CARE Ratings stated that the revision in the rating assigned to long-term bank facilities and issuer rating of Eureka Forbes (EFL) factors in the significant and sustained improvement in scale of operations and profitability in the last two years led by cost rationalisation and productivity improvement initiatives taken by its management.
The industry outlook for water purifier and vacuum cleaner segments continues to be robust with increasing urbanisation, income levels, higher participation of female labour in workforce, and rising emphasis on health and hygiene among others.
EFL is the market leader in water purifier and vacuum cleaner segments with a market share of over 40% and 60% respectively and has been gaining market share over the last two years (per the management articulation).
Driven by strong industry outlook EFL is expected to sustain the growth momentum in scale and profitability with minimal reliance on external debt.
The rating continues to derive strength from established brand presence and leadership position in water purifiers and vacuum cleaners’ market in India with its well-established nationwide distribution network, optimal utilisation of existing installed capacity, experienced board members and management team, and strong liquidity position.
However, rating strengths are tempered by susceptibility to raw material price volatility and presence in highly competitive market with changing market dynamics and customer preferences.
Eureka Forbes is engaged in the health and hygiene segment with product profile comprising water purifiers, vacuum cleaners, air purifiers and home security systems.
The scrip had declined 1.59% to end at Rs 578.85 on the BSE on Friday.