National, 18th July 2023: Sheela Foam Limited (NSE-SFL | BSE-540203 | INE916U01025), a leader in Home Comfort products (foam-based) and the largest Polyurethane (PU) Foam manufacturer, announced two simultaneous deals, with controlling stake in Kurlon Enterprises Limited (flagship brand Kurl-on — Mattress of India) and a stake in Furlenco furniture (India’s fastest growing online furniture brand owned and operated by “House of Kieraya Private Limited” or “HOK”).
SFL is acquiring 94.66% shareholding in KEL at an equity valuation of Rs. 2150 crores (cost of acquiring 94.66% around Rs. 2035 crs); subject to customary working capital, debt and debt like items and other adjustments, if any. The indicative time period for the completion of the acquisition is by or before 30th November 2023.
SFL is also investing in 35% shareholding in HOK-Furlenco for an equity valuation of Rs. 857.14 crs (cost of investing in 35% stake is Rs. 300 crs); subject to customary working capital, debt and debt like items and adjustments, if any. The indicative time period for the completion of the investment will be by or before 30th August 2023.
The Kurlon deal gives Sheela Foam an undisputed leadership across major product categories with its flagship brand Sleepwell’s strength in foam (consistent quality and innovation); and acquired brand Kurl-on’s strength in rubberised coir; wherein both these companies are leaders in their respective product segments. Sheela Foam will now command a combined market share of around 21% in the modern mattress market in India.
Sheela Foam being the leader in northern and western India, whereas KEL is having a higher market share in southern and eastern region of India, the Kurlon Enterprises Ltd.’s (KEL) acquisition will help Sheela Foam to diversify customer base and extend to a pan India footprint. Both companies have a complimentary distribution network – Sheela Foam functions mainly through exclusive distribution network (such as EBOs) whereas KEL is strong in multiple distribution network (MBOs). This consolidation would provide SFL a robust distribution network; and production efficiencies and cost savings. Sheela Foam and KEL have many complimentary manufacturing facilities which will help the combined entity to serve customers from lesser distance and hence, improve both logistic costs and also improve raw material procurement efficiencies and thereby creating various operational synergies.
The Furlenco deal will help Sheela Foam to enter the fast-growing branded furniture and furniture rental market, and an opportunity to further diversify its presence even in the furniture sales market and become a full portfolio company in the segment. As per industry estimates, furniture market is much bigger in size then Sheela Foam’s existing playing field with a TAM of Rs. 1 lakh crore (trillion). It will also help leverage digital capabilities of Furlenco for Sheela Foam products and will also help leverage the strong distribution network of Sheela Foam for Furlenco products and services. The investment would also create synergies by selling input products such as foam, etc., by Sheela Foam to manufacture Furlenco products. Sheela Foam and Furlenco can collaborate in R&D activities. Sleepwell & Kurl-on exclusive stores may be made available with Furlenco furniture offerings. With the world’s largest furniture & appliances refurbishment facilities, Sheela Foam-Furlenco can now offer Refurbishment as a Service (RaaS) for furniture. Sheela Foam will also benefit from Furlenco’s Digital-First, Direct-to-Customer and e-commerce capabilities; as well as Furlenco’s design capabilities.
Mr. Rahul Gautam, Chairman & Managing Director, Sheela Foam Ltd., said, “With the coming together of Kurl On, Sheela Foam will further cement its leadership position in the modern mattress market. The investment of Furlenco would give it a very strong entry into the branded furniture market, and a much bigger market than its existing market. With these two within its fold, Sheela Foam is at an inflexion point, where opportunities created by inorganic activity would greatly strengthen the business model and propel a higher level of organic growth.” The diverse products, integrated manufacturing, distribution synergies, pan-India footprint & Digital-First play will help to tap new-age customers. And the Sheela Foam family will get bigger and better as employees and business partners of Kurl-On & Furlenco continue in their role and responsibility and add to the overall expertise of the existing team.”
SFL has had a strong track record of acquisitions and also turning them around. Sheela Foam had acquired Joyce Foam in Australia with 5 manufacturing plants in 2003 and Comfort Technologies in Spain in 2019. This puts it in a very suitable position to drive advantage of the new acquisitions.”
