Sheela Foam Looks To Bounce Back After Kurlon Integration

Sheela Foam Ltd., the maker of Sleepwell mattresses, expects a recovery in the next six months after completing the integration of Kurlon, according to the company's Executive Chairman, Rahul Gautam.  

Sheela Foam posted a subdued performance in the second quarter of the current financial year, with consolidated net profit slipping 79% year-on-year to Rs 9.32 crore versus Rs 44.27 crore a year ago. The company’s revenue was up 32.5% year-on-year to Rs 812.72 crore against Rs 613.18 crore in the corresponding period of the preceding fiscal.  

Commenting on the results, Gautam told NDTV Profit that he expected things to improve in the first half of the new Samvat with the integration of Kurlon in the final stages.

"The next couple of months or six months, at least, for our trade—Sheela Foam and Kurlon combined—will be positive. One thing giving us tailwinds is the acquisition (of Kurlon), which is now a year old, and the integration is nearing completion. So, as a company, we have bit of advantage compared to the segment," he said.

Gautam added that a shift towards higher growth was just waiting to happen. The top executive said he expected the margins to improve in the remaining period of the current fiscal as the synergies and integration picked up pace.

Sheela Foam's margins slipped 230 basis points to 8.5% in Q2 against 10.8% a year ago.  Ebitda, however, was up 5% at Rs 69.28 crore from Rs 66.19 crore in Q2 of the last fiscal.

Talking about volume protection for the year, Gautam said he saw a healthy growth rate, but the numbers would, perhaps, not be as high as those seen in Q2. Kurlon witnessed a 26% volume growth in Q2, while Sleepwell grew 40% year-on-year.

He added that Sheela Foam would clock a volume growth of 10% to 15% in fiscal 2025 and a CAGR of 15% from fiscal 2026 onwards.

In July 2023, Sheela Foam acquired 94.6% stake in Kurlon Enterprise Ltd. at an equity valuation of Rs 2,150 crore. The company also acquired a 35% stake in furniture maker Furlenco in an all cash deal of nearly Rs 300 crore.

Gautam emphasised that India would continue to remain the key focus for the company even as it made strides in European and Australian markets.

"The focus is going to be on the Indian market. If I look at the last quarter, what used to be a ratio of about 65:35 between India and Australia, it is now 70:30," he said.

Shares of Sheela Foam Ltd. were trading 2.4% lower at Rs 847.2 apiece on the NSE, compared to 1.69% decline in benchmark Nifty 50 at 1:05 p.m. on Monday.