Event Participants
Executives
4 Rahul Gautam, Tushar Gautam, Rakesh Chahar, Amit Kumar Gupta
Analysts
12 Akash Shah, Arjun Agarwal, Dikshi Jain, Garvit Goel, Naveen, Pankaj Tibrewal, Pritesh Chheda, Rachna Kukreja, Ritesh Shah, Savita Singh, Vansh Solanki, Vikshan Gupta
Financials & KPIs
| Metric | Reported | Commentary |
|---|---|---|
| Consolidated Revenue | ₹1,032 crores | +26% YoY; first time >₹1,000 crores in Q1, driven by India +20% and strong international growth |
| Consolidated EBITDA | ₹109 crores | +45% YoY; first time >₹100 crores in Q1; margin expanded 139 bps to 10.6% from 9.2% |
| Consolidated PAT | ₹62 crores | Substantial YoY jump; no derivative MTM impact going forward (hedging instrument closed) |
| Standalone Revenue | ₹761 crores | +20% YoY |
| Standalone EBITDA | ₹68 crores | +13% YoY; cash accretive despite raw material volatility (prices swung +40% to -20%) |
| Mattresses (India) | Value +15% YoY | Volumes +6%; industry estimated growth ~5%, management targets ~10% volume |
| Foam Business (India) | Value +26% YoY | Volumes +4%; management prioritized supply reliability and cash generation over margin protection |
| E-commerce | Value +30% YoY | Volumes +23%; Brand.com (own sites) +69%, platforms (marketplaces) +19% |
| U2O / EBO Network | Value +81% YoY | Volumes +19%; ~10,000 dealers; 5" and 6" mattress launches drove better realization |
| Australia (Joyce) Revenue | ₹120 crores | +31% YoY; EBITDA margin 12.8% vs 6.8% in Q1 FY26; yield program and supply chain restructuring |
| Spain Revenue | ₹133 crores | +54% YoY; EBITDA margin 14.7% vs 5.7% in Q1 FY26; ~₹12M in Euro terms vs ₹9-10M regular |
| Furlenco | Revenue +38% YoY | Subscribers +36%; EBITDA +65%; Q1 operating profit ~₹9 crores with 35% group share |
| Staqo (IT Business) | Revenue +67% YoY | EBITDA run-rate 28-30%; Presence360 ERP crossed 3.2 lakh users |
Geographic & Segment Commentary
India - Mattresses & Foam: Mattress value grew 15% YoY (volume 6%) while foam grew 26% in value (volume 4%). Foam's higher growth was driven by supply reliability as unorganized players stepped back amid raw material volatility; this was cash accretive though gross-margin dilutive. TDI and polyols constitute 65-70% of COGS, making margins sensitive to raw material swings. ASPs marginally improved, indicating ongoing premiumization.
E-commerce: Overall category grew 30% YoY in value and 23% in volume. Own-website (Brand.com) sales grew 69% YoY versus 19% on marketplaces, reflecting strengthening direct-to-consumer capabilities. New channel-specific mattresses launched to drive conversion and margins.
U2O / Unorganized-to-Organized (EBO): Network expanded to nearly 10,000 dealers with 81% YoY value growth and 19% volume growth. Introduction of 5-inch and 6-inch mattresses attracted brand-conscious upgraders, lifting category realization. Pricing levels are now settled and sustainable after a price hike last year.
Australia (Joyce): Revenue grew 31% YoY to ₹120 crores with EBITDA margin of 12.8% (vs 6.8%). Gains driven by strategic yield improvement program, supply chain restructuring, and longer-dated lower-cost inventory in a rising raw material environment.
Spain: Revenue grew 54% YoY to ₹133 crores (€12M) with EBITDA margin of 14.7% (vs 5.7%). Benefited from inventory advantage and lower frequency of foam price changes versus India; expansion into new industries accelerated volumes.
Furlenco (Furniture Rental): Acquired subscriber base grew 36% YoY with revenue up 38% and EBITDA up 65%. Positioned as premium versus mass (RentoMojo), with higher furniture mix. Furniture now being ramped across Sleepwell/Kurl-On stores - target of 100 stores, presently at 40-50.
Staqo (IT/ERP): Revenue grew 67% YoY with healthy EBITDA run-rate of 28-30%; Presence360 user base crossed 3.2 lakh, reflecting strong market traction.
Company-Specific & Strategic Commentary
Furniture Segment Entry: Launched sofa beds under both Sleepwell and Kurl-On brands, leveraging Furlenco design/manufacturing/logistics capabilities. Distribution via existing EBO/COCO network (3,500 exclusive brand outlets) and online channels with minimal incremental investment.
Kurl-On Integration: Nearly complete at 96-97% (backend, frontend, HR, IT). Operating units rationalized from 21 to 12; 75-80% of synergies realized with the remaining ~₹40 crore synergy (machine installed, full benefit expected in Q3 FY27).
COCO Store Expansion: 42 stores in operation (22 upgraded from last year, target 50). Each store requires ~₹27 lakh capex plus ₹20-22 lakh working capital (total ~₹50 lakh/store, ~₹25 crores for the full rollout). Store sizes range 1,800-3,000 sq. ft. in key urban areas.
Supply Reliability Strategy: Management deliberately carried inventory and served customers through the raw material crisis to differentiate from unorganized competitors, accepting near-term margin moderation for long-term market share and customer trust.
ESG & Sustainability: CRISIL ESG rating upgraded to "Strong" in 2026; S&P Global CSA percentile improved to 61 (from 51); Sustainalytics industry rank improved to 218 (from 351). Sustainability 2030 roadmap anchored on 4 UN SDGs.
Guidance & Outlook
| Metric | Guidance / Outlook | Commentary |
|---|---|---|
| Revenue Growth (Standalone) | >15% for FY27 | Q1 clocked 20%; incremental foam sales helped; management confident of double-digit volume recovery |
| EBITDA Margin | 11-12% for FY27 (reaffirmed) | Management corrected earlier confusion - never guided 13%; gross margins only ~2% below target - volatility subsiding should restore level |
| International Operations | >₹1,000 crores revenue, ~₹120 crores EBITDA for FY27 | Both Australia and Spain on strong trajectory; sustainable growth ~5% in local currencies with 10-12% EBITDA margins |
| Return on Capital Employed | 20-25% within next 3 years | Capital base stable, profitability growing; currently ~10% |
| Balance Sheet | India debt-free in ~1 year | FY27 free cash flow ₹150-200 crores to go to debt repayment; India debt ~₹300+ crores, overseas debt ~₹350 crores to be paid over 5 years from own cash flows |
| Volume Growth | Double-digit for FY27 (foam and mattress combined) | Expects Q3 (festive, best quarter) and Q4 to exceed last year's volumes; Q1 was soft due to price hikes |
Risks & Constraints
| Risk | Context |
|---|---|
| Raw Material Price Volatility | TDI/polyol prices swung +40% to -20% during Q1 amid Middle East conflict; Suez Canal and Strait of Hormuz disruptions persist. Management expects volatility to continue through October-November 2026. Margins face pressure from in-pipe/in-channel inventory at high raw material costs when prices fall. |
| Margin Dilution from Foam Mix | Foam segment (higher growth, lower gross margin) pulling overall gross margins down. This was deliberate for cash generation and customer retention, but a prolonged unorganized-sector retreat could sustain this mix shift. |
| International Margin Normalization | Q1 international EBITDA margins (12.8% Australia, 14.7% Spain) benefitted from longer low-cost inventory. CFO expects moderation toward sustainable 10-12% as raw material costs normalize - Q2 expected to show normal inventory levels. |
| Leverage Position | Consolidated debt ~₹650 crores (India ~₹300+, overseas ~₹350). India debt to be cleared in ~1 year; overseas over 5 years from own cash flows. No change in EBITDA margin target of 15% for FY28. |
Q&A Highlights
Inventory Policy & International Margins
- Question: Is the strong international margin sustainable, and what is the inventory holding period? (Ritesh Shah)
- Answer: India holds 15-30 days inventory; Australia and Spain carry longer inventory, which advantaged them in the rising raw material cycle. International gains will moderate as India improves - sustainable EBITDA margins of 10-12% for overseas (Rahul Gautam).
U2O Pricing & Volume-Value Gap
- Question: Why is U2O value growth (81%) far outpacing volume (19%)? (Ritesh Shah)
- Answer: U2O products were launched at low prices; after strong demand, price was increased last year with channel support. The price level is now sustainable, so the volume-value gap should normalize (Rahul Gautam).
India Volume Growth Satisfaction
- Question: Is 6% standalone volume growth acceptable? (Ritesh Shah)
- Answer: Industry grew ~5%, so we are ahead, but sub-10% is not satisfactory - closer to 10% would be. Given the quantum of price hikes, volume moderation was expected (Rahul Gautam).
Furlenco Profit/Deferred Tax
- Question: Why did Furlenco's profit contribution decline QoQ? (Pritesh Chheda)
- Answer: Last year's ₹60 crore net profit included ₹27 crore deferred tax asset recognition; operating profit is ~₹9 crores/quarter at 35% group share, which is in line with Q1 - not a degrowth. DTA re-recognition happens at year-end (Amit Kumar Gupta).
Volatility, RoCE & Balance Sheet
- Question: Is current profitability the new normal? What about RoCE trajectory and debt? (Pankaj Tibrewal)
- Answer: Volatility expected through Oct-Nov 2026; profitability should be better than Q1. 15% revenue growth and 15% EBITDA margin targets unchanged. RoCE should reach 20-25% in 3 years from
10% now. FY27 free cash flow of ₹150-200 crores to repay debt; India debt (₹300+ crores) cleared in1 year, overseas (₹350 crores) over 5 years (Rahul Gautam, Amit Kumar Gupta).
International Sustainable Growth Rate
- Question: What is a sustainable growth rate and margin for Australia/Spain without inventory gains? (Dikshi Jain)
- Answer: ~5% growth in Euro/Aussie dollar terms with 10-12% EBITDA margins is sustainable. Spain's expansion into new industries may keep growth above guidance (Amit Kumar Gupta).
Raw Material Prices & Pricing Discipline
- Question: Where do TDI/polyol prices stand, and is there a structural re-pricing lag risk? (Garvit Goel)
- Answer: Prices are moving in both directions (spike in March, decline from April, re-spike recently). Management does commensurate price increases; risk is limited to in-transit inventory, as seen in Q1 (Amit Kumar Gupta).
Margin Guidance Clarification
- Question: Do we stand by the 12-13% EBITDA margin guidance for FY27? (Rachna Kukreja)
- Answer: Guidance is 11-12%, not 13%. Gross margins are down more than needed; a ~2% recovery in gross margin gets us back on track - purely dependent on volatility subsiding (Rahul Gautam, Amit Kumar Gupta).
Gross Margin Impact - Foam vs Mattress
- Question: Was the gross margin hit more from foam or mattress? (Vikshan Gupta)
- Answer: Foam was the primary driver as it uses TDI/polyol more intensively; mattress was hit less. TDI/polyol make up 65-70% of COGS (Rahul Gautam).
Kurl-On Integration & Market Share
- Question: Is Kurl-On integration complete, and what is our market share? (Arjun Agarwal)
- Answer: Integration is 96-97% complete; 75-80% of synergies realized, remaining 15-20% pending. Combined organized mattress market share is ~20% - post-integration growth synergies to be realized over next 2 years (Rahul Gautam).
Furlenco vs RentoMojo Positioning
- Question: Is RentoMojo a comparable competitor to Furlenco? (Naveen)
- Answer: Same business area, but RentoMojo is mass segment with higher utility mix; Furlenco is premium with higher furniture mix (Amit Kumar Gupta).
Management Responsibility Split
- Question: How are responsibilities divided among top management? (Akash Shah)
- Answer: Rakesh Chahar (sales, operations, supply chain), Tushar Gautam (new products, growth areas), Amit Kumar Gupta (finance and accounts), Rahul Gautam coordinating (HR, IT, marketing) (Rahul Gautam).
Key Takeaway
Sheela Foam delivered a milestone quarter with consolidated revenue of ₹1,032 crores (+26% YoY) and EBITDA of ₹109 crores (+45% YoY) - the first Q1 above ₹1,000/₹100 crores respectively. PAT stood at ₹62 crores. India standalone grew 20% in value, but 6% volume growth reflected price hikes amid acute raw material volatility (TDI/polyol swung +40% to -20% due to Middle East conflict). Management deliberately prioritized supply reliability over margin protection in foam, accepting gross-margin dilution for cash generation. International operations were exceptional - Australia (+31% revenue, 12.8% EBITDA margin) and Spain (+54% revenue, 14.7% margin) benefitted from inventory advantages and restructuring. U2O network (10,000 dealers) grew 81% in value, and furniture entry (sofa beds under Sleepwell/Kurl-On) leverages Furlenco capabilities. The company reaffirmed 15% revenue growth and 11-12% EBITDA margin guidance for FY27, expects volatility to subside by November, projects double-digit volume recovery, and plans to repay India debt within a year with RoCE moving toward 20-25% over three years. Key watch points remain raw material price trajectory, timing of the pending ₹40 crore synergy benefit (full impact in Q3), and normalization of international inventory gains.