What do Kurlon, Furlenco acquisitions mean for Sheela Foam? Here’s what CMD Rahul Gautam has to say

Equity investors on Dalal Street gave the thumbs up to Sheela Foam on Tuesday after the company announced on Monday its acquisition of a 94.66 per cent stake in Kurlon Enterprises for Rs 2,035 crore. Separately, the home comfort products manufacturer said it will also acquire a 35 per cent stake in online furniture firm Furlenco, operated by House of Kieraya, for Rs 300 crore.

In response, shares of the company surged 14.76 per cent in early trade on July 18. So, what do the acquisitions of Kurlen and Furlenco mean for Sheela Foam?

In an interaction with Business Today, Rahul Gautam, Sheela Foam’s Chairman and Managing Director, said, “We have been relatively strong in North and West. Kurlon has been strong in the South and East. With the coming together of Kurlon, 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.”

In financial year 2021-22, Kurlon Enterprises’ turnover rose to Rs 808.80 crore from Rs 767.25 crore the previous year. The figure stood at Rs 995.56 crore in FY20. Furlenco saw its unaudited turnover rise to Rs 152 crore in FY23, from Rs 129 crore in FY22 and Rs 84 crore in FY21.

Meanwhile, Sheela Foam’s consolidated gross sales increased 0.27 per cent year-on-year to Rs 2,873.72 crore in FY23. But its net profit declined 7.44 per cent YoY to Rs 201.15 crore. Gautam believes the company’s turnover may touch Rs 5,000 crore in the next three years.

Asked how much these companies will add to Sheela Foam’s top line, Gautam said, “Kurlon is not doing well if [we] take an average of last two years. But they are at a normative level. We expect Rs 1,000 crore from Kurlon. From Furlenco, we may add Rs 200 crore in our top line this year and Rs 600 in three years.”

“These acquisitions will certainly affect the bottom line of the company in FY24.  Profit will be impacted due to backward integration. At the same time, the front end of the structure will add to the revenue side. We may see the impact of these acquisitions in FY25,” Gautam said.

Incorporated in 1971, Sheela Foam is the largest manufacturer of Polyurethane Foam (PU) in India, Australia, and New Zealand. The company also has a presence in Spain and Europe. It manufactures various foam-based home comfort products like mattresses, furniture cushions, as well as technical grades of polyurethane foams for end-use in a range of industries like automobile, acoustics, among others.

Speaking about Furlenco, Gautam said: “We produce foam for furniture at present. However, we think the kind of EBO we have, it is ideal to sell finished furniture also on an offline basis. Therefore, we had to get into finished furniture and now Sheela Foam is entering into a fragmented segment of the furniture market with the stake in Furlenco.” He added that Furlenco should become PAT positive by December. 

Also read: Hot stocks on July 18, 2023: Adani Enterprises, Mazagon Dock, Reliance Industries, Brightcom Group, others

Also read: Adani Enterprises shares rally 4% post AGM. Here's why