Sheela Foam

Sheela Foam reported a 5% YoY revenue growth for its India business, reaching ₹644 crores, with core EBITDA surging 47% to ₹75 crores. This led to a significant expansion in India business core EBITDA margins to 11.7% from 8.4% in Q1 FY25. Consolidated revenue, however, saw a modest 1% YoY increase to ₹821 crores, with consolidated EBITDA growing 43% to ₹85 crores, and margins at 10.4%. Mattress volumes demonstrated strong underlying growth at 10% YoY, with Sleepwell growing 22% and Kurlon 6%.

The 18-month Kurlon integration has yielded substantial benefits, including a reduction in operating facilities from 21 to 12 and an improvement in gross margins to 43.5%, which is 400-400 basis points above pre-acquisition levels. The company has already realized ₹190 crores in run-rate savings from the integration, with an additional ₹60 crores expected by the end of FY26. This integration is a key driver for the targeted 14-15% EBITDA margins within the next three years, supported by a 15% overall growth target.

Sheela Foam is aggressively expanding its distribution network, aiming for 1,000 new showrooms in the current fiscal year, with 234 already operationalized in Q1 FY26. New product launches like Tarang and Aaram, targeting the sub-₹10,000 category, have achieved 60% YoY volume growth and are projected to generate over ₹100 crores in revenue for FY26. The e-commerce channel continues to be a strong growth driver, recording 66% YoY value growth and targeting 50% growth in FY26.

Furlenco, the furniture rental subsidiary, demonstrated robust growth by onboarding over 40,000 new customers, leading to a 60% increase in its subscriber base. It achieved a PAT of ₹4 crores in Q1 FY26, surpassing its full-year profitability from FY25. Furlenco plans to raise ₹100-125 crores in equity to fund its expansion, with revenue targets of ₹370 crores for FY26 and ₹500-550 crores by FY27. Sheela Foam may participate in this equity raise to avoid dilution but has no immediate plans for full acquisition.

The company aims to significantly reduce its group net debt from the current ₹700-800 crores to ₹300-400 crores. This will be achieved through a combination of FY26 PAT, projected at ₹150-200 crores, and asset monetization, targeting ₹300-350 crores, of which ₹40 crores has already been realized from three smaller facilities. Management indicated no fresh CAPEX is planned before 2029-2030, focusing instead on optimizing existing operational facilities.

Raw material prices, particularly polyol, saw a drop from ₹117/kg to ₹110/kg between Q4 and Q1. While this led to subdued value growth in the B2B foam segment (2-3% vs 6-8% volume growth) as price reductions were passed on, the company maintained overall profitability. The Tarang and Aaram brands, despite being in a lower price category, maintain similar or better EBITDA margins due to cost-efficient production at the Jabalpur facility.