Eureka Forbes Limited (BSE: 543482) Q3 2026 Earnings Call dated Feb. 05, 2026
Corporate Participants:
Pratik Pota — Managing Director and Chief Executive Officer
Gaurav Khandelwal — Chief Financial Officer
Analysts:
Unidentified Participant
Keshav Lahoti — Analyst
Siddhartha Bera — Analyst
Renu Baid — Analyst
Umang Mehta — Analyst
Aniruddha Joshi — Analyst
Priyansh Gopawat — Analyst
Parikshit Kabra — Analyst
Achalkumar Lohade — Analyst
Deepak Kumar — Analyst
Mayur Parkeria — Analyst
Presentation:
operator
Ladies and Gentlemen, good day and welcome to Eureka Forbes Limited Q3FY26 earnings conference call. We have Mr. Pratik Pota, Managing Director and CEO and Mr. Gaurav Khandelwal, CFO Eureka Phobes with us. As a reminder, all participant lines will be in the listen only mode and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during this conference, please signal an operator by pressing Star then zero on your touchtone phone. Please note that this conference is being recorded before I hand it over to Mr. Pratik Potta. Please note the disclaimer Certain statements made by the management in today’s call may be forward looking statements.
These forward looking statements reflect management’s best judgment and analysis as of today. The actual results may differ materially from the current expectations based on a number of factors affecting the business. I now hand the conference over to Mr. Pratik Potta. Thank you and over to you sir.
Pratik Pota — Managing Director and Chief Executive Officer
Thank you. Good afternoon everyone and I welcome you all to the Q3 FY26 earnings call of Eureka Forbes Limited. We witnessed a resilient performance in Q3 in a challenging macro environment. Revenues grew 8% year on year. An adjusted EBITDA margin expanded by 57 basis points year on year to reach 11.3%. This quarter witnessed macro challenges on the consumer demand front. A slowdown post the festive period led to elevated trade inventories which weighed on growth. This impact was the most pronounced in the E Commerce Channel and on the water purifier category. Our water purifiers performed ahead of the category leading to market share gain both sequentially and year on year.
Our emerging categories did well in the quarter and sustained or accelerated their momentum. Robotics continued its strong trajectory and delivered very strong growth during the quarter. Our full range portfolio, comprehensive playbook and good execution enabled an all round growth across all channels. The air purifiers portfolio did very well and delivered a breakout performance in quarter three. We built a stronger product range this year and rolled out strong awareness and point of sale activation programs which helped the business grow 3x, albeit on a low base and we were out of stock during the end of quarter Going ahead Given the worsening air quality across the country and in most metros, we see this demand staying strong and becoming more geographically broad based beyond the north markets.
In addition, the water softeners category continued to perform well and delivered healthy growth in the quarter. As the quarter’s results show, we have clearly transitioned from being a single category product business to a business which now has multiple and meaningful levers of growth coming to service. Our AMC bookings growth trajectory continued strongly making Q3 as a third consecutive quarter of double digit growth. We rolled out a new program aimed at appropriating a larger share of the filters aftermarket which included launch of a new simplified assortment of filters, attractive pricing and engagement program for market service technicians and for the distributors on customer experience.
I’m pleased to share that our service KPIs have witnessed a sharp improvement during the quarter and we are now at a new all time high on profitability. We delivered a 57 basis point margin expansion despite increasing our ANSP spends by 23% year on year. Stepping back, let me reframe our Q3 performance in a broader context. Coming as it did after eight quarters of double digit growth, it is our firm conviction that the growth slowdown in the quarter was a one off aberration which came on account of very temporary channel specific issues. With the benefit of hindsight, it is now clear that the Q3 sellout growth was not in line with our earlier projections and the post festive slowdown was not anticipated.
A more accurate view of our performance therefore might be to look at Q2 and Q3 together. As we stand today, our inventory levels have begun improving and we expect the growth trajectory to normalize from this quarter onwards and increasingly and progressively position us on course to achieve the longer term ambition that we have set for ourselves. It is important to recognize that the relevance of our categories and the need for our categories has never been felt more or been more salient, be it water purifiers or air purifiers or convenient cleaning. Recent news headlines highlighted the criticality of point of use water purification.
Given the poor quality of groundwater in the country and the risk of water contamination in transit, we believe that the EWT category will see sustained tailwinds as consumer awareness grows about the hazards of drinking untreated and impure water. Similarly, the challenge of poor air quality is now actually visible through and experienced directly by people living in most metros and large towns. We have seen growing incidents of respiratory and health issues and this in turn is leading to greater category awareness and demand. We expect this to continue and indeed only increase in the foreseeable future. Not only are the categories more relevant, but we also believe and have no doubt that we have the right strategy and the right playbook to drive profitable growth in our business.
Number one, we will continue to grow the water category, driving both penetration and premiumization towards this Our economy portfolio did well last quarter and we also launched a new premium product, the Aquaguard Arctic Blaze at a price point of rupees 79,999, the highest in the category. Our newer categories of convenient cleaning softeners and air purifiers drove growth for us last quarter. We have built a comprehensive strategy and playbook for each of these categories and we will continue to invest in creating consumer awareness, driving differentiated innovations and bringing alive a visible and compelling point of sale experience.
Number three in service, we will make customer experience a source of competitive advantage for us. We will grow revenues by increasingly participating in the aftermarket filters business. Towards this we have launched the assortment of filters and spares. We are investing in customer education, building a dedicated go to market and forging relationships with a larger group of market technicians. Number four, Our installed base of long standing and loyal customers provides us a very valuable market for both upgradation and cross selling. And we will mount online to offline D2C programs in that this base. Finally, we will remain focused on driving profitability even as we continue to invest in driving growth.
In summary, our overall business remains on a firm footing. The breadth of our performance across categories along with a year on year margin expansion gives us the confidence to achieve and to aim for a longer term ambition of achieving 2x revenue and 3x EBITDA by FY30. Thank you. And now I hand you over to Gaurav to give some more flavor on the Q3 performance. Gaurav.
Gaurav Khandelwal — Chief Financial Officer
Thank you Prateek and good afternoon everyone. Starting off with the Q3 headline numbers, our revenues at rupees 645.4 crores grew 8% year on year. Adjusted EBITDA margins expanded by 57 basis points to 11.3% in quarter three adjusted PBT grew by 11.3% year on year and pre exceptional PAT at rupees 39 crores grew by 11.9% year on year. The adjustment referred to above here relates to a one time pre tax charge of rupees 40.4 crore arising from the new labor codes. The company has done an assessment and will continue to monitor developments as we go ahead.
We do not expect this to be a significant recurring impact. This onetime impact has been reported as an exceptional expense in our financial statements. On the revenue side, our emerging categories delivered a solid performance during the quarter. These categories comprising robotics, softeners and air continue to report strong growth. The electric water purifier segment experienced a softer quarter. The post festive demand was lower than our expectations thereby leading to elevated trade inventory levels. This was most pronounced in the E. COM channel. We see this to be a temporary phase as underlying growth fundamentals remain intact. If you see Q2 and Q3 combined we delivered a robust double digit revenue growth of 11.7%.
We see inventory levels normalizing in the offline channel already and expect that to happen in the E COM channel. Within this quarter gross margins expanded 331 basis points year on year to be at 60.8% during quarter three. This improvement was primarily driven by a COGS program and water specific issues like channel mix and lower discounts. Our COGS program is now well institutionalized and is helping create the headroom for growth investment. In line with our strategy, we continue to increase our ANSP spends to increase category awareness. Our ANSP spends grew by 23.3% year on year in quarter three and the focus will remain on investing for category expansion.
I would now like to draw attention to our YTD performance on a YTD basis. The business remains on a healthy double digit growth trajectory and our structural levers remain intact. YTT Revenue stood at Rupees 2026.6 crores registering a growth of 11.1% year on year and adjusted EBITDA margin stood at 11.9% up 67 basis points year on year. Adjusted PBT grew by 22% year on year to Rupees 204.8 crores nine month patch pre the labour code impact stood at Rs 139.1 crores up nearly 24% year on year. Gross margins have expanded by 90 basis points to be at 58.8% for the nine month period.
I would like to highlight here that our gross margins have remained resilient and as reference they were at 59.4% in FY23. In effect, our gross margins have remained range bound at these levels and we expect that to continue our operating discipline. Our guardrails around gross margins supported by portfolio breadth across price points and the ongoing cost focus continue to give us multiple levers. Given the headroom provided by gross margin improvement, we have made conscious investment decisions mostly in the areas of ANSP and service charges while the total expenses have grown by 11.7%. This is primarily due to a 14.5% increase in service charge and a 16.4% increase in ANSP spends.
In summary, our YTD performance remains strong with healthy double digit revenue growth and margin expansion supported by gross margin expansion as a result of our Cox Program. We remain focused on driving growth and margin expansion on a full year basis. In FY26 the business continues to benefit from strong fundamentals, low category penetration and even more favorable category tailwinds going ahead. Thank you. I now hand it over back to the moderator for the Q and A.
Questions and Answers:
operator
Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press Star and one on the touchtone telephone. If you wish to remove yourself from the question queue, you may press star and 2. Participants are requested to please use handsets while asking a question. Ladies and gentlemen, we also request that you please limit yourselves to one question and one follow up. If you have any further questions, you may rejoin the queue. We will now wait for a moment while the question queue assembles. Our first question comes from the line of Keshav Lahoti from HDFC Securities.
Please go ahead.
Keshav Lahoti
I thank you for the opportunity. So firstly I want to understand as Q3 is a one off so it’s a fair assessment Q4 will be back to our normal double digit growth. And secondly now you’re giving a five year roadmap of growth and margin possibly. Can you give some color on what sort of growth you’re looking in FY 26 and 27 and what sort of EBITDA margin?
Pratik Pota
Like I said in my opening remarks and as you just remarked, Q3 was clearly a one time aberration on account of very temporary channel specific issues leading from the unexpected unanticipated post festive slowdown. This impact was mostly and the most pronounced actually in the E commerce channel. I think that is by and large behind us in the offline channels and would get behind us in E commerce by the end of this quarter. This quarter therefore will be much more in keeping with the longer term trajectory of our business that we have shown so far. We believe that with all the plans that we’ve got in motion, our quarter 4 growth will be ahead of the widely growth that we’ve delivered which is of 11.1%.
And we believe that going forward we will move progressively towards a glide path on the glide path towards our objective that we outlined which is of 2x revenue and 3x EBITDA that we have very graded very progressive calculation of our journey. But we will move systematically towards that journey and that destination.
Keshav Lahoti
Got it? That is helpful. Last question from my side on service. You have announced quite, you know, a lot of new initiatives on investor day. Can you elaborate more how are the progress happening on that side and when we will possibly see some colors on the revenue because of these initiatives.
Pratik Pota
Yes, Keshav, actually as you mentioned, both at the investor day and even just now on the call, we’ve talked about many initiatives that we rolled up in the service network. Let me start with the first one which is a very focused effort aimed at improving customer experience. We’ve rolled out set of programs, initiatives comprising digital interventions and inputs, training interventions, availability improvement for spares and also revised incentive program, all of which has helped drive our KPI significantly higher. We have now the highest ever 24 hour complaint stat resolution. We also have a very high level of complaints met within one hour of the complaints being booked or the time being booked.
And that of course is leading very clearly to higher nps. So a bunch of programs that we’ve done which have aimed at improving customer experience and that’s playing out and giving us results. Number two, as we had talked about in the investor day, we have rolled out a comprehensive program to address the non AMC service opportunity. As you’re aware our business model for the longest time has been AMC Centric and we were foregoing and not tapping into the large market for filters. We began sort of making up. We’ve made a foothold in that segment by launching a completely new assortment for this filters ecosystem.
We put together a new go to market system. We rolled out a market SD engagement program and we also investing in customer education highlighting the importance of genuine filters. You may have seen some of our advertising campaigns in the print and digital media. As you can imagine that this behavior change will take time. This is a very large market, a well entrenched behavior and therefore we expect this to start having some impact from quarter two of next year onwards. The AMC booking growth that we’ve always worked on that attempt that the journey continues. We are driving both a greater share of the multi year AMC mix which allows our customers to have longevity on a network and of course increases therefore lifetime value.
You’re also investing in driving amc. Count those results you’ve seen already in quarter three and indeed quarter two and that will sustain in quarter four as well.
Keshav Lahoti
Thank you. Thank you Bishop.
operator
Thank you. Our next question is from the line of Siddhartha Bera from Nomira. Please go ahead.
Siddhartha Bera
Yeah. Hi sir. Thanks for the opportunity. Sir, first question is on the gross. Margins we you have mentioned in water purifier, the economy segment has grown quite. Well in the quarter. So given the strong improvement in Ross Marlins, have we seen some drag from the affordable segment share going up in the portfolio and also on the Other expense side, we have seen a strong 20% increase. You mentioned that the AD increase has been around 23% and AD is about half of the other expense. So does that mean that in some of the other elements here also we have seen a strong increase in the current quarter.
Gaurav Khandelwal
Hi Siddharth, this is Gaurav. So let me start off with the gross margin question. I think the big impact that has played out on gross margin is the COGS program. The effect of that is definitely there in the economy segment as well. As you can imagine. Any cost optimization program would actually be looking at the parts of the portfolio which make a lower gross margin, e.g. economy segment and hence our efforts were directed more towards it. So that is something where the impact has played out in economy segment as well. But having said that, our Cox program is all encompassing, looks at all cost of goods sold line and not limited to any particular line.
I think the reason why you start seeing an impact more pronounced now is that as the year progresses the number of projects that start getting commissioned will increase. You know what you would have in quarter one versus quarter three, you know there will be a difference. So that is one impact which plays out. The second, which is more specific to this particular quarter is that in this quarter, given that you know the growth in the E COM channel was on the lower side, there is a mix impact which also played out. So these are the two main reasons which are there on the question of other expenses.
Yes, even the lines other than the ANSP line, they have shown an increase and that is largely driven by the fact that we have given the headroom that we saw which was coming because of gross margins, there were certain capability projects that we’ve done specifically in the areas of supply chain and it and that is a cost that has been incurred as far as other expenses is concerned. But just to just to reiterate, it’s not that these are structural costs that are getting added. These are capability building costs with a finite time horizon.
Siddhartha Bera
Got it sir. Thanks a lot. I’ll come back.
operator
Thank you. Our next question comes from the line of Renu Bed from IIFL Capital. Please go ahead.
Renu Baid
Yeah. Hi team. Firstly can you help us understand valued mentor mentioned the channel inventory is coming off and getting normalized. Just for understanding how elevated was the channel inventory at the end of December quarter. If you can quantify versus normalize inventory and do you think this will have a meaningful impact on your 4Q offtake?
Pratik Pota
Hi Renu, thank you for the questions. As I mentioned in my earlier remarks and in the Opening events, we had built up a certain inventory at the end of quarter two in anticipation of a certain momentum and offtake in quarter three and a certain sellout growth in Q3 that did not transpire and hence we were carrying excess inventory through the quarter which we are now unwinding. I think by the end of this quarter we would have normalized inventory across all channels already in offline channels. It is in the control and evident from the fact that the quarter has begun well.
So I think that’s on the inventory part on your quarter. My question about quarter four, as I said earlier, quarter three clearly is a one off and we expect quarter four to return to a trajectory of double digit growth. Indeed, we expect Q4 growth to be ahead of our YTD growth number.
Renu Baid
Sure. But any quantifiable numbers on how elevated the channel inventory was versus normalized trend in terms of…
Pratik Pota
It would be hard to quantify given the fact that our stock covers are defined by the expected secondary stock tertiary. It would be misleading given the fact that it was festive in Q2 part of Q3 and more festive going forward. But our inventory levels have corrected compared to both quarter two and quarter three.
Renu Baid
Got it. And just a bookkeeping for Gaurav. Can you share with us what has been the YTD growth in our key segments of air purifiers, water purifiers, services and also at the YTD level, what is advertisement and sales promotion as a percentage of revenue? Thank you.
Gaurav Khandelwal
So you know we give out the mental growth number only once a year. So you know that is when post quarter four results is when we’ll be sharing it. But if I were to give some color on, you know, some of the key categories service, you heard us, peak of having grown in bookings all through the year, you know, in mid to high teens. So that is the number that you can keep in mind as far as robotic is concerned that has continued to be in a very strong growth trajectory. It is now already nearly 2/3 of our vacuum cleaner portfolio.
So that is something which continues and I think air is one category which I think water 3 in particular was very good where it grew 3x albeit on a lower base. So big picture is that we very clearly transitioned away from being a business which was dependent just on service and water purifier to having far many more growth levers. But we would be sharing these numbers as part of the annual numbers.
Renu Baid
Got it. Got it. Thank you and best wishes.
Gaurav Khandelwal
Thank you.
operator
Thank you. Our next question comes from the line of Umang Mehta from Kotak Securities. Please go ahead.
Umang Mehta
Hi. Thanks for the opportunity. Patek. We historically maintained that water purifiers because of low penetration has generally been, you know, in a way not impacted by the consumption slowdown. Any assessment as to what happened exactly on the E Commerce channel and just a link to a question linked to it was have we seen any impact from the two new players which are kind of, you know, showing aggression in this category?
Pratik Pota
Let me answer your second question first. I think like I said in my opening remarks, we have gained market share in the water purifier segment both sequentially and year on year. This market share again has come across channels online and offline. So as the strongest brand in this category, the impact of the new brands that have launched over the last 12, 18 months hasn’t been felt by us as much as it has been felt by the smaller brands. So the answer to the question is no. I think our share continues to be strong and indeed we gain share.
On the first part of the on your first question, actually, let me just reframe the discussion on water a little bit. I think the first point is the water purifiers segment grew double digits in the first half of the year. In. The quarter three that we just talked about and that has just gone by. If I take out E commerce outside of E commerce, the water purifier segment had a strong sellout growth in double digits in E Commerce. We had a challenge stemming from what I said earlier, which is that there was a clear slowdown in offtakes, post festive and a very clear slowdown in traffic on a particular platform. So while of the two big platforms one did well for us, including in water, the other platform saw a very clear slowdown in traffic and which reflected in the largest category that we have, which is a water purifier.
That said, again, zooming out a little bit, the reality is that the relevance of this category has never been more acute and most strongly felt. And we believe that the growing awareness and growing realization about the need for this category, this category will see sustained tailwinds and it will keep growing in the future.
Umang Mehta
Got it. Thanks for that. The second question was for Gaurav. Gaurav, you mentioned that the gross margin expansion had two elements to it. One was the ecom mix going down and the other one was your internal initiative. So for the next three quarters till these actions anniversary, how much tailwind should be in terms of Iovy gross margin expansion?
Gaurav Khandelwal
I think there are two parts to this. I think first, what our gross margins tell us is that, you know, contrary to what has often been asked that, you know, if we expand into, if we drive penetration as a strategy, if we grow categories beyond water purifier, if the product business is growing faster than Slovis, does it mean that gross margins will decline? I think stepping back and taking a four year view is telling us that that is not going to be the case. So I think that’s principle number one. And given the capabilities we’ve built, we are confident of keeping our gross margins within a particular band.
Now coming to what do we expect going ahead? See, from our perspective, we will keep pushing the envelope as far as cogs is concerned and from there. Now, whether we choose to deploy it for a growth investment, whether we choose to deploy it for any pricing action which itself would impact gross margin, or whether we choose to let it flow into EBITDA as we’ve done in this. Quarter. That’S going to be a tactical choice. Our guiding principle in this transformation has been very consistent that we will be optimizing at an EBITDA margin level. I think in this particular quarter we saw the window where we felt our gross margins were going to be good and hence we stepped up investments wherever we felt it was required. But stepping back, I think what can be assumed is that we will keep our gross margins at a range bound level. We do not expect to keep our gross margins at a level of 61% that you would have seen in the score quarter, but you’ve seen our trajectory over the last four years and we intend to keep it range bound at those levels through multiple levers and keep aiming for an EBITDA margin improvement.
Umang Mehta
Got it? Very clear. Thank you so much and all the best guys.
Gaurav Khandelwal
Thank you.
operator
Thank you. Our next question is from the line of Aniruddh Dajosi from ICICI Securities. Please go ahead.
Aniruddha Joshi
Yeah, thanks for the opportunity. So we have seen various instances like indoor water contamination or North India, very heavy air pollution even in cities like Mumbai, Pune. So there is a sharp increase in the tam and generally a natural increase in TAM also attracts lot of competitive activity also. So do you see a market leader like Eureka should focus very aggressively on driving growth because there is a natural growth available right now in the market. So what will be our strategy considering the conditions are extremely favorable for growing most of the categories, that is question number one and question number two is with almost 23% increase in ad spend, is Eureka having a highest share of voice among all the peers in almost most of the Products. Y eah, thanks.
Pratik Pota
Thank you, Anirudh. I think like a lot of people across the country, as Indian citizens, we were also heartbroken and you know, we were concerned to see the news coming out of Indore and the other cities. I think the problem of impure water is one which can be solved only by using point of use water qualification systems. And as awareness of that grows, like you rightly said, this category will grow in penetration and grow in penetration across town classes, not just in the large towns that may indeed in turn attract more competition, but as India’s largest and strongest brand and the brand with the largest service network with a proven track record of delivering innovations with a very, very comprehensive and omnichannel go to market, we have the strongest right to win.
In this segment, you can be sure that we will remain focused on driving two things. First of all, a maniacal focus on growing the category by addressing all the barriers that hold back category penetration. A case in point being our advertising campaign that we’ve done over the last couple of years with our economy segment and more recently with our nanopore filter campaign to address the category barriers and to create the need. So that’s number one. Number two, we will invest in driving differentiated innovation across price points given the low penetration levels of the category. Category entrants come in at all price points, not just the economy level.
So it’s important for us to keep innovating and attracting customers across the price ladder. Again, an example being a Blaze Instahot product which got almost 70% new customers into the SKU. That’s number two. Number three, we will invest in creating awareness as you’ve seen us do. And that’s your second question as well. In creating awareness both in terms of using advertising and also point of sale visibility. I think the one thing is absolutely clear that even as we grow this category, we will defend our market share. Indeed, we will grow our market share with absolute aggression.
We will not let our guard down. We will not give any quarter the category growth and the category will grow has to occur to us more rightfully given our share brand strength. So that’s number one. Going back to your second question of ad spends. Our increase in advertising has been across all categories. I spoke about our investments in inventory, growing awareness on the back of the filter campaign. We also invested behind robotics and growing the category. You’ve seen a Shraddha Kapoor campaign over the year. More recently in the last quarter, we’ve also invested in increasing awareness about air purifiers.
And truth be told, this for the first time the last three, four years that we actually meaningfully scaled up and participated in our air purifier portfolio. So with all of these investments, we have seen our ANSP spend grow by 23%. To your question, yes, we had the highest share of voice in water purifiers. We also had the higher share of voice, as you can imagine, in cleaning, given the lack of spends by the other players as also in air purifiers, albeit in a very small category and a category with low media spends. Finally, I want to conclude by saying that as the category grows, as we start seeing tailwind, as more competition comes in, it’s actually very, very good for the category.
More competition will create more awareness and it will drive category growth further. And like I said earlier, as the strongest brand, we have the most right to win and to appropriate a larger share of this growing market.
Aniruddha Joshi
Yeah, sure sir, this is very helpful. Just last question. We have also seen a trend that there is a RO filter being installed at the housing society level itself. So a lot of consumers may not go for buying a separate water purifier in their homes, but at the same time it creates the opportunity for a bulk water purifier kind of a market. Like the way there is a room air conditioner versus a large project air conditioner H vac kind of a market also. So will that be an opportunity for Eureka? It will not be a consumer product asset, but like a largely a consumer centric product asset.
So will Eureka also look at that segment as it becomes more popular? Yeah, that’s it from my side. Many thanksgut.
Pratik Pota
So just to your question, I think we as Eureka folks, as an Aquaguard brand, we are in the business of ensuring that our consumers and our customers get pure drinking water and safe drinking water and which keeps them healthy, keeps them safe. Any way customers want that pure water, we’ll be there to participate in that opportunity. Even as we speak, we have a part of our business which addresses the B2B water purifier segment and that can be easily repurposed to address opportunities, the kind that you’ve mentioned. We are in the business of pure water and we will provide that pure water and safe water to customers whichever form and shape they choose to have it.
Aniruddha Joshi
Oh sure sir, Many thanks. Very helpful.
Pratik Pota
Thank you.
operator
Thank you. Our next question is from the line of Priyansh Gopawat from Cornwall Capital. Please go ahead.
Priyansh Gopawat
Hi, am I audible?
operator
You are audible, sir. You may proceed.
Priyansh Gopawat
Hi, just one question from my side, so could you just throw some light on how we should, you know, look at connecting service charges or looking at it as a leading indicator for service bookings growth. Because for the last quarters what we have seen is the service charges have grown double digits. And this is what the commentary has also been on the service bookings growth. But this quarter the service charges growth is around 9%. Whereas you had mentioned that the service bookings had grown by double digits. So could you please throw some light on that?
Gaurav Khandelwal
Hi Priyansh. So I think there are two lead indicators that one can look at, you know, and both of them I must call out would not be, that would not be the perfect lead indicator. So one surrogate is service charge, as you mentioned, you know, it has grown roughly 9%. Service charge has two components. There is one part which is linked to revenue because there is basis of revenue that is generated. There is a certain percentage that is paid out equally, there is a part which is not linked to revenue. So for whatever installations are being done, whatever visits are being done, whatever mandatory visits are being done, those are independent of revenue.
And hence it is that part which causes a bit of a disconnect and a perfect correlation with revenue. Equally, from our perspective, one very important work stream that we continuously work on is trying to address leakages that may come up. Because as you can imagine, you know, there could always be opportunities for a technician to kind of, you know, do some kind of leakage, etc. So that’s one part of, you know, which is service charge, which you can draw a bit of correlation but not a, not a perfect correlation. The other number to look at is the deferred income liability which comes on the balance sheet.
That is something which, you know, also gives an indication of the service service business growth and that will again help you. Having said that, given that we are, you know, equally looking at tapping the filter sale opportunity, what it will also mean is that, you know, there will be a cohort of customers who may actually opt for a filter. Yeah. And that is something which be like a normal product sale. So that is something which will not even reflect on the balance sheet as well. That would be a normal product sale based accounting that would happen.
So it’s going to be a blend of these three things. But unfortunately it’s a line where a perfect correlation may not be possible. But I think importantly from our perspective, you know, the trajectory that we’ve seen in our business, that is something which has sustained and the line of sight that we have is that we expect this momentum to continue and with now the entire filter portfolio coming across that provides a strong foundation for this business to grow.
Priyansh Gopawat
Perfect. Understood. Thank you so much. Just one more question. So could you also just brief me as to how you account for cost for this particular line of business and how the revenue is recognized?
Gaurav Khandelwal
Sure. And I’ll explain this by an example so that it’s, you know, it’s more relatable. So let’s assume for a moment that the price of an AMC is let’s say 1200 rupees and it is a one year AMC. And let’s say the the cost for that is X for acquiring that amc. The entire cost gets recorded as a service charge at the time of sale. So in a quarter you will see the entire cost getting recorded up front. However, since the AMC is for a 12 month period, the revenue recognition that happens is 1 by 12 every month.
So in a quarter there will be 300 rupees recorded as revenue. There will be 900 rupees which will be recorded as a deferred liability on the balance sheet. But the entire cost related to getting a 1200 rupees AMC is sitting within that quarter.
Priyansh Gopawat
Understood. And by the entire cost, do you also include the cost that you would be paying out your technical.
Gaurav Khandelwal
Yes, it does. The entire cost of acquisition of getting an AMC customer is sitting here.
Priyansh Gopawat
Understood. Thank you so much. That is super helpful.
operator
Thank you. The next question is from the line of Parikshit Kabra from PKD Advisors llp. Please go ahead.
Parikshit Kabra
Hi, thank you for the opportunity. I just wanted to try and triangulate the growth numbers that we are talking about. So Pratik has said earlier in the call that in Q4 our growth numbers should definitely be higher than what the YTD numbers were. So even if I pull a ballpark number of 12, 13% on that just for the sake of calculation and compute, my annual revenue for this year will be around 2,700 odd crores which will overall from last year give me a growth of about 12%. And let’s take 13% also FY25, your growth was about 11.5% and at that time you were not doing as much ad spend and also you had services that was holding you back.
Now services also, okay, not fully come in double digit, but at least you’ll be getting mid single digit growth. At least. So all in all, wouldn’t this imply that our product sales and particularly our water purifier product sales growth rate has decreased in FY26 compared to FY25?
Pratik Pota
Parishit, thank you so much. For the question and for doing the math, I think like I said earlier, quarter three was an apparition, was a one off. And we expect quarter growth, quarter four growth to be ahead of the YTD growth. And like you also underlined within that the product growth will also obviously be ahead and will grow double digits. Your specific question on how our growth have trended over the last, since the last year, I think. Let me zoom out and talk about it in two different parts. The growth that we have in our emerging category, whether it’s robotics or softener or indeed now air purifiers, that growth has either remained at the same level or in fact actually gone up.
We see those green shoots playing out next year as well and the momentum sustaining. Yesterday, if you recall, we had talked about robotics being a 1000 crore category by FY30. That momentum continues coming to water purifiers. As I said in response to an earlier question, our growth in water purifiers in the first half was double digits. Our growth in quarter three, if I take out the impact of E commerce, a sellout, growth in water purifiers in quarter three was again double digits. We expect that to sort of sustain going forward in quarter four as well.
So that’s the picture on water purifiers for this year. That said, compared to last year, directionally the momentum of the category has indeed slowed down a little bit, but remained at the double digit level going forward. For reasons that we discussed earlier on the call, the very clear heightened sense of need, felt need, the growing instances of water contamination, the poor quality of groundwater in India and indeed the contamination in transit. We believe that this category will see sustained tailwind and penetration growth for the next many, many years.
Parikshit Kabra
So just to follow up on that, I appreciate the overall long term story. About water purified category. I think that makes sense. But what would you attribute the lack, the slowdown in the growth momentum for such an underpenetrated category? Because yes, there is a one off quarter, but I don’t want to focus on it because honestly it’s a one off quarter and it’s one channel. In fact it’s one platform. I’m just trying to understand how can the overall direction, the momentum come down when we are making as much investment as we are at an overall year level.
Pratik Pota
And that’s a good question and a fair observation. And you’re right, absolutely. We should not concatenate the longer term potential of this category with performance in one platform in one quarter. And that was exactly the attempt, I think the reality also equally however, is that the performance that we deliver has to be seen in the context of the broader macro environment and the consumer sentiment. And as the largest legacy category that we have, this category is also subject to the same variables as any other large category, the emerging categories, because they are small, because they are nascent, because they have a very, very long Runway to grow, they see less of those drags and those headwinds.
But as a category that was ongoing, a very large category, the water category, did see some headwinds on account of consumer sentiment. As that drag goes away and as like I said, the salience and the need grows and awareness grows, this category will return to strong momentum that it had last year.
Parikshit Kabra
Got it. All right, great. Just one last question is on the E commerce model that you have with this particular platform, is it that you guys, you know, you guys are selling over the inventory to them and then they sell it further, Is it not that you are. It’s not a drop shipment model.
Gaurav Khandelwal
So it is a, it is a model where we sell the inventory to them and we partner with them on the, on the sellout plan. So typically the way it works and that, that works with with most of the large chains is that there are joint business plans that are made. They have an assessment of what, what they are seeing of the market. We have an assessment of what interventions we are planning. So it will basis that assessment that, you know, joint plans are made out and that’s how it’s done. So it is a sale from us to them, which is there.
And obviously then there are linked plans on sellout, etc. And I think that’s the part that we mentioned earlier in our comments that there was a certain expectation and a plan on both sides that we would achieve a particular sellout growth and that did not pan out as per expectation and that is the overhang that came across.
Parikshit Kabra
Okay, thanks Gaurav. Thank you, Pratik.
Pratik Pota
Thank you.
operator
Thank you. The next question is from the line of Mr. Achal Lohade from Nuvama Institutional Equities. Please go ahead.
Achalkumar Lohade
Yeah. Good afternoon, team. Thank you for the opportunity. Sorry, I’m hopping on the same line of questioning. I’m just curious to know, you know, in 2Q we had a fair amount of growth and we did highlight that, you know, the ecom had done very well. So is it fair to combine two Q&CQ and look at the growth? Is that a fair way of looking at growth for the E Comm business? And B, specifically you called out that it’s probably a problem with one particular platform. What is the challenge? Is that the challenge in terms of execution challenge in terms of any differences of opinion on how to grow this together? If you could clarify a little bit on the same.
Pratik Pota
Yes, Achill, thank you so much for the questions. On your first question. Absolutely. Our plans in E Commerce across both quarter and quarter two and quarter three were built on assumption of a certain level of tertiary sellout and certain category growth. While that played up to script played on script up to quarter two post festive in Q3 especially we saw deceleration and that led to therefore pressure on stocks and in turn pressure on our sell ins with the platform. So therefore, if you were to look at a more accurate depiction of our performance in the last six months, combining Q2 and Q3 I think would give you a far more accurate picture.
So I would agree with you on that. On your question about the issue with the platform and was there a difference? No, absolutely not. There is. You know both the platforms and the platform teams and our teams were completely aligned on the need to grow the categories, the need to grow the business, the need for us to grow share. From our point of view, however, what the platform saw was a deceleration in traffic and that in turn reflected directly on lower tertiaries and lower sellouts. It was more of a platform issue than an issue between us and the platform.
Achalkumar Lohade
And did you see a shade of that even on the other platform and other E Comm, you know, sections or not really, it was just one platform.
Pratik Pota
On the contrary, Agile are the other platform. E Commerce did exceedingly well for us, delivering strong growth across all categories, including in water. So the problem was confined therefore to just that one platform.
Achalkumar Lohade
And has that problem been identified and course corrected? Are you seeing that revival in 4Q or you know there is another way of managing for at the company level.
Pratik Pota
For us I think the problem has certainly been identified. It’s been discussed with the platform and the partner. They are also aware of the issue. We are working with them jointly in driving out driving up tertiary sales and ensuring that we have stronger sellouts in the quarter and that impact will start being felt progressively through the quarter. As we said earlier Achan, at the end of this quarter we expect even the E Commerce inventory levels to normalize.
Achalkumar Lohade
Right. Just last question if I may. You know probably I missed out in the beginning in terms of the guidance, the medium and long term guidance, what. You had called out that stays as. Is or is there any change to that.
Pratik Pota
Achal that longer term guidance stays absolutely unchanged. We have, notwithstanding the quarter that just gone by, we have complete conviction and we believe that we are well on track to deliver to the ambition that we’ve outlined which is of 2x the revenue and 3x of the EBITDA. Our categories have never been more salient, the read has never been felt more acutely. And keeping aside Q3 as a one off aberration, we believe that we are well on track to realize that ambition.
Achalkumar Lohade
Got it. I have more questions but I’ll call back in the queue. Thank you so much.
Pratik Pota
Thank you.
operator
Thank you. Our next question is from the line of Pritesh from Lucky Investments. Please go ahead.
Unidentified Participant
My questions are answered..
operator
Thank you. Our next question comes from the line of Deepak Kumar from Kalyani family office. Please go ahead. You are audible. You may proceed.
Deepak Kumar
Yeah, so just I wanted to know. I mean see, okay, on growth momentum the management gave it, you know, what’s the problem and what they are working on. I just wanted to know more about, you know, the. See as our business grows, the cash balance is also growing in our books. So do we plan to any, you know, look for any inorganic growth opportunities or how do we plan to deploy that, you know, use that excess cash balance which we are building on our books.
Gaurav Khandelwal
Thanks Deepak. So I think there are multiple areas in which the cash can be deployed. So one is, you know, looking at growth opportunities. That would be a strong preference where we keep investing the cash. For now that could be in the form of organic growth investments or inorganic. So just to give a sense, our YTD capex this year is running close to 60 crores rupees. And you know, we’ve given out the guidance that we intend to keep our capex in the range of 60 to 70 crores. So I think that’s one area where the cash deployment is happening and will happen.
Inorganic is an ongoing process. As you can imagine. We keep looking at opportunities that may be there. Having said that, the important guardrail is to make sure that, you know, whatever we look at has to make business sense. There have to be synergies, there have be to be complementarities, it has to be accretive, value creating, etc. So those guardrails are there in place to make sure that we come to the right decision. But at a big picture, our first preference will always be to use that cash for growth. Having said that, equally with the cash balance we are also looking at areas and that will all be subject to board approval whether there is some way to reward the shareholders.
So all Those options are ongoing, you know, ongoing items of discussion. But our strong and disproportionate focus and bias would be towards investing the cash for growth.
Pratik Pota
If I can just add to that, Deepak, absolutely agree with what Gaurav just said. With an increasing cash balance, we are very open to looking at any inorganic growth opportunities that might come away. As you can imagine, they are hard to come by and not easy. But our intent is to use this growing cash that we have to invest in growing the business and specifically through inorganic possibilities.
Deepak Kumar
Sure. Thank you.
operator
Thank you. Our next question comes from the line of Mayur Parkeria from Wealth Managers India Private Limited. Please go ahead.
Mayur Parkeria
Good afternoon and thank you for taking my questions. I just wanted to understand one thing. In the past, this is slightly qualitative. Understanding here.
operator
Sorry to interrupt my year, but your line is not very clear. May I request you to please ask your question again? Your line is not very clear.
Mayur Parkeria
Now, is it?
operator
Okay, it seems better. Sir, Please go ahead.
Mayur Parkeria
Yeah, yeah. So in the past we have alluded to some of the initiatives we have taken to bring down the effective cost of ownership over the life cycle for the water purifier segment from a customer standpoint, whether it is with respect to two year filters, whether it is the AMC cost, you know, the effectiveness and some of the other initiatives I had. What I wanted to understand is will. It be possible for you to give us an understanding on the. If you index the effective cost of ownership or let’s say, what was it four years back and has it come down from let’s say 100 to 80, 70, 90, something like that? Just to understand the impact of all. The initiatives which we have taken from a customer standpoint, that is just on the past. What initiatives and similar question from the future perspectives, do you believe that in your growth strategy going forward to FY30 and the aggressive market share retention as well as the growth outlook and the under penetration of them, how much of. It is continuously built on the fact. That we will have to continuously reduce the effective cost of ownership going ahead and by what percentage do we target that, if at all? Is the question very complicated or am I not clear? Just a triangle?
Pratik Pota
No, no, Mayur, you’re very clear. It’s a very good question and thank you for asking it. You’re absolutely right. Reducing the cost of ownership has been a very clear strategic area of focus for us. Our category has very low penetration, as you’re aware. And one of the barriers that people voiced was the high cost of both entry and the cost of Sustenance and the cost of ownership. So we’ve taken over the last few years multiple measures to reduce and bring down the barriers and lower the cost of entry and the cost of ownership. Starting with the launch of economy products, Aquazard Shore and then followed by the launch of a lower priced AMC and more recently last year, the launch of a two years filter water qualifier.
And that range was across price. With all of these initiatives, the cost of staying in the category, the cost of ownership over a five year period has dropped between 40 to 50% for customers. So it is a meaningful drop. And we believe that this in turn as awareness of this growth, it will help drive adoption and category penetration. Your second question about our FY30ambition and will that mean that we keep dropping the cost of ownership? Let me separate the two. I mean, our ambition of growing the water purifier business remains very important and one of the top priorities for us.
That growth will come on account of two things. Driving penetration and driving premiumization. Penetration increase will happen both by reducing the cost of ownership, but also even more importantly by creating awareness about the dangers and the hazards of drinking untreated impure water. By driving relevant innovations, by driving distribution and access and of course driving our service network higher. So all of these together will help us drive growth and drive profitable growth and bring us closer to our ambition of FY30.
Mayur Parkeria
So sir, you are not again because 40, 50% in the past has been a meaningful drop. Will it be fair to say that from a overall perspective we have come to the maturity of effective cost of ownership or there is scope or to reduce this meaningfully further in order to improve the PEN one is the macro trend. We understand the penetration, the lower quality of water and everything else. But what is internal to us is our strategy to bring down the effect. And it may be little bit, but do you believe that if you have to still index from today, it has a scope to meaningfully come down further?
Pratik Pota
Yes. So mayur we have multiple levers open to us to drive category growth and to drive water purifier growth. Driving affordability is one of them. Driving awareness is the other. Driving innovations is the other. As you can imagine, there are multiple consumer segments and one size will never fit all. So we have multiple levers available to us to grow the water purifier category. Both by driving new category adoption, but also equally by driving faster replacement and faster upgradation.
operator
Thank you ladies and gentlemen. We will take that as our last question for today. I would now like to hand the conference over to the management for closing comments. Over to you gentlemen.
Pratik Pota
Thank you. Thank you everyone for your time today and for joining the call. We hope you were able to address your questions adequately. Please do reach out to US and investor relations team in case you have any follow up questions. Thank you and have a good day.
operator
Thank you on behalf of Eureka Forbes. That concludes this conference. Thank you all for joining us. You may now disconnect your lines.