Shares of Sheela Foam surged 15% today after the company announced a buyout of a controlling stake in rival company Kurlon Enterprises and picked up 35% stake in Furlenco, a furniture rental company, also known as House of Kieraya Ltd.
The shares opened a gap up at ₹1,300 and surged to an intra-day high of ₹1,363 against the previous session close of ₹1,188 on the BSE. At the time of filing the story, the stock settled 8.68% up at ₹1,291.25. At the current share price, Sheela Foam's m-cap stands at ₹12,598.16 crore.
Sheela Foam, a leader in home comfort products (foam-based) and the largest polyurethane foam manufacturer, says these acquisitions will cement its leadership position and will allow its entry into the branded furniture market.
"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," Sheela Foam says in a statement.
The company adds: "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."
Rahul Gautam, chairman & managing director, Sheela Foam Ltd., says 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 inflection point, where opportunities created by inorganic activity would greatly strengthen the business model and propel a higher level of organic growth.”
With Kuron into its fold, the company now claims to command a "combined market share of around 21% in the modern mattress market in India". Sheela Foam is the leader in northern and western India, whereas KEL is having a higher market share in the southern and eastern regions of India. The Kurlon acquisition could help Sheela Foam to diversify its customer base and extend to a pan-India footprint.
On the Furlenco deal, Sheela says it'll mark the company's entry into 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, the furniture market is much bigger in size than Sheela Foam’s existing playing field, with a total addressable market of ₹1 lakh crore. The investment will likely create synergies by selling input products such as foam, etc., by Sheela Foam to manufacture Furlenco products. Sheela Foam and Furlenco can also collaborate in R&D activities, the company adds.
Sheela Foam's flagship brands include 'Sleepwell’ for mattresses and home comfort; ‘Feather Foam’ a pure PU Foam; and ‘Lamiflex’ a polyester foam for lamination. Kurlon is engaged in the manufacturing and marketing of various foam-based and Coir-based home comfort products. House of Kieraya, founded in the year 2012 by Ajith Mohan Karimpana, is one of the largest and fastest-growing furniture rental companies in India.
