SWOT ANALYSIS

Financial performance

Key risks and concerns

 Dependence on third-party vendors for manufacturing of own brands (73% revenue share)  Rising competition from other offline and online value retailers  Inflationary risks and inability to pass on price hikes  Sales concentration in select states  Follow-on stake sales from promoters (private equity-backed) and a lack of clarity on long-term ownership

Multi-category, own-brand portfolio acts as a strong moat for VMM

 VMM has successfully established a diverse and expanding portfolio of 26 own brands across key consumption baskets, with revenue contribution from these brands steadily rising to 73% by FY25.  In FY25, 19 of VMM’s own brands surpassed INR1b in sales, with six brands exceeding INR5b, demonstrating strong brand acceptance. VMM’s own brands typically offer the lowest opening price points, which makes them attractive for value-conscious consumers.  VMM operates a 100% private label portfolio across men’s, women’s, and kids’ fashion, covering a wide range of categories such as denim, ethnic wear, innerwear, and sportswear.  The company has significantly expanded its own brand offerings in GM under the ‘Tandem’ brand for home appliances, introducing products such as air fryers, garment steamers, sound bars, and kitchen tools.  VMM’s private labels account for ~35% of its FMCG revenue and hold ~45% share in categories where they are present. Moreover, the volume share is significantly higher, given the 20-50% price discount vs. leading brands.

Valuation and view

 We expect VMM to post a revenue/EBITDA CAGR of 19%/20%, driven by: 1) ~13% CAGR in store additions, 2) consistent double-digit SSSG, and 3) modest operating leverage benefits.  Given VMM’s debt-free balance sheet, robust cost controls, and tight working capital management (~15 days net-working capital), we expect ~24% PAT CAGR.  Over FY25-28, we expect VMM to generate a cumulative OCF/FCF of ~INR32b/ INR23b, which should enable accelerated store expansions.  We believe the company’s diversified category mix, ownership of opening price points, significant contribution from its own brands, and lean cost structure provide it with a strong moat against intense competition from both offline and online value retailers.  We initiate coverage on VMM with a BUY rating and a TP of INR165, premised on DCF-implied ~45x Sep’27E pre-IND AS 116 EV/EBITDA (implying ~31x Sep’27E reported EBITDA and ~69x Sep’27E P/E). Our DCF-implied multiples are at ~4-7% premium to VMM’s average trading multiples since the listing.  Based on our reverse DCF analysis (10.5% risk-free rate, 6.5% terminal growth rate), our TP of INR165/share implies ~11%/13% revenue/pre-INDAS 116 EBITDA CAGR over FY25-50E, driven by ~115 store additions annually and ~4% CAGR improvement in store productivity.  Despite strong performance since the listing (up 75% from IPO price), we believe the risk reward remains attractive (bull: INR210/share; bear: INR120/share)

Vishal Mega Mart 90-110
Expected level 135
Support 88

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Eureka Forbes Company Details Report

Eureka Forbes Limited (EFL) is a part of the private equity firm advent which was bought from Shapoorjipallonji group company forbes LTD . Company is engaged in the health & hygiene segment with product profiles comprising water purifiers, vacuum cleaners, air purifiers, and home security systems.
the stock price having the potential to double in 3-4Y. Under the new management, EFL (a leading health and hygiene brand) is transforming products/services and unlocking significant growth in highly underpenetrated categories of water purifiers/vacuum cleaners (EFL pioneered these and leads with ~40%/60% market shares, respectively), entering adjacent categories. Focus on category-led campaigns, affordability (models from Rs6.5k), and distribution (~20k pin codes) led to 7 straight quarters of double-digit growth despite weak sentiment/softness among peers in the other appliance category. Service momentum is reviving (double-digit AMC bookings in Q1). Despite rising R&D/marketing spends, margins rose by ~400bps in 2Y to 11% in FY25 (although lags Kent’s ~15-20%, implying major headroom). We bake in revenue/EBITDA/EPS CAGR of ~13%/20%/24% over FY25–28E, with robust net cash of Rs2.5bn now (vs net debt in FY23), FCFE yield (~3% by FY28E), and ROCEs (+250% in FY25, adjusted for Goodwill/other Intangibles

From barriers to breakthrough – Driving category growth; early success visible EFL’s leadership in highly underpenetrated categories (6%/2% in water purifiers/vacuum cleaners) offers significant growth headroom. Backed by 6x R&D and 8x A&P investments in 3Y, EFL is reshaping category perception, breaking affordability barriers, and delivering sustained double-digit product growth (vs low single-digit growth over the last decade). The focused thrust on affordability (entry models at Rs6.5k) and new product-led premiumization (~Rs15–20k) aided growth in water purifiers. In vacuum cleaners, new offerings (3x rise in robotic SKUs in a year) and ‘cleaning as easy as 1-2-3’ campaign target first-time users. Robotics is now +50% of vacuum cleaner revenues. We model 13%/15% revenue CAGR over FY25–28E for water purifiers/vacuum cleaners.

Transformation underway in service business; digitization to act as a catalyst EFL has overhauled service offerings by moving beyond AMCs to tailored solutions, driving the installed app base to 1.6mn in FY25 (vs 140k in May-23) via an enhanced user interface. Digitization (slot-based booking, technician tracking) has lifted app-based engagement (80% complaints are online vs 33% in May-23); low penetration is being addressed via tiered AMCs (from Rs599), QR-coded filters for authenticity, and 1-hour service guarantees. While historically muted (~2% CAGR over FY23-25), early greenshoots are visible (service bookings saw double-digit growth in Q1FY26). We believe the services revenue engine will start firing, with ~13% revenue CAGR over FY25–28E

Sharpened focus on profitability;
valuation at 50x Sep-27E PER EFL has turned around sharply, expanding margins to ~11% in FY25 (vs ~7% in FY23) and moving to Rs2.5bn net cash despite high marketing, digital, and R&D spends. Margins, however, remain well below Kent’s ~15–20%, offering meaningful upside potential. EFL is now embarking on its next phase of EBITDA optimization. We value EFL at 50x Sep-27E PER, on ~24% EPS CAGR, superior returns, and an asset-light model.

Eureka Forbes overview

Business model

New leadership – a catalyst for transformation Post-acquisition transformation –

Advent’s playbook in action ⏹ Leadership change: Advent installed a new management team, with Pratik Pota (exJubilant/HUL/Airtel) as the CEO, bringing a growth and execution mindset. EFL moved fast on the people strategy and built a completely new leadership team at the top 2 levels, ie CXO and CXO-1. Moreover, back in 2022, EFL launched an ESOP program covering 100% of the managers with a view to creating an employee ownership culture and to attract, retain, and motivate eligible employees for ensuring sustained growth. ⏹ Digital revamp: Major investments were made in app-based servicing, technician tracking/platform, filter authentication, and D2C platform development (~50% of service revenue). These efforts led to ~64% of AMC bookings to be done online in FY25 (vs 28% in May-23); with 80% of the complaints logged digitally now (vs 33% in May-23). ⏹ Product innovation - premiumization and affordability: EFL recently launched new IoT-enabled purifiers, high-end vacuum cleaners, and air quality devices, marking a shift from utility to aspirational positioning. The company also launched affordable entry models (~Rs6.5k) to bring in first-time users into the category. ⏹ Cost discipline and a structural margin reset: The operating model was made leaner. Centralized procurement and product mix changes lifted the gross margin to ~58–59% (vs ~54% pre-acquisition). EBITDA margin rose from ~7% in FY23 to ~11% in FY25. ⏹ Balance sheet cleanup: EFL moved from net debt to a net-cash position of Rs2.5bn as of Q1FY26, enabling reinvestment into growth without capital strain.

Financial performance

Reinventing services as a growth engine

⏹ EFL’s service arm (~13% of revenue in FY25), historically muted (~2% CAGR over FY23-25) and driven largely by standard AMC renewals, is undergoing a structural transformation into a digitally enabled, engagement-led model aimed at monetization and customer lifetime value. ⏹ The company’s several strategic interventions were to address key friction points (low installed base penetration, perceived high cost of ownership, and lack of trust in genuine parts), which previously constrained service revenue’s scalability. ⏹ Ahead, we believe services revenue will be a key enabler to drive topline growth (vs being a drag historically; 2% CAGR over FY23-25). Early green shoots are visible, with service bookings already delivering double-digit growth in Q1FY26. We model ~13% revenue CAGR from the segment over FY25–28E. A] EFL’s services poised to become a key growth lever ⏹ Large untapped installed base: Currently, only a small proportion of customers with installed purifiers use formal AMC services; higher awareness and affordability can significantly improve penetration. ⏹ Filter go-to-market strategy and IoT integration: EFL is focused on building a structured consumables market (filters, cartridges), supported by QR authentication and targeted campaigns, while scaling IoT-enabled products, enabling predictive maintenance and recurring service revenue. ⏹ Premiumization and innovation: Continued rollout of premium and smart products over the next 3–4M will not only drive higher product margins but also increase service intensity and frequency.

EFL’s vision and strategy

(Project Udaan) – first investor call in Q4FY23 ⏹ In its first investor call in Q4FY23, EFL had highlighted six strategic pillars to transform the company into a vibrant D2C health and hygiene leader; it delivered sustained, profitable growth through strong product portfolio, best-in-class innovation, customer service, and a digital-first model. 1. Grow the water business (core) ◼ Expand penetration in an underpenetrated category (~5% penetration in FY23). ◼ Address barriers via affordability (entry price at ~Rs6,499), relevance (consumer education), and accessibility (distribution expansion). ◼ Drive premium innovations for design-conscious customers. ◼ Campaign example: ‘Nal se kapda hatega toh sar se kapda hatega’, targets cloth/sieve users. 2. Expand cleaning and air categories ◼ Cleaning: Build both mass adoption and premiumization agenda. ◼ Air purifiers: Nurture and incubate the category through awareness and consumer education, leveraging rising air quality concerns. 3. Transform customer experience ◼ Reimagine service by giving customers the ability to schedule, track, rate, and give feedback. ◼ Equip technicians with digital tools for seamless service delivery. 4. Lean cost and an efficient operating model ◼ Structured program to drive productivity, cost negotiation, spend control, and cash optimization. ◼ Free up resources for growth and reinvestments. 5. Digital-first enterprise ◼ Leverage the 8mn+ customer base and the large on-ground network. ◼ Rebuild digital assets to deliver convenience, engagement, and commerce. ◼ Enhance agility across customer, employee, and partner experience. 6. People and culture ◼ Build a blend of experience and fresh talent to drive transformation. ◼ Strengthen leadership team across functions. ◼ Foster a culture of customer centricity, collaboration, agility, ownership, and accountability.

The acquisition structure

⏹ In Sep-21, Advent signed a deal to acquire ~72.56% stake in Eureka Forbes via its affiliate Lunolux, from the Shapoorji Pallonji Group. ⏹ The deal valued Eureka at ~Rs44bn and was routed through a demerger from Forbes & Company, making EFL a standalone listed entity by Jul-22. ⏹ The acquisition was part of Shapoorji Pallonji Group’s deleveraging efforts while for Advent, it marked a long-term bet on India’s consumer health sector. This report is intended for Team White Marque Solutions

EUREKAFORB 400-438
Expected level 500
Support 360

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