Eureka Forbes Ltd

Backed by our strong physical presence and a growing online footprint, we are creating awareness and improving penetration across the length and breadth of the country.

Dear shareholders,

It gives me immense pleasure in sharing with you the updates for the year gone by and the exciting journey that we have embarked on.

Financial Year 2022-23 was a unique year in many ways. Your Company was faced with a tough macro environment which continues to persist. Inflation remained high and this had an impact on consumer sentiment and demand. The impact was felt by the business as well and I am pleased to share that the Company was able to make improvements on several fronts. Equally, we kept ourselves focused on the long term agenda of transformation of the Company.

This required fundamental changes in the business and we embarked on that journey of change. Several building blocks for our transformation journey were put in place.

Eureka Forbes in its 4 decade history has constantly reinvented itself. From being the 1^st to bring vacuum cleaners into India to being pioneers of the Direct sales channel, we have constantly adapted and reinvented ourselves.

Being pioneers and innovators is in our DNA. It is that spirit which has again been reignited to take your Company ahead.

Looking back at Financial Year 2022-23

During the year, your Company focused on navigating both business performance and creating enablers for a strong future.

Business performance was steady in the face of muted consumer sentiment. The focus was on improving execution abilities, reclaiming the role of category building in the form of a new campaign and driving business efficiencies.

On the transformation side, there were interventions made across the spectrum – from the organisation structure, talent infusion, go to market strategy, customer service, cost rationalisation and governance to creating a digital roadmap.

I am pleased to report that we were able to make steady progress on multiple fronts.

Our people have always been at the core of Eureka Forbes' transformation. The Company's management has been strengthened with an infusion of fresh talent and we now have a healthy blend of new talent and existing employees. Customer service is critical to our business and we witnessed a significant changes in this area. We believe, our focus on customer service will create a sustainable and competitive advantage. It has also helped to improve our service KPIs.

Frugality and cost consciousness as an approach and mindset was an important area of focus. The business witnessed a steep change in its profitability profile. From a past trend of approx.

5% EBITDA margin, we witnessed 3 successive quarters of margin expansion, exiting the year at 9.3%. Our focus on operational efficiencies led to a significant reduction in our net debt. Our efforts now provide us with sufficient headroom to make necessary growth investments.

Digitization has accelerated in the post COVID world and new business models have come up around a ‘Digital First' approach. Your Company has embarked on a major transformation journey in this area.

While structural changes were initiated within the business, there was a continuous focus on governance. With the objective of ensuring transparency for all shareholders, your Company started a quarterly earnings call and investor relations communication during the year. This has been well received and we will continue our engagement with stakeholders in future as well. At Eureka Forbes, we take immense pride in our commitment to excellence in corporate governance. We firmly believe that an effective governance framework_built on integrity, transparency, and accountability is essential for long-term business sustainability and value creation_for our stakeholders. Our Corporate Governance framework is designed to align with a dynamic business model, enabling us to adapt to an evolving regulatory landscape and the expectations of our stakeholders. Finally, as we exited the year, I am pleased to share that strong foundational blocks have been put in place to make Eureka Forbes future ready. Some early success has been visible in key business parameters of profitability and net debt. These early wins give us immense confidence as we look ahead to the exciting transformation journey ahead of us.

Unlocking the India Opportunity

India stands at a pivotal moment in its history. Favourable demographics, evolving geo strategic environment, stable economic growth, heightened health consciousness in a post COVID world and positive developments like access to piped water and electrification create the necessary tailwinds for long term sustainable growth.

The trust and loyalty earned by us over the last 4 decades make us best placed to unlock this opportunity. Our emphasis on improving the health and hygiene of people drives us to introduce new and innovative products to the market. Backed by our strong physical presence and a growing online footprint, we are creating awareness and improving penetration across the length and breadth of the country. Leveraging our pioneering legacy, omnichannel presence and one of the largest direct sales networks in the country, we are reaching out to consumers and enhancing the scope of our operations.

While we do this, we will leverage our existing strengths and intertwine them with new age capabilities to prepare Eureka Forbes for an exciting future.

The Transformation Journey Ahead: Project Udaan

In Financial Year 2022-23, we have embarked on a transformative journey ‘Project Udaan', which lends us the strength and courage to dream big and fly higher. Udaan will prepare the Company for the next stage in its journey of sustained and profitable growth. This transformation is sought to be achieved through six strategic transformation pillars.

The transformation initiatives cover the entire spectrum of business - from water penetration to expanding categories, from profitability to becoming a Digital First Company - all while keeping the customer at the heart of what we do and relying on the strong shoulders of our proud, passionate and committed EuroChamps.

Looking back on our journey over the last year and the results that we have been able to achieve, it gives me and the Board immense joy and also the conviction to march ahead and improve performances.

I appreciate your trust in Eureka Forbes and the continuous support and counsel of my other Directors. As we embark on our journey of ‘Udaan', I look forward to your continued support and trust in the organisation. The faith of our customers and support of all stakeholders has made us an iconic brand and I am confident that we will achieve even greater heights of success as we move ahead.

MD & CEO's Message

Many decades ago, we were in effect India's first direct-to-consumer (D2C) Company and we now reimagine that D2C reality in a more contemporary and digitally-enabled manner.

Dear shareholders,

I am delighted to share an update with you on our performance in Financial Year 2022-23, which was in many ways a pivotal one, and a synopsis of the exciting transformation journey that we have embarked upon.

Your Company has several distinctive foundational strengths that it has built and nurtured over the years.

We were pioneers and category creators many decades ago. While we may have lost some of the innovation muscle in the recent past, we retain the pioneer's DNA in our bloodstream.

In Aquaguard, your Company has one of India's strongest and most credible brands, one that has almost universal awareness and enjoys long-standing relationships with millions of customers and has their trust and confidence.

From being a Direct channel dominated Company, we are now an omnichannel business with strong presence across Retail and E-Commerce as well. Our Direct Sales channel however remains unique and lends us a competitive advantage.

We have a large and distributed national service network, one of India's largest, which allows us to service and support our large base of installed devices.

However, we have faced several challenges in the recent past. We have had slow growth and our profitability has also been low. In addition, we have fallen behind on innovations and ceded ground to competition and lost market share.

In Financial Year 2022-23, we kicked off a journey of transformation that will allow us to harness the many strengths that we have, even as we resolve the more recent challenges. Titled Project Udaan, it aims to unlock growth, improve profitability, and deliver an elevated customer experience. We believe that this new strategy will help us break free from our often self-imposed boundaries and give flight to our ambitions.

Project Udaan

As part of the strategy, Project Udaan has a few clear and distinct pillars.

Grow Water Purifier business by driving category penetration and investing in innovations.

Strengthen our portfolio of Vacuum Cleaners and incubate and grow the fledgling Air Purifier business. Offer an elevated and superior customer experience

Become a digital-first business that will enable us to be agile, flexible and efficient. Drive a culture of cost-consciousness and efficiency.

Strengthen the army of EuroChamps and make the organisation future-ready. Despite the universal need for pure drinking water, Water Purifiers (WPs) have remained at a low penetration of 5%. Even in urban markets, the penetration of WPs is just 12%. These penetration levels are significantly lower when compared to other durable categories in India and WP penetration in other countries.

The category is now seeing several tailwinds building up. There is growing awareness of the importance of health and hygiene, and pure water is at the core of good health. Additionally, availability of tap water in households has jumped from 17% to over 60% in the last four years, and most homes are now electrified. We believe that the convergence of all these factors and combined with our brand strength positions your Company to drive growth.

We will drive growth in water purifiers through offerings addressing all price points, category creating communication and expanding distribution. Equally, we will step up the pace on innovation to address the large replacement market in Water Purifiers. We have strengthened our R&D team and are building capabilities such as Internet of Things (IoT) and Engineering & Design. We have an exciting set of innovations lined up which will drive differentiation and market share.

Our recent product offerings and new TV campaign have shown very encouraging results with a dominant proportion of buyers being new category entrants. On the innovation front, our launch of Aquaguard Superio SS in Financial Year 2022-23 did well and helped drive strong growth and market share gain in the mid-price segment.

The Vacuum Cleaner category has seen increased acceptance after the pandemic related challenges on availability of domestic help. Within this, the sub-segments that offer convenient cleaning solutions are seeing strong growth. We have a strong existing portfolio of Vacuum Cleaners which we will further enhance through an exciting range of new products that offer easy and convenient cleaning solutions to customers.

Our new robotics Vacuum cleaner saw extremely favourable customer acceptance and became the market leader in this segment.

We believe strongly in the potential of Air Purifiers given the distressed air quality in many parts of the country. Going forward, we aim to make investments for incubating and growing the category through the availability of right products at the right price points.

Customers now have become accustomed to high standards of service and we, at Eureka Forbes will step up to exceed our customer expectations.

We will take charge of the customer experience and the service delivery process. We will work with our business partners to strengthen the service network, embed digital ways of working and reinforce our training inputs - to deliver an experience that truly delights our customers.

In Financial Year 2022-23, we made a good beginning by introducing a digital platform that onboards and hosts all our service technicians centrally. This will be a critical enabler in transforming the service experience and we will use this to accelerate service speed, improve quality and drive efficiencies.

We will embrace digital ways of working across every part of the business. Many decades ago, we were in effect India's first D2C Company and we now reimagine that D2C reality in a more contemporary and digitally-enabled manner. We will use our growing strengths in Digital to drive customer convenience, access, and personalisation. We will also provide our frontline teams with digital enablement that will help them provide customised solutions to our customers and improve their efficiency.

We made a start in Financial Year 2022-23 by building a strong team that will power our Digital ambitions. We have invested in new-age capabilities in Product Management, Engineering and Architecture and Data Science. In addition, we have also strengthened our external partnerships and kicked off exciting digital projects that will drive impact in the years to come.

We will steadily improve the financial health of the business. Several initiatives are underway that will enhance the margin trajectory of the business, improve cash flows and strengthen return on capital over a period of time.

In Financial Year 2022-23, we reset the EBITDA margin bar with margins moving up from our past mid single digits to exit the year with 9.3%. Our net debt reduced from H 216 crores to H 50 crores, giving us the headroom to invest in growth opportunities.

We are fortunate to have an army of Euro-champs who have been with us for many years and who carry a wealth of experience.

We have augmented this team with the infusion of new leaders with new capabilities, new ideas and new energy. We now have an exciting combination of experience and new ideas that we believe will build on our strong foundation and drive transformation.

In addition, for the first time ever in corporate India, every single manager of the Company has been given ESOPs. This has helped bring in goal alignment, increased ownership and drive and instilled a sense of pride and positivity.

To conclude, your Company with a rich legacy of over four decades is at an inflection point in its journey. As responsible custodians of the brand and the Company, our outlook is long term and our goal is to transform Eureka Forbes, to make it future ready and to set it on the path of sustained and profitable growth for the next several decades.

In the year gone by, we have made a start and put in place the building blocks needed to take the transformation forward. We recognise that a transformation of this scale will pan out over a period of time but we are enthused by our early experience.

We could not be more excited about the future and are confident that Project Udaan will help us drive much faster growth, improve our customer experience and profitability.

So please sit back, fasten your seat belts, and look ahead as we take Udaan…!

Regards,