Sheela Foam Q3 FY26 earnings call

Sheela Foam reported a robust Q3 FY26, with consolidated revenue growing 7% YoY to ₹2,771 crores and standalone revenue increasing 6% to ₹2,143 crores. The company achieved a consolidated core EBITDA margin of 10.9% for Q3, expanding 220 basis points YoY, and a 3x YoY jump in consolidated PAT to ₹53 crores, primarily due to higher profitability and reduced interest costs from debt repayment. For the nine months, core EBITDA stood at 10.6%, growing 34% YoY to ₹293 crores.

The merger of Kurlon is now complete, significantly contributing to the group's performance. Post-acquisition, the combined Indian operations achieved a consolidated core EBITDA of 10% for the last nine months, aligning with SFL's pre-acquisition margins. The company has realized ₹200 crores in synergies, with an additional ₹30-40 crores expected from new material introduction and machinery installation, with full benefits anticipated by Q1 of the next financial year.

Mattress volumes grew 11% YoY for both Q3 and the nine-month period, while foam volumes saw a 20% increase in Q3 and 12% over nine months. The company is actively pursuing a premiumization strategy, with Average Selling Prices (ASPs) increasing across offline, e-commerce, and the unorganized to organized (U2O) segments. Offline median mattress values are around ₹14,000-₹15,000, and online values are ₹9,000-₹10,000, with efforts to push these higher.

Sheela Foam expanded its retail footprint by adding approximately 600 net new showrooms over nine months, targeting 700 by year-end, with strong traction in Kurlon showroom expansions in North India. The e-commerce business demonstrated significant growth, increasing 53% YoY over nine months to reach net revenues of around ₹180 crores. The U2O segment, operating through over 8,000 dealers, grew nearly 100% over nine months, achieving a turnover of ₹75 crores by December 2025.

International operations in Australia and Spain showed a marked improvement and clear turnaround in Q3, with EBITDA margins reaching approximately 12% for the quarter and 10% for the first nine months. This improvement was driven by disciplined execution, diversified sourcing, and cost control. The company is also expanding its GCC presence, including local manufacturing and strengthening its digital presence.

The company repaid approximately ₹400 crores of debt in early October and further reduced debt by ₹100-₹125 crores through asset monetization, including the sale of a land parcel in Jhadagia, Gujarat. This has brought net debt levels in India to less than ₹300 crores and consolidated net debt to ₹600-₹650 crores (excluding lease capitalization). Anticipated CapEx for the next year is around ₹125 crores, with ₹37.5-₹50 crores allocated for maintenance.

Sheela Foam infused ₹30 crores into Furlenco as part of a ₹125 crore equity raise, valuing Furlenco at ₹1,050 crores. Furlenco currently operates at an annualized revenue run rate of ₹400 crores and generated a PAT of ₹18 crores and cash profits of ₹68 crores for the nine months, which were reinvested. The capital infusion is expected to propel Furlenco's top line to ₹500-₹550 crores, leveraging SFL's retail network for omni-channel expansion.

Raw material prices, particularly TDI, firmed up towards the end of Q3. A temporary spike in TDI prices to over ₹240 was noted due to a major supplier shutdown, though stability is expected by February 20th. Price increases of 4-5% were implemented across Sleepwell and Kurlon products towards the end of Q3, with their full impact expected in Q4, aiming to align value growth with volume growth.