Sheela Foam Ltd (SFL) Q2FY27 Concall Transcript - Sep-2026 Qtr
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Moderator: Ladies and gentlemen, good day and welcome to Sheela Foam Limited Q2 H1 FY '27 earnings conference call, hosted by Emkay Global Financial Services Limited. As a reminder, all participant lines will be in the listen-only mode and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star then zero on your touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Devanshu Bansal from Emkay Global Financial Services Limited. Thank you and over to you Mr. Bansal.
Devanshu Bansal (Emkay Global Financial Services Limited): Yes, hi, good afternoon everyone. I would like to welcome the management and thank them for this opportunity. We have with us today Rahul Gautam, Chairman and Managing Director, Tushaar Gautam, Vice Chairman and Joint Managing Director, Rakesh Chahar, Deputy Managing Director and Amit Kumar Gupta, Group Chief Financial Officer. I shall now hand over the call to the management for the opening remarks. Over to you, gentlemen.
Rahul Gautam (Sheela Foam Ltd): Thank you, Devanshu. Just want to make a little correction that Tushaar Gautam is not available at this time. Good afternoon, ladies and gentlemen, and thank you for joining us to share our results for the second quarter Q2 and the first half, that is H1 of this year. I hope you've had the chance to go through the numbers and the presentations. Let me begin with the environment first. As it has already really shaped this quarter. From February onwards, this has been an absolutely unprecedented kind of time for our industry. On a ballpark, the crude is up by about 50% and our two key raw materials have moved even more. Since mid-February, polyol, our main chemical or main raw material, is up by 65% and TDI by 33%. Sustained increases of this kind have simply not been seen before. The war has disrupted the entire supply chain and logistics. Some of the facilities in the Middle East have been partially destroyed and others are restricted because of the Hormuz blockage.
Rahul Gautam (Sheela Foam Ltd): Additionally, the festive season, which was in late September last year, moved into October this time, resulting in a shift of demand from Q2 to Q3. However, we recognize that these are the times where the strength of a leader shows. Our first responsibility when things get this hard is to keep serving our customers, and that is what we did. We kept material flowing through supplier relationships that have been built over decades at a time when many of the smaller, unorganized players simply could not source or hold their prices. With the strength of the brands, we've had the advantage of being able to pass these increases on to the market and eventually to the consumer. The consumer has his own affordability benchmarks also. A customer who comes in with about Rs. 20,000 to spend on a mattress can stretch a bit, but not to the full impact of the large price increase. The same money now buys him a slightly lower category of the product, and that change impacts us even when values may hold up. With demand still soft, we have chosen to spend more and not less on our brands, advertising, and consumer schemes. We went out and launched the great Sleepwell festival across the country. It has turned out one of the strongest schemes we have ever introduced for our consumers. This does take off some profitability in the near term, but it has built a healthy pipeline of demand as we go into the festive quarters of the second half. The outcome is that even after a margin hit, we have held our profitability in absolute terms. In a quarter like this, protecting the core of the business while still investing in it was important to us. The numbers tell the story quite clearly. On a con consolidated basis, revenue for the quarter grew by about 19% to a level of Rs. 1,045 crores. The first time that we have crossed the Rs. 1,000 crore revenue number in Q2, and also our third consecutive quarter of a 15% plus growth. Our operating EBITDA for the quarter was Rs. 87 crores, almost the same as we delivered in the corresponding quarter a year ago. PAT was Rs. 46 crores, and that is about 5 times of last year. Coming to the half year, revenue grew about 22% to a level of 2,076 77 crores, and the operating EBITDA grew 23% to a Rs. 200 crore mark from 162 last year, at a margin of 9.6%. And I must also add that the PAT rose to Rs. 109 crores, that is more than 6x last year. Though we clocked higher gross margins than the first quarter of this year, our investment in brand and marketing kept our operating EBITDA margins muted. I now want to spend a little time on Furlenco, because I believe it genuinely changes the picture of our group. From 1st October, 1st October this year, Furlenco has become a subsidiary of Sheela Foam. This is not a sudden step. It is something we have worked towards for some time and widens our reach, our scale, and the very nature of what we do. Let me explain the business, because it is very different from our existing business. Furlenco is primarily a furniture rental company. It gives people in our cities access to well-designed furniture, and that too, on a
Rahul Gautam (Sheela Foam Ltd): subscription basis without having to own anything or everything. We think nobody would want to rent these things. That is what we have always been thinking, but today it is not only the floating population, it is people who simply like a change, who want their furniture kept in good shape, who move homes or move cities are indulging in this offer. Furlenco offers them a catalogue of more than 300 products. It is present in more than 30 cities. It has a subscriber base of more than 200, 200,000, or 2 lakh subscribers and it runs a disciplined asset-based model keeping the asset utilization much above 90%. That discipline is what makes it profitable. What this business has done in a short time says a great deal about our ability to spot value and build it. When we invested in FY24, Furlenco had a revenue of about 139 crores and had a subscriber base of 70,000. It was also losing close to 130 crores a year. Post the turnaround, this year we expect it to close at 500-crore mark with an EBITDA margin of about 40%. From deep losses to a profitable business with revenue almost four times where it was in about three years, and still growing at more than 30%, that is Furlenco today. The recent trend is the same in the first half for Furlenco. The revenue has grown about 34% and a 34% to 229 crores, and EBITDA was also up by about 69% to a level of 89 crores. And it's active subscriber base has grown 35% over the previous year. This is a space whose time has come. Furniture rental is finding real acceptance, and particularly with the younger and Gen Z consumers, who value flexibility far more than ownership. The capital markets have taken a note as well, with one of the players in this space having listed recently. All of this changes what Sheela Foam as a group is today. We have enlarged our B2C portfolio in many growth areas, a house of more than 13 brands, held together by one idea that has guided us from the very beginning. The science of comfort for all the consumers that we deal with. The group today stands on primarily four pillars. First is mattress, where we serve every kind of a customer from mass to premium to luxury. Sleepwell and Kurl-on sit at the premium and economy end, Tarang and Aaraam give us depth and reach across the value segments, and Chattadam & Wells and Nature's Rest take us into luxury. The second pillar is furniture, in both rental and retail, led by Furlenco, and alongside it, our entry into branded furniture retail, also under the flagship brands of Sleepwell and Kurl-on. The third category, or the third pillar, is foam and cushioning. Our technical and industrial foam business, under B2B category as well as B2C, with brands such as Feather Foam and Lam HR, etc., work well in this area. This caters not only to consumers, but to much wider set of industries, with applications ranging from automotive to footwear, and our foam has long been a benchmark across all of them. And the fourth is the international subsidiaries and the IT initiative that we have. Our business abroad, Joyce in Australia
Rahul Gautam (Sheela Foam Ltd): and Interplasp in Spain and our enterprise, technology and digital solutions company, Staqo, have all been doing extremely well. Sheela Foam today is a broad based consumer company with brands at home and abroad across categories, channels, price points, and markets. As these pieces come together, we expect the combined group to close this year at a revenue of around Rs 5,000 crores with an EBITDA of roughly Rs 600 crores, a margin little above 12%. I must also add that the international businesses remain strong and profitable. In Spain, the revenue grew well. We took on new customers during the quarter and their volumes will begin to show on the second half. The cost of winning and servicing did weigh on Spain's margin this quarter, but that to my mind is money well spent for the growth ahead. For the half, Spain has already delivered an EBITDA margin of over 10%, actually 10.7%. In Australia, Joyce can well did well and ran well at the operating level with an EBITDA margin of also 10.7% in the quarter and 13.4% for the half year. The reported profit for the quarter has pulled down by a one-off provision we had to take against one of our key customers, A.H. Beard, going into administration. We expect to normalize this very soon. Our newer growth engines also continue to do well. On the D2C and e-commerce side, we are strong and continue to grow at a healthy pace led by our own website, brand com brand.com. The U2O business, which is the unorganized to organize business, which takes us from the unorganized to the organized market and has now reached more than 10,000 touch points or dealers and has grown by about 41%. And Staqo, as I mentioned, our technology company, keeps growing well while holding a healthy EBITDA margins of around 28%. Let me close here. This was a quarter that tested us on every front and I believe we managed to handle it reasonably well by standing with our customers, investing through the cycle, and holding the profitability of the business to the previous levels. With Furlenco now part of the family, the portfolio is wide, is actually very wide. I'm confident that Sheela Foam will continue its growth trajectory going forward. With that, I will ask our group CFO, Mr. Amit Kumar Gupta, to take us through the financials in more detail. Thank you very much.
Amit Kumar Gupta (Sheela Foam Ltd): Thank you, sir. Ladies and gentlemen, now let me take you through the financials for the quarter and the first half of the current financial year. On a consolidated basis, revenue from operations grew to Rs 1,045 crores, a growth of 19% over similar quarter last year, helped by both growth in mattresses as well as foam, and a very strong growth in Australia and Spain. Operating EBITDA for the quarter was Rs 87 crores at a margin of 8.4%, broadly flat against Rs 87 crores a year ago. Reported EBITDA was Rs 83 crores. As Rahul Sir explained, the pressure came from the sharp rise in polyol and TDI prices and the higher spends behind the Great Sleepwell Festival. PAT for the quarter was Rs 46 crores against Rs 10 crores last year, close to five times, helped by both operations and by lower finance cost and depreciation. Cash EPS for the quarter was Rs 8.3. For the half year, consolidated revenue grew by 22% to Rs 2,077 crores from Rs 1,696 crores. Operating EBITDA grew by about 23% to Rs 200 crores from Rs 162 crores at a margin of 9.6%. The operating leverage of the first quarter was partly offset by raw material inflation the second. Sorry. PAT for the second half rose to PAT for the first half rose to Rs 109 crores
Amit Kumar Gupta (Sheela Foam Ltd): from 17 crores last year for the similar period and EPS grew to 18.7 from a diluted EPS of around 9.8 rupees last year. On a stand-alone basis, revenue for the quarter grew 17% to 781 crores, with EBITDA at 61 crores, at a margin of 7.8%. For H1 this year, stand-alone revenue grew by 18% to 1,452 crores, and EBITDA grew 5% to 129 crores. At the segment level, for the first half, mattress grew by 11% and foam grew by 26%, with volumes broadly flat, reflecting the pricing actions and the festive season shift. On the business abroad, Australia and Joyce had half-year revenue of in Australia, Joyce had a half-year revenue of 241 crores, a growth of 16% year-on-year, and an operating EBITDA margin of around 13.4%. In Spain, Interplasp had half-year revenue of 250 crores, at a growth of 44%, and EBITDA margin of 10.7%. Furlenco, which became our subsidiary from 1st October, had a revenue of around 229 crores, EBITDA 89 crores, and a margin close to 39%. From the third quarter onwards, our consolidated revenue numbers will also reflect Furlenco as a subsidiary. With that, I request the monitor moderator to open the floor for questions. Thank you.
Moderator: Thank you. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touch-tone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question comes from the line of Harshit Khadga from Robo Capital. Please go ahead.
Harshit Khadga (Robo Capital): Hello. Thank you for the opportunity. Am I audible?
Amit Kumar Gupta (Sheela Foam Ltd): Yes, please.
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