Industry Overview:
The Indian mattress market is poised for robust growth, driven by key consumer factors such as an increasing population, rising urbanization, and higher disposable incomes. The annual consumption is projected at ~19mn units, split between new purchases (~7mn) and replacements (~12mn).
Residential consumers accounted for 80% of India’s mattress market, while 20% was constituted by institutional customers.The Indian mattress market is divided into: a) Cotton Mattress: ~64% of Indians sleep on cotton mattresses, durees, chattais, and similar productsb) Modern Mattress: Remaining ~36% is with the organized modern segment including i) Polyurethane (PU) Foam: 50% share, ii) Rubberized coir: 28% share, and iii) Spring mattresses: 22% share.
The Indian modern mattress market is expected to grow at a CAGR of ~10%+ and is en route to attaining an Rs 250bn mark by the year 2030 from Rs 123bn as of FY23 which has grown at ~9% CAGR over FY18-23. Indian market is fragmented with a large number of branded and non-branded players present in the market selling variety of mattresses with local distribution channels. The branded market is just ~40% of the total Indian modern mattress market. There are 25 players in the branded market with Sleepwell (~19% MS) and Kurlon (~11% MS) occupying a combined market share of ~30%.
The PU Foam market is further divided into a) Flexible PU Foam and b) Rigid PU FoamFlexible PU Foam: India’s flexible PU foam market has reached Rs 110bn in FY23 grown at ~9% cagr over FY12-23, which is further bifurcated into i) Slabstock, which is ~70bn market and ii) Moulded, which is ~40bn market. Slabstock foam is produced in large blocks or slabs, which are later cut into desired shapes and sizes. It is widely used in applications where large volumes and uniform density are required such as Mattress, Furniture, Automotive, Footwear and Others having usage mix as 50%/15%/13%/12%/10% whereas Moulded foam is created by injecting liquid chemicals into a mould, where they react and expand to form the final product. This method allows for precise shaping and density control finds its application in industries such as Automotive, Furniture, Refrigeration and Others having usage mix of 80%/6%/5%/9%.
The Indian mattress market is dominated by mid-range products priced between ₹8,000 to ₹20,000, comprising 54% of sales. Budget mattresses below ₹8,000 accounted for 25%, while premium mattresses in the ₹20,000 to ₹50,000 range made up 18%. Luxury mattresses priced above ₹50,000 constituted a smaller 3% share, indicating a focus on affordability with emerging opportunities in the premium segment.
The Indian Mattress market channel distribution were as follows: GT accounted for 71%, followed by Institutional with 20%, MT with 8%, and E-Com with 1%. MBO/EBO mix for Industry is 80%/20% whereas for Sheela it is 20%/80% and Kurlon is 75%/25%.
Company Description:
Sheela Foam Limited (SFL) began its journey in 1971, founded by Mrs. Sheela Gautam in Sahibabad, Uttar Pradesh. The company launched its flagship brand ‘Sleepwell’ in 1994, becoming a popular choice among urban Indian households. In 1998-99, it introduced rubberized coir products under the brand Starlite and established partnerships with Serta, USA, and Dunlopillo, UK. By 2001-03, SFL operated India’s largest PU foam producing plant in Greater Noida and expanded to Rajpura, Punjab, and Sikkim. The company made a significant global expansion in 2005 by acquiring Joyce’s polyurethane and polystyrene business in Australia. Between 2008 and 2010, it launched innovative products like Impressions, Latex Plus, and Resitec Air. SFL went public in 2016, listing on the NSE and BSE. In 2019, it expanded its European footprint by acquiring Interplasp S.L. in Spain. To tap into the rural market and focus on exports and e-commerce, it established International Comfort Technologies in 2021. In 2022, the company issued bonus shares at a 1:1 ratio. The year 2023 saw strategic acquisitions, including Kurl-on, the market leader in rubberized coir mattresses, and a controlling stake in Furlenco, India’s rapidly growing online furniture company. The combined entity (SFL +KEL ) now has a global manufacturing footprint with 21 nationwide manufacturing plants in India, 5 in Australia, and 1 in Spain.
Dominance in India’s Home Comfort Market and Diverse International Footprint:
SFL is a leading manufacturer of Polyurethane Foam (PU) in India. SFL produces foam-based home comfort products, including a) Mattresses and b) Furniture Foams and c) Comfort Foams. Also, the company offers d) Technical PU foams for various industries like automotive and acoustics. Its flagship brands are ‘Sleepwell’ for mattresses and home comfort, ‘Feather Foam’ for pure PU foam, and ‘Lamiflex’ for polyester foam used in lamination. It has a strong presence with ~30% combined (SFL+KEL) market share in Indian organised mattress market engaged in B2B/B2C/D2C/Exports and ~40% market share in Australia through its wholly owned subsidiary, Joyce Foam Pty Ltd engaged in B2B.Over FY21-24, India’s business contribution increased from ~69% to ~75% due to robust domestic market demand, strategic investments, and effective marketing, particularly in the mattress and technical foam segments. In contrast, Australia’s share dropped from ~17% to ~14%, and Spain’s from ~14% to ~11% due to market saturation, economic challenges, and cost pressures.During FY21-24, India business grew at a ~10% CAGR which consists of 1) Home Comforts (Mattress, Comfort Foam, Furniture Foam) and 2) Technical Foam. Conversely, the international business showed mixed results: Australia’s growth remained flat, while Spain saw a slight decline with a -1% cagr. On looking at India business segment wise performance over FY21-24, Mattress/Comfort Foam/Furniture Foam/Technical business grew by ~+12%/-1%/-1%/+13%. Further, if we look at the Home Comfort segment combined it grew by ~7% during the same period.
Strategic Acquisitions led to Strengthening Position in Mattress and Furniture Markets:
On 20th Oct’23, SFL successfully acquired Kurlon, obtaining a 94.66% stake in Kurlon Enterprises Ltd for an equity valuation of Rs 21.5bn. The acquisition was financed through a combination of internal accruals, debt, and equity. This strategic acquisition positions SFL as a stronger player in the Indian mattress industry, enhancing its product portfolio and market reach. For FY23, Kurlon achieved the Revenue of Rs. 8.6bn, +8% yoy, EBITDA stood at Rs. 427mn with margins at 5.0% and PAT stood at Rs. 105mn with 1.2% margins. Founded in 1962, Kurlon, a subsidiary of the Pai family business group, is a leading mattress manufacturer in India. It holds a market leadership position in rubberized coir mattresses and ranks as the third-largest player in the organized modern mattress market with an ~11% market share. The company operates 10 manufacturing plants across 6 states and boasts an extensive distribution network with 500+ EBOs 4,500+ MBOs, 4 Centralised Hubs, 10,000+ touchpoints, 550+ Shop-in-Shop model. Kurlon’s portfolio includes well-known brands such as Kurl-on, Home Komforts, Komfort Universe, and the premium brand Spring Air. The company caters to both mass and premium segments, emphasizing rubberized coir mattresses.SFL acquired a 35% stake in Furlenco for Rs 3bn, valuing Furlenco at Rs. 8.57bn to foray into branded furniture market, which is 4x market than the mattress market. Furlenco, founded in 2012, a platform to rent / buy branded furniture along with home solutions and tech-driven digital capabilities. It operates in major Indian cities, with FY23 revenue of Rs 1.5bn, +20% yoy, primarily from rentals (95%) and sales (5%).
Capacity Expansion and Integration along with Wide Distribution Network to unlock growth:
SFL has 21 manufacturing facilities with a total capacity of 146,000 MTPA, comprising Sheela’s 129,000 MTPA and Kurlon’s 17,000 MTPA. They also have 5 plants in Australia (11,000 MTPA) and one in Spain (22,000 MTPA) targeting the US and European markets. The capex over FY22-23 of Rs 3.5bn was distributed as 70% in India, 15% in Spain, and 15% in Australia. This strategic investment aims to leverage regional market dynamics. In FY24, the new plant in Maneri near Jabalpur (capex: Rs 1.2bn) is operational, focusing on foaming and foam processing utilizing technology from their Australian and Spanish units, targeting the economy mattress segment. Upon reaching full capacity, it is expected a 3-4x in fixed asset turnover, generating incremental revenue exceeding Rs 12bn.SFL with KEL’s acquisition now has an extensive pan India sales and distribution with 100+ exclusive distributors, 6,100+ Exclusive Retail Dealers (EBO’s), and 12,000+ Multi-Brand Outlets (MBO’s)
Management Guidance:
Looking ahead, SFL’s management has set a robust guidance of ~15% annual growth rate in topline, primarily driven by strong volume growth penetrating the B2C segment, particularly in the mattress market. Additionally, the company aims for an incremental EBITDA margin by ~3% in the next 2-3 years, driven by the synergy gains from Kurlon aquisition and decline in RM costs. Kurlon is expected to deliver topline of Rs 10bn and EBITDA of Rs 1bn in FY25.
Key Risks: (1) Raw Material Price Volatility, (2) Competition from Unorganized Sector, (3) Shifts in consumer spending habits could affect demand for home comfort products