Eureka Forbes expects ‘short-term’ impact on bottomline after GST rollout

Shapoorji Pallonji group firm Eureka Forbes is expecting a “short-term impact” on its bottom line – particularly in Q1 (April to June) and extending into a part of Q2 (July to September) – post the Goods and Services Tax (GST) roll out.

Typically for products sold in the July to September period, retail trade partners place orders and do stocking during the April to June period. Hence, these two quarters are likely to see some impact.

Mumbai-headquartered Eureka Forbes is the market leader in water purifiers (67 per cent), air purifiers (44 per cent) and vacuum cleaners (80 per cent). It is also into home surveillance and security solutions.

While the impact is primarily because of stocking issues across the trade, no immediate upward revision of prices are expected for end consumers, said Shashank Sinha, Associate Vice-President – Marketing, Eureka Forbes.

Market sources say liquidating old stocks post GST implementation is a concern for the retail trade especially for consumer durables’ firms. Moreover, some expect a price revision too. Direct sales (to the customer through company representatives) are not expected to see much of an impact.

“There may be a short-term impact because trade channels are hesitant in stocking. However, it will be for two-odd quarters more so in Q1. But a good monsoon should help demand pick-up towards the later half of Q2,” he told BusinessLine during an interview.

Reaching out The company has already started reaching out to trade partners to make them aware of GST rates and ensure that there are no major stocking issues.

“The proposed (GST) rates on water purifiers and other offerings are similar to the existing ones. So, not much change in prices is expected,” he explained.

As Sethi points out, any disruption, because of GST, will be short-term and is unlikely to lead to any slowdown or shrinkage in demand. It will only defer the same, and hence, topline impact isn’t expected.

“Good monsoons will increase demand for water purifiers. At the most, demand at a customer level will move from one-quarter to the next,” he explained.

According to Sethi, the long-term benefits of GST will be beneficial to organised players. Unorganised and smaller players, who have so far taken advantage of legal loopholes and been out of the tax loop will now be forced to comply.

Focus areas In fact, the company is also keen on new launches and not delaying them because of GST. It has recently launched ‘biotron’ enabled water purifiers. Water purifiers continue to account for 70 per cent of its turnover.

Focus will also be on the niche and nascent air-purifier market where the company intends to make products suited to the Indian conditions; rather than going for a one-size-fits-all strategy. Air purifiers and security solutions together account for 6 per cent of its turnover.

Vacuum cleaners contribute the remaining 24 per cent.

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