Detailed Narrative
Record Consolidated Performance in Q1 FY27
Sheela Foam achieved a significant milestone in Q1 FY27, reporting consolidated revenues exceeding INR 1,000 crores and EBITDA surpassing INR 100 crores for the first time in its history. Consolidated revenue grew 26% year-on-year to INR 1,032 crores, while consolidated EBITDA increased 45% to INR 109 crores. This strong performance resulted in a 139 basis points expansion in the EBITDA margin to 10.6% and a substantial year-on-year jump in PAT to INR 62 crores.
Indian Business Growth and Margin Dynamics
The standalone Indian business delivered a 20% revenue growth, reaching INR 761 crores, and a 13% EBITDA growth to INR 68 crores. Within this, mattresses value grew by 15% and volumes by 6%, while the foam business saw higher value growth of 26% and volume growth of 4%. However, gross margins experienced moderation due to a sharp fall in raw material prices during the quarter, particularly impacting the foam segment which is more reliant on volatile inputs like polyol and TDI.
Exceptional International Performance and Strategic Initiatives
Both international subsidiaries, Joyce (Australia) and Spain, demonstrated exceptional operating performance. Joyce's revenue grew 31% to INR 120 crores, with its EBITDA margin improving significantly to 12.8% from 6.8% in the prior year. Spain's revenue increased 54% to INR 133 crores, and its EBITDA margin rose to 14.7% from 5.7% last year. This improvement was attributed to strategic yield enhancement programs, supply chain restructuring, and the benefit of higher inventory in a volatile raw material environment.
Robust Growth in U2O and E-commerce Channels
The unorganized to organized (U2O) business expanded significantly, reaching nearly 10,000 dealers across the country and achieving an 81% year-on-year growth with 19% volume growth. This was driven by the introduction of 5- and 6-inch mattresses. The e-commerce segment also saw strong growth, with Brand.com sales up 69% year-on-year and platform sales up 19%, contributing to an overall category growth of 30% with volumes increasing 23%.
Furlenco Integration and New Furniture Segment Entry
The integration of Furlenco is nearing completion, with 96-97% of the process finalized and 75-80% of synergies already realized. Furlenco itself continued to perform well, with subscriber base growing 36%, revenue up 38%, and EBITDA up 65% year-on-year. Sheela Foam is leveraging Furlenco's designs and logistics to enter the furniture segment, starting with sofa beds under Sleepwell and Kurlon brands, and plans to expand Furlenco's physical presence to 100 shop-in-shop formats.
Capital Allocation Focused on Debt Reduction and ROCE Improvement
The company aims to achieve a Return on Capital Employed (ROCE) in the 20-25% range within the next 2-3 years, up from the current ~10%. While the balance sheet will not be debt-free by the end of FY27, management expects to generate INR 150-200 crores in cash this year for debt repayment. The India debt, currently around INR 300 crores, is targeted for full repayment within another year, and international debt of INR 350 crores will be paid over five years.
Strong ESG Performance and Management Responsibilities
Sheela Foam received a 'strong' category upgrade in CRISIL ESG ratings and improved its S&P Global Corporate Sustainability Assessment to the 61st percentile from 51st. Management outlined responsibilities: Rakesh Chahar oversees sales, operations, and supply chain; Tushaar Gautam focuses on new products and growth areas; Amit Kumar Gupta manages finance and accounts; and Rahul Gautam coordinates overall services like HR, IT, and marketing.