipate EBITDA margins to improve to mid-high teens, driven by cost rationalization and the benefits of operating leverage.

Source: Brokerage Report

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