To be correct they did some equity raise too but promoters might not be sure diluting themselves that migh be reason to mix debt and equity
3 Likes
Q4 FY 25 -Growth & Margin Guidance
- Targeting 15% CAGR revenue growth over next 2-3 years.
- EBITDA margin guidance: 13-14% in 3 years, with potential to reach 15%.
- Interest cost to reduce from Rs. 100 crore to Rs. 10-15 crore p.a. post deleveraging.
- So I did back of the envelope valuation exercise
- Net profit range in 28 -300 to 350
- Exit PE -20
- Exit Marketcap in 28- 6000 to 7000 Cr
Discount Ratio -12%
Discounted to PV- 4200 Cr to 5000 Cr
Current Market Cap- 6791 Cr
So If company becomes 20%-30 % cheaper, then the set up can be interesting.
5 Likes
We can never know full picture regarding the decision of raising debt. We do not have all the information. So, we cannot say whether it was the right or wrong decision.
We need to believe in the management, and assume that they must have explored all the options and chosen what they believed was the better one.
I not saying this specifically for Sheela foam but his holds true for all the companies. We as a public shareholders have a very limited knowledge and hence it is difficult to guess why management opted for something particular.
Again, we can only speculate the intent of management but True reason / logic would never be known to us.
3 Likes
Hi Nikhil,
While I understand your prespective of investing in DMART though as a fellow investor would suggest that you could have also put some numbers behind your story or investment thesis.
As stories are great but numbers tell the real throughput happening on the ground.
Few Pointers:
- Ecommerce is a different turf which they ignored and now new players have occupied the space and they only have a 10% share and mgmt agreed that they are making losses in this space.
- They have been extending the period when the benefits will accrue from the acquisition . If you the FY24 numbers - Reported at INR 850 crores, which was an increase of 10% year-on-year. However, compared to Q3FY25 (INR 967 crores), consolidated revenue decreased by 12.1%.
So I feel the mgmt really need to get their act together else the other players will eat their share - similar to what happened in the luggage space and now VIP is fighting a losing battle.
P.S: Nikhil - I know you sell the sheela foam mattresses - Do you see that more customers have started arguing for bargain? Or do feel the market getting crowded? Looking forward to hearing your prespective from the ground
4 Likes
Wakefit files DRHP with SEBI for IPO. The IPO includes a fresh issue of shares worth ā¹468 crore and an offer for sale (OFS) of up to 5.83 crore shares by early investors and founders.
As part of the OFS, the promoters, Ankit Garg and Chaitanya Ramalingegowda and Other Selling Shareholders including Nitika Goel, Peak XV Partners Investments VI, Redwood Trust, Verlinvest S.A., SAI Global India Fund I LLP, Investcorp Growth Equity Fund, Investcorp Growth Opportunity Fund and Paramark KB Fund I will be offloading their shares.
According to the filing, Wakefit proposes to utilise the net proceeds from the Fresh Issue towards funding of capital expenditure worth ā¹82 crore for setting up of 117 new COCO ā Regular Stores and one COCO ā Jumbo Store; ā¹15.4 crore towards capex for purchase of new equipment and machinery; ā¹145 crore towards expenditure towards lease, sub-lease rent and license fee payments for existing stores; ā¹108.4 crore towards marketing and advertisement expenses for enhancing the awareness and visibility of the brand and the remaining amount will be used for general corporate purposes.
Wakefitās IPO comes at a time when the company has posted a 21% y-o-y revenue growth to Rs 986 crore in FY24. The company also trimmed its net loss by 90% to Rs 15.05 crore in FY24 from Rs 145.68 crore in FY23. For the nine-month period ended December 31, 2024, Wakefit reported revenue from operations of Rs 971 crore, with a net loss of Rs 8.8 crore.
It will be interesting to see the valuation which Wakefit is seeking as this will be second entity to get listed in mattresses space in Indian market having decent market share.
For DRHP, one can refer to SEBI or Wakefit website:-
Disclosure- Invested in Sheela Foam
3 Likes
Sheela Foam appears to be a classic āvalue-trapā versus a ādeep-valueā conundrum for investors. I tried to study the company but came back with some red flags.
- Q4 FY25 EBITDA margins are just 4%, whereas the management has consistently stated in conference calls and TV interviews that margins are at 8%. The gap is explained by a one-time exceptional gain of ā¹35 Cr from the erstwhile Kurlon promoter in Q4 FY25. However, itās unclear why the underlying margin has dropped so sharply. Management was not transparent.
- The ā¹120 Cr synergy/cost savings have already been realized, yet the EBITDA margin remains at only 4%. Why hasnāt this had a meaningful impact on profitability in Q4?
- Sheela Foam, Indiaās #1 mattress company, has ventured into IT services through Staqo. This is an unrelated diversification into a domain where the company has no prior expertise. The rationale behind this move is unclear.
- The path from 4% to 13% margin is not well-articulated. The management has not offered a clear explanation of the core issues or their resolution. Their responses lack the transparency and clarity needed to build investor confidence.
For now, I plan to wait and watch for another 1ā2 quarters before making any decisions.
10 Likes
This management seems to be a liar. While company is not doing well, promoter-led management is drawing good amount of salary. Additionally the promoters although in private capacity are buying prime properties in Delhiās Lutyensā zone. Read this from Moneycontrol -
In October 2024, Sidhant Real Estate, backed by DLF chairman Rajiv Singh and his family, has acquired a sprawling bungalow on Prithviraj Road for Rs 150 crore.
In the same month, Rangoli Resorts, led by Sheela Foam executive chairman Rahul Gautam and his family members, has acquired a bungalow on Hailey Road for Rs 165 crore. Sheela Foam, known for its Sleepwell brand, specialises in making mattresses and comfort accessories.
This is exactly a year after company did a QIP of 1200 cr to acquire Kurl-on at such a high valuation.
Look at the Promoter Rahul Gautamās interview in August 2024 where he says integration is complete and things should normalise now etc. etc. Seems either he is a confident liar or an incompetent person -
Sheela foam Promoter Interview Zee Business August 2024
11 Likes
Sheela Foam misread the competition big time..
while it was focussed on kurlon .. it started losing focus on what other players funded by private equity were doing
Instead of upping differentiation between 2018-2021 when it had lot of cash it squandered it on playing price game and acquisitions .. it is now into more commodity products like low cost Tarang etc ..This is painful phase which will last for few more years as most of these mattress company get money from IPOs ..
1 Like
Partly true, but maybe partly also a lack of sufficient demand growth. Given the VC/PE funded companies were undercutting them in the mid-premium segment which probably contributed most to their revenue and margin, I imagine they had to look at other growth levers.
But agree that unless something changes dramatically on the demand side, itās likely going to be a painful period.
3 Likes