Summary
Sheela Foam Limited - Q3 FY26 Earnings Call Summary Wednesday, February 4, 2026, 4:00 PM IST
Event Participants
Executives 5 Amit Kumar Gupta (Group CFO), Rahul Gautam (Chairman & Managing Director), Rakesh Chahar (Deputy Managing Director), Tushaar Gautam (Vice-Chairman & Joint Managing Director), Md. Iquebal Ahmad (Company Secretary)
Analysts 7 Bhavin Rupani, Pranav Doshi, Raghav Maheshwari, Rahul Agarwal, Ravi Purohit, Rishi Mody, Viral Shah
Financials & KPIs
| Metric | Reported | Commentary |
|---|---|---|
| Revenue (Consolidated) | ₹2,771 crores | +7% YoY; Driven by strong volume growth in mattresses and foam segments. |
| Revenue (Standalone) | ₹2,143 crores | +6% YoY; Reflects steady organic growth in the domestic market. |
| Core EBITDA (Consolidated) | ₹117 crores | +39.3% YoY; Margin expanded 220 bps to 10.9% due to Kurlon synergies and top-line growth. |
| PAT (Consolidated) | ₹53 crores | +200% YoY; Significant jump due to higher operational profitability and reduced interest costs. |
| Cash PAT | ₹209 crores (9M) | Represents PAT + Depreciation + Deferred Taxes; Cash EPS stands at ₹19 per share. |
| Mattress Volume Growth | 11% (9M) | Steady growth across Sleepwell and Kurlon; ASPs increased in offline and e-commerce. |
| Foam Volume Growth | 20% (Q3) | +12% for 9M; Volume growth outpaced value (12% in Q3) due to lower YoY RM prices. |
| E-Commerce Revenue | ₹180 crores (9M) | +53% YoY; Driven by targeted marketing and value-accretive portfolio expansion. |
| Net Debt (Consolidated) | ₹600-650 crores | Reduced via asset monetization (₹100-125cr) and operational cash flows; India net debt <₹300cr. |
Geographic & Segment Commentary
- India Operations: Achieved a consolidated core EBITDA margin of 10% for the 9-month period, successfully integrating Kurlon. Business focus remains on the “U2O” (Unorganized to Organized) segment, which reached a run rate of ₹120 crores, and expanding the retail footprint to 700 net new showrooms by FY26 end.
- Australia & Spain: Both regions saw a turnaround with Q3 EBITDA margins at ~12% and 9M margins at ~10%. Australia benefited from waste reduction and supply chain optimization, while Spain performance was driven by improved pricing discipline and sales realizations.
- GCC (Middle East): Strategy involves deepening presence through large-format retail chains and outsourced local manufacturing to improve fulfillment timelines. Digital presence is being bolstered via Amazon, noon.com, and brand websites.
Company-Specific & Strategic Commentary
- Kurlon Integration: The merger is legally complete; synergies have already contributed ₹200 crores in benefits, with another ₹30-40 crores expected by Q1FY27 following new machinery installation.
- Furlenco Omni-channel Strategy: Recently raised ₹125 crores (including ₹30 crores from Sheela Foam) at a ₹1,050 crore valuation; plans to leverage Sheela Foam’s retail network to establish a physical presence.
- Asset Monetization: Sold land parcels in Jhagadia (Gujarat) and Bangalore, generating ₹100-125 crores used entirely for debt reduction.
- ESG & CSR: Operationalized 500kW solar capacity with 1,000kW additional in progress; CSR initiatives in emotional wellness and skill development have reached 562 million individuals digitally.
Guidance & Outlook
| Metric | Guidance / Outlook | Commentary |
|---|---|---|
| Revenue Growth | 15% (Long-term) | Target for India operations; expected to reach 1.15x current levels in coming years. |
| EBITDA Margin | 14-15% by FY28 | Gradual expansion from current ~11% level via operating leverage and remaining Kurlon synergies. |
| Capital Expenditure | ~₹125 crores/year | Includes ₹100cr for India and ₹25cr overseas; focus on debottlenecking as current capacity supports 2x growth. |
| Product Pricing | 4-5% Price Hike | Implemented in late Q3 to offset firming raw material costs; full impact expected in Q4. |
Risks & Constraints
| Risk | Context |
|---|---|
| Raw Material Volatility | TDI prices spiked to ₹240/kg due to a temporary GNFC plant shutdown; management expects normalization to ₹210/kg by late February. |
| Competitive Intensity | High competition in the online mattress segment prevents immediate price pass-through, unlike the offline segment where regional players have raised prices. |
| International Growth | Overseas markets (Australia/Spain) typically grow at a slower pace (5-6%) compared to India, potentially diluting consolidated growth rates. |
Q&A Highlights
Margin Sustainability
- Question: Are 10%+ margins sustainable? (Raghav Maheshwari)
- Answer: Yes, the 10% level is a baseline achieved through Kurlon synergies and top-line growth; the journey continues toward 15% (Amit Kumar Gupta).
Furlenco Valuation & Integration
- Question: What is the long-term plan and valuation for Furlenco? (Ravi Purohit)
- Answer: Current valuation is ₹1,050 crores; Furlenco will use Sheela Foam’s retail network for capital-efficient offline expansion (Rahul Gautam).
Debt & Asset Monetization
- Question: What is the current debt level post-asset sales? (Ravi Purohit)
- Answer: Total net debt is ₹600-650 crores (excluding leases) after utilizing ₹125 crores from property sales in Gujarat and Bangalore (Amit Kumar Gupta).
Retail Strategy
- Question: Why was the showroom addition target revised? (Pranav Doshi)
- Answer: Revised from 800 to 700 net additions; focus is on quality showroom formats (Shopee, Home, Korner) to drive penetration over the next three years (Rahul Gautam).
Raw Material Dynamics
- Question: How are TDI and Polyol prices trending? (Viral Shah)
- Answer: TDI rose to ₹240/kg due to local supply gaps but should return to ₹210/kg; Polyol remains stable around ₹123-124/kg (Rakesh Chahar).
Key Takeaway
Sheela Foam delivered a robust Q3 FY26, characterized by a 7% consolidated revenue growth and a 3x jump in PAT to ₹53 crores. The successful turnaround of Kurlon has brought consolidated India margins back to the pre-acquisition level of 10%+, with a clear roadmap to reach 15% EBITDA margins by FY28. Key growth drivers included an 11% volume growth in mattresses and a 53% surge in E-commerce revenues. Strategically, the company is pivoting toward an omni-channel model for Furlenco and focusing on debt reduction through asset monetization, which has already lowered net debt to approximately ₹600-650 crores. While raw material spikes (TDI) present a short-term headwind, management has implemented 4-5% price hikes to protect margins. The company remains well-positioned to leverage its expanded capacity and distribution network to target 15% long-term revenue growth.
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