Sheela Foams ups the game

Sheela Foams, India's largest polyurethane (PU) foam manufacturer, has announced two acquisitions. It plans to acquire a 95 per cent stake in rival Kurl-On for Rs 2,150 crore, and a 35 per cent stake in Furlenco Furniture for Rs 300 crore.

The acquisition of Kurl-On is expected to be completed by November 30, 2023. The Furlenco deal is also expected to be closed by August 2023.

A bit about Sheela Foams

Sheela Foams sells pure PU and polyester foam under the brand names 'Feather Foam' and 'Lamiflex', respectively. Its mattress brand 'Sleepwell' is one of the most recognisable brand in the foam mattress segment commanding over 30 per cent market share. In FY23, 'Sleepwell' accounted for around 29 per cent of the company's total revenue (FY23). The company also generates 29 per cent revenue through its overseas manufacturing and sales operations.

Consolidating mattress segment

Similar to Sleepwell, Kurl-On holds leadership in rubberised coir mattresses. With this acquisition, Sheela Foam's combined market share would become 21 per cent in the modern mattress market making it the undisputed leader.

Sheela Foams and Kurl-On's combined and now bolstered networks, are expected to optimise logistics costs. With their complementary manufacturing facilities, they also expect production efficiency and cost saving.

Diversifying into furniture retail

Furlenco is one of India's largest and fastest-growing online furniture retailer and rental businesses. Sheela Foams considers this investment as a mode of diversification due to the significantly larger size of the furniture market. The company expects production synergies along with leveraging Furlenco's online presence to cross-sell their products. Moreover, with their now consolidated distribution system they can even expect to sell Furlenco's products physically.

Impact on financials

Post acquisition Sheela Foam's revenue would increase by around Rs 800 crore (Kurl-On's FY22 revenue). However, it must be noted that Sheela Foam does not have enough cash reserves, it may acquire debt to fund these transactions. But the management is confident about the move given the market position it will have.

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