Detailed Narrative
Q2 & H1 FY26 Performance Overview and Margin Expansion
Sheela Foam reported robust growth for Q2 and H1 FY26, with consolidated core EBITDA margins exceeding 10% for both periods. In Q2, revenue grew approximately 5% YoY from ₹1,622 crores to ₹1,696 crores. Core EBITDA saw a significant 31% YoY increase to ₹177 crores, resulting in a 210 bps margin expansion. For H1 FY26, the reported PAT was ₹17 crores, which normalizes to ₹35 crores after excluding one-time📎 impacts from MTM on foreign currency and financial investments.
Strong Volume Growth Across Mattress and Foam Segments
The mattress business demonstrated strong volume growth, increasing by 13% in Q2 FY26 and 11% in H1 FY26. Within this, the Sleepwell brand grew by 14% in Q2 and 18% in H1, while Kurlon, post-merger, grew by 13% in Q2 and 10% in H1. The foam business also registered healthy volume growth of 9% in Q2 and 8% in H1, with technical foams growing 11% and comfort foams 8% in H1. Lower-end mattresses (Tarang and Aaram) saw a substantial 58% volume growth in H1 FY26.
Aggressive Distribution Expansion and E-commerce Momentum
The company is aggressively expanding its distribution network, having opened 420 net new showrooms in H1 FY26, with a target to reach 800 by year-end. The long-term goal is to expand the EBO network to 10,000 outlets in the next 3-4 years, with a specific focus on Kurlon showrooms in West and North India. The e-commerce business exhibited exceptional performance, growing 73% in volume in H1 FY26, and is projected to achieve ₹200-275 crores in book revenue for FY26, up from ₹173 crores in FY25.
Kurlon Merger Integration and Strategic Reorganization
The Kurlon merger received final NCLT approval, effective October 20, 2023, leading to restated comparative financial statements. This merger is seen as a significant opportunity for future growth, prompting a strategic reorganization. Mr. Rahul Gautam will now function as full-time CMD, Mr. Tushar Gautam has been elevated to Vice Chairman and Joint MD, and Mr. Rakesh Chahar continues as Deputy Managing Director, to guide the company's strategy and harness these opportunities.
Furlenco's Profitability and IPO Aspirations
Furlenco, a key investment, achieved a PAT of ₹9 crores in H1 FY26 and is operating at an exit revenue run rate exceeding ₹350 crores per annum. The company is raising ₹125 crores in equity, with Sheela Foam contributing ₹30 crores to limit dilution. Management targets Furlenco to reach ₹500 crores turnover next year and believes that achieving ₹500-700 crores turnover with a 13-14% PBT margin could position it for an IPO.
Debt Reduction Strategy and Asset Monetization
Sheela Foam reported a total net debt of approximately ₹800 crores (₹450 crores in India and ₹350 crores overseas). The company aims to become debt-free in India within 1.5 to 3 years, targeting a net cash position by FY28. This will be achieved through asset monetization, with ₹150 crores remaining from a ₹200 crores target, and annual cash flow generation of ₹100-150 crores. Post-October, the gross debt was reduced to approximately ₹400 crores after utilizing ₹450 crores of financial investments.
Raw Material Dynamics and Margin Management
Declining raw material prices, with TDI reducing from ₹196 to ₹172 and polyol from ₹117 to ₹107, have impacted the top-line, particularly in foam-based products where price changes are passed on. While gross margins have improved, a significant portion of synergy benefits and raw material tailwinds are being reinvested into business robustness and growth initiatives. Management anticipates raw material prices to start increasing in the next 2-3 months, which could further influence margins and top-line.