Ladies and gentlemen, good day and welcome to the Sheela Foam Limited Q1 FY 2026 earnings conference call hosted by Arihant Capital Markets Limited. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star then zero on your touch-tone phone. Please note that this conference is being recorded. I now hand the conference over to Ms. Deepali Kumari. Thank you, and over to you, ma'am.
Thank you. Hello and good afternoon to everyone. On behalf of Arihant Capital Markets Limited, I thank you all for joining the Q1 FY 2026 earnings conference call of Sheela Foam Limited. Today, from the management, we have Executive Chairman Mr. Rahul Gautam, Managing Director Mr. Tushar Gautam, Deputy Managing Director Mr. Rakesh Chahar, Group CFO Mr. Amit Kumar Gupta. So without any further delay, I would like to hand over the call to Rahul sir for their opening remarks. Thank you, and over to you, sir.
Thank you, Deepali, and thank you, Arihant, for hosting this call. Good afternoon, ladies and gentlemen. As is our practice, we begin with our vision statement. So I'm going to start with the recitation of that. Our vision: we will continue to be recognized as a leading organization in quality comfort products while practicing values of integrity, reliability, proactivity, and transparency. To do business with a smile, for customer delight, and a commitment to society. Thank you very much. At the outset, let me thank you all for attending this conference call to discuss our operational and financial results for Q1 FY 2026. I do hope you have gone through our results and the earnings presentations which have been uploaded by the exchanges. Q1 FY 2026 saw a robust growth across all the relevant parameters. Let me begin by the operations.
Our mattress volumes in Q1 FY 2026 grew by 10% year-on-year, while Sleepwell registered a growth of 22%. Kurlon registered a growth of 6%. This should have been more. It's an accounting issue based on the integration process that we have been going through. This growth was possible due to steps initiated for integration of Kurlon. Both Kurlon and Sleepwell supported each other in their respective strongholds. There was renewed focus on all the segments and support given by our channel partners. Let me give you some updates on our business and the initiatives taken, which will pave the way for deeper penetration across Indian markets, resulting in a sustained growth. First, the B2C business.
Kurlon has a strong brand recall among the consumers, and the strategy is to harness this by deeper penetration into northern and western markets, apart from increasing presence in its existing strong areas, which are both south and east. To further capitalize on the brand strength of Kurlon and Sleepwell, we intend to open about 1,000 new showrooms in the current fiscal year. And let me share with you that in Q1 FY 2026, we have already signed up for 392 new showrooms, out of which 234 are already operationalized. Majority of these showrooms were Kurlon in north and west part of India. With this, today, we have a strong network of almost 6,000 exclusive brand outlets and more than 20,000 touch points. Number two, distributors and dealers are our preferred partners in distribution.
Distributors and dealers help in developing strong bonding and enable us to create a feedback on customer preferences and expectations. This helps our research, R&D, production, and marketing teams to customize and develop and position products as per customer preferences. We will continue to focus on customer delight as a part of this continuous engagement. In Q1 FY 2026, we organized a distributors meet in Delhi and facilitated 33 dealer meets at 11 different locations across India. The interactions enabled channel partners to gain clarity on various benefits and the incentives they would derive out of the various schemes. This helps in further strengthening our channel relationships. Coming to new products, to address the rising consumer demand in the sub-INR 10,000 category, whose market is estimated at around INR 12,500 crores, we have launched new mattress models for both Sleepwell and Kurlon.
Our new products have been well received by the consumers and are in the process of being established. Tarang and Aaram mattresses. For our Small-Town Initiatives, both Sleepwell Tarang, and Kurl-on Aaram are being aggressively marketed and now have presence across 7,000-plus dealers in 4,500 towns. This segment is showing positive results, as demonstrated by a volume growth of around 60% year-on-year, thereby achieving an annual run rate of INR 80 crores per annum. We are confident of achieving revenues of 100-plus crores from this value-driven initiative in the current fiscal year. E-commerce business. E-commerce continues to be another strong growth-oriented value driver segment. It registered a value growth of 66% year-on-year on marketplaces and on our own websites. This segment generated a revenue of INR 200 crores in FY 2025, and we expect 50% value growth through this channel in FY 2026.
We also have some operations in Dubai, and I want to take that up. With a lot of Indian diaspora in Dubai, both Sleepwell and Kurlon brand enjoy strong salience in the region, which has encouraged us to establish a strong presence in the Middle East in a cost-effective manner. What we started as a small franchise outlet is now growing faster. We sell our brand mattresses through online and franchise network, enabling us to have a strong foothold. Today, we have six exclusive brand outlets and seven multi-brand outlets. B2B business. This includes the three categories under which we sell foam: furniture cushioning, technical applications, and comfort foam. In Q1 FY 2026, we have seen high single-digit growth in terms of volume in these segments. Value growth was a little subdued, primarily because of reduction in raw material prices.
Deeper penetration continues in comfort foam with onboarding of new dealers and distributors in unrepresented areas. Due to continuous focus on developing newer products, the company's dominant position continues in technical foam application and industries like automotives, footwear, aviation, etc. Supply chain efficiencies. Because of various cost optimization initiatives like network redesign, truck upsizing, better fill rates, and geographical realignment of units and distribution points, we are able to improve our logistics costs despite inflationary pressures on account of increase in tolls, insurance premiums, fuel, CNG costs, etc. Post-Kurlon acquisition, we could reduce logistics costs by more than 1% of sales due to these and other initiatives. Let me now go to the Kurlon integration process. We had undertaken a huge exercise post-Kurlon acquisition to integrate the company with our existing operations. While it has taken around 18 months, the results have been very satisfying.
Number one, optimized the channel network, which is now a combination of both exclusive brand outlets and multi-brand outlets, retaining the strengths of each channel type wherever they were existing. This further enhanced the network of each brand across territories of the other, relying on existing relationships. Example, expansion of Kurlon in the north and west relying on our existing EBO relationships that Sleepwell enjoyed. Number two, optimizing the operating facilities of both the companies, resulting in reduction of facilities from total number of facilities from 21 to 12. Number three, efficiencies in purchase of input materials. The combined volumes helped us to become a more dominant purchaser, leading to lower purchase prices. Also, with enhanced volumes, it became imperative to experiment and innovate with new ideas of cost reduction, which have led to huge cost benefits. Number four, improvement in logistics costs as mentioned above.
Number five, improvement in overhead costs as the entire business of the company is managed by one harmonized team instead of two separate ones. The benefits of the same are now reflected in our results, both at gross margin levels and at the EBITDA margin levels. Now, I turn to Furlenco. It's a company that we have invested in and is doing well. Furlenco has shown tremendous growth. More than 40,000 new customers got onboarded, resulting in a 60% increase in subscriber base. Furlenco now operates in 29 cities across India. Another key milestone is that Furlenco registered INR 4 crore as PAT achieved in the quarter one of this year, which is more than the full-year profitability achieved in fiscal 2025. This is mainly due to the operating leverage the company is enjoying with greater volumes. The company is on its growth trajectory.
To further capitalize on consumer demand, Furlenco will raise around INR 100 crores-INR 125 crores of equity, which would fuel the expansion and would lead the road to levels of INR 500 crores-INR 550 crores of revenue by FY 2027. To conclude, I would also like to highlight the noble work of ESG that we have been doing. Out of the 17 Sustainable Development Goals, which the United Nations has declared, we have adopted four goals as part of our next five-year strategy. These goals are: number one, good health and well-being; number two, gender equality; number three, affordable and clean energy; and four, responsible production and consumption. For us, protecting the environment, uplifting the social status of the community around us, and streamlining our corporate practices will continue to be focus areas in the future.
I am sure a strong operational and financial performance, combined with our commitment to adopt and implement a robust ESG framework, will go a long time in creating immense value to all the shareholders. All the above have now set the stage for a next level of growth of Sheela Foam, which has already started showing results in the Q1 FY 2026 that we have just presented. Now, Mr. Amit Gupta, our group CFO, will take us through the results which have been posted. Thank you. Over to Amit.
Thank you, sir. Thank you, sir, for updating on our business and the way forward. First of all, the financials coming to Q1 financial year 2026 results. The key highlights are as follows. India business constituting of Sleepwell, Kurlon, and Sheela Foam reported revenues of INR 644 crores against INR 612 crores in the corresponding quarter last year, which is a growth of 5% YoY. Core EBITDA stood at INR 75 crores against INR 51 crores in Q1 financial year 2025, thereby registering a growth of 47%. Core EBITDA margins also stood at 11.7% against 8.4% for the corresponding quarter last year. The growth is on the back of 10% volume growth, and both of our premium brands continue to deepen their footprint amongst consumers. Adjusted EBITDA does not include the forex loss of INR 10 crores on the hedge we had taken, which adversely affected our performance this year.
On a consolidated basis, for the first quarter, we reported revenue of INR 821 crores against INR 810 crores for the corresponding quarter last year, a growth of 1% YoY. Core EBITDA for the quarter stood at INR 85 crores against INR 60 crores for the corresponding quarter, a growth of 43%. EBITDA margins were reported at 10.4% against 7.4%. Net profit stood at INR 7 crores. This difference is primarily in account of claims of INR 31 crores, which were received in quarter one financial year 2025 last year. The various cost initiatives taken by us for integrating Kurlon into our business and increasing efficiencies of both Sleepwell and Kurlon combined are yielding positive results, which are reflected in our gross margins, which now stands at 43.5%, which is almost 400 to 400 basis points above the pre-acquisition levels.
Kurlon integration, which has started 18 months ago, has finally culminated in higher core EBITDA and EBITDA margins. To substantiate, in financial year 2023, Kurlon standalone EBITDA margin was at 6.7%, whereas Sheela Foam standalone was at 9.2%. The combined business both now are improved to 11.1% for these two entities. This was possible because of the various initiatives we had taken, as already enumerated by Rahulji. This has resulted in savings of INR 190 crores and improvement of core EBITDA margin. We are hopeful that the balance savings of INR 60 crores would also be realized by the end of financial year 2026. The further improvement in profitability will primarily come from the growth of top line, and we are pretty hopeful on this with the festive season coming in.
Raw material prices dropped from INR 196 per kg per TDI between Q4 and Q1, and polyol prices from INR 117 to INR 110 per kg for the similar period. This has resulted in lower top line growth of our foam segment as these prices are directly passed on to them. If we compare them on an equal input raw material price, we will see that even the top line for these categories have increased by approximately 8%-9%. To conclude, we would continue to focus on cost optimization for further improving our profit margins. With this, I will request the moderator to open the floor for question and answer.
Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touch-tone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. We take the first question from the line of Rachna from SiMPL. Please proceed.
Hello. Am I audible? Hello?
Hello.
Yes.
Yeah. Can you speak a little louder, please?
Yes, sir. I wanted to know about our mattress realization because they have declined on Y on Y and Q on Q basis, despite us taking price hikes of around 3%-5% around early fourth quarter 2025 across both brands. So what led to this decline in mattress realization?
Okay. Thank you. Thank you, Rachna. Amit, would you take that question?
Sure. Sure. So if you see, we are growing faster on the online segment and the Small-Town Initiative segment, the price levels of which are lower than the price levels of the mainline segments on our stores, what we sell. I can tell you that we have not reduced prices of any of our categories. It is only the branded average selling price, which is coming out, is lower because of these two reasons.
Okay. And I wanted to know more about the Tarang and Aaram brand, how they have contributed to the mattress revenue overall in Q1 FY 2026. And from a long-term perspective, where do you see the share of these Tarang and Aaram brands pegging at?
In the first quarter, we have achieved a run rate of INR 80 crore per annum. Around INR 17 crore-INR 18 crore is what we sold in the first quarter for Tarang. Going forward, this year, we have a target that we should close this year at INR 100 crore. The run rate, of course, by the end of the year will be higher. If you ask me what is the potential of this with the quantum of network and the rural areas in India, which is around 65% of the market being contributed by traditional mattresses, I can say that the potential is infinite. We will continue to penetrate into these areas and grow on a year-on-year basis.
Okay, and following up to that, if the market is large for Tarang and Aaram brands, do you think this might dent profitability in the long term?
On Tarang and Aaram?
No, overall.
Yes. I'm coming to that. So I can tell you that this will not impact profitability. Tarang and Aaram currently enjoy the same or better level of EBITDA margins than our other products on an average combined. Yes, it will be lower than the mainline segment, but if you consider it as overall for Sheela Foam, it is well into the profitability range. So we don't foresee any reduction in profitability. In addition, Tarang and Aaram are made at our Jabalpur facility, which has a variable pressure foaming machine, which makes foam at 10%-15% lower cost. So this is sufficiently compensating for any depletion in profit because we sell in a low-price market.
Okay. One question. Are your answers on the Indian market due to the industry tailwind?
Sorry to interrupt, Ms. Rachna. Your voice is breaking, ma'am, actually. Could you fix that?
Yes. Hello. Hello. Hello.
Much better. Please continue.
Yes. Thank you so much. Sorry for the intermittentness. My second question was, our long-term ambition was to capitalize on the Indian market due to the industry tailwinds and first capitalize on this opportunity. Now, given that, and I wanted to know more on the export side, as we are expanding in Dubai, are there any plans to scale down operations in Australia and Spain and shift focus towards B2C business in exports as well?
Rakesh, please.
So we are, as well as GCC country, Dubai and the GCC countries, we have made a beginning. The initial response is very encouraging, and we are piloting a few formats of retail. Once we get our learning from there, then there's a plan to scale up in the entire GCC. So maybe a couple of months down the line, we should have a better visibility of the potential that we'll be able to realize in these countries.
Okay and with respect to.
As with GCC exports.
Yes. Go ahead, Rachna.
With respect to Australia and Spain, if you could highlight, are there any plans to scale down operations?
So listen, our focus for the last couple of years has been on the B2C business and the India business, and the potential also lies here. So there are no plans to scale down the businesses there, but just as a natural outcome of our focus, the percentage contribution of Spain and Australia to our overall EBITDA is a reducing number. Australia is a matured market. We all know that. The growths are limited, however profitable, but limited. Spain continues to grow, but the growth rates will always be similar or at best a little lower than that of India. And India being a large base and a large size, it will continue to grow much faster. So there is no intention, but at the same time, it will automatically emerge like that.
One last question. In our annual report, we have talked about the rural-focused model. If you could please explain how the distribution is rooted within this model or what are the levels of distribution and how this model differs from dealer-led distribution in urban markets?
That's something.
Again, had a period of voice which was not coming through clearly, so you will have to repeat that question.
Okay. Hello?
Go ahead, Rachna. Please repeat the question.
Yes. Please continue.
Yes. Yes. Am I audible now?
Yes. Yes.
Hello? Yes. In the annual report, we had talked about the rural-focused model. If you could explain how the distribution is rooted within this model or what are the levels of hierarchy in this distribution and how this model differs from dealer-led distribution in urban markets. And can this model generate some incremental margins? Also, is this a part of a Small-Town Initiative within which Tarang and Aaram mattress products are more focused, or some of our legacy SQs are also distributed through this model?
So for the rural distribution, we are trying to develop a new distribution with the distributor, and the aim there is for a deeper penetration and also cater to the smaller outlets, which are furniture, furnishing, and room outlets. So the same model we will also be using for the urban, where there are small, small outlets which sell furniture. Along with furniture, they sell mattress. So this distribution is independent of the mainline distribution, which is used for Sleepwell and Kurlon network.
Okay. So this is more like a direct distribution, if I understand it correctly?
So it is through the distributor, but an independent distributor, which is away from the mainline distributor. So this is another line of distribution that we are creating to avoid any kind of cannibalization.
Okay, and thank you, and sorry for the intermittent.
No. Thank you. Thank you very much.
Thank you. Before I proceed with the next question, I would like to remind participants that please restrict your question to two per participant in order to ensure that the management is able to address questions from all participants. The next question is from the line of Ritesh Shah from Investec. Please proceed.
Hi, sir. Thanks for the opportunity, sir. I have five questions. I'll try my luck. Sir, first is, sir, competition is raising money, multiple players. How are we looking to prioritize or balance growth versus profitability? Specifically, you did indicate about the e-com revenues and the target growth for next year as well. If you could please help us understand this better? That's the first question.
So if I get your question right, you're saying that how do you balance growth and profitability?
Yes, sir.
I mean, I guess that's what we want to do, which is profitable growth. That's what we try to do. Competition is raising money, you said, and I presume that you are talking because the competition is doing a lot of activities, etc., and we must complement them. Whatever they are doing is to grow the market. My belief is that there is enough at the moment, there is enough market which is available, and we can, in spite of whatever activities that are happening, I think that's doing well for this segment. For us to continue with spreading our distribution with our retail showrooms, and the growth will happen with profitability. At the moment, we don't need to do anything bizarre out of it. I mean, just standard business practices will get you that.
Okay. Sir, let me put it the other way. E-com, sir, you indicated we did around INR 200 crores last year, and you indicated 50% growth. So can this number be higher, or is it given the margin profile probably is lower, that is where we are comfortable, say, at 50%?
No, I don't think that we are satisfied, but whether we are comfortable or not, I presume we are. A growth rate of anything upwards of 50% also requires many other things to be fulfilled. There is the logistics side. There is the sizes part of it. There is satisfaction of the systems that both the marketplaces are wanting to do and everything to sort of tick before we can sort of say that a sale has been consummated or closed. Therefore, I think if we try and go beyond 50% or 60%, it will not be a sustainable growth. It will go through the hiccups. It will go through the little ups and downs because one thing or the other will start becoming a constraint. You need 25,000 things for a sale to happen.
So I think that this time, we are able to sustain this, and we keep growing. It's also in quick time, in about two to three years' time, that you would have a large number that would be there. And you are growing higher than the market size, than the market is growing. I mean, the markets would be growing at 25% or so. And if you are growing at 50%, I would say, are we satisfied? No, but comfortable, yes.
Sir, that's helpful. Sir, my second question is probably Rakeshji. So we have indicated we look to open around 1,000 new showrooms. I couldn't comprehend the answer which you gave to the prior question. So why is this number so high of 1,000? And if one had to look at in context of the existing network that we have, which is very, very wide, if one had to look at the effectiveness of the current network versus what we intend to do with 1,000 new showrooms, how do you put these two pieces together?
Ritesh, this number has come out from a study of the micro markets and the gaps therein. The number is looking higher because from this year onwards, we have taken Kurlon expansion as a main driver to grow sales of Kurlon in both north and west, where it is relatively weak. In the previous year, it was only Sleepwell, and there was an organic expansion that used to happen. Once or twice, it used to be higher, but this is being driven more from a Kurlon side. And even for Sleepwell, I mean, as the markets also keep evolving, so we have done this whole exercise once again. And there is also a lot of opportunity because of the two brands coming together, where the Sleepwell outlet is ready to open a Kurlon outlet. That is one phenomenon that we have seen.
Second is the Kurlon MBO is willing to now become an exclusive outlet. So because this is the first year of this drive, and therefore this number is looking high to you. I mean, on a normal basis, I mean, my assumption is that it will be more, say, about 400 outlets or so, but this year, there's going to be a jump in it.
Sir, so is this a net number that we should look at? Because you said MBO, two EBOs. So is this a net number that we are looking at, or the net number will be lower?
Net number will be lower because many MBOs will get converted to the showrooms, which has a higher throughput than an MBO.
Fair. Sir, last, I'll just squeeze one question. You did indicate that we are launching INR 10,000 per piece for both Sleepwell as well as Kurlon. Now, is this across channels that we intend to do, e-com as well as the traditional network? And basically, how would we assure that it doesn't basically, when it comes to the shelf placement, we have found Aaram and Tarang, even in tier-one cities? So how should we comprehend that the product or the SKU placement is like it doesn't kill the different market segments?
So, how we are treating this is that as far as EBO is concerned, for products less than 10,000 in the urban market, we just focus on the placement, and then we don't promote it at the EBO because there the play is to upsell, to increase the ASP. But there are customers who do enter the outlet, and instead of they're going out because they don't have a product of their pocket size, so the EBO can offer it. The main purpose is to drive sales through the MBOs for these sub-10,000 products. That's the intent, and that's the reason we have introduced this. As far as Tarang, Aaram is concerned, I mean, the major focus there is again on smaller MBOs, which are basically furniture outlets. I mean, you would have also noticed in micro markets, there are very small, small furniture outlets. So that's our focus.
EBO will also get Tarang and Aaram, but that's again for, let's say, you need an extra bed for the house or you need for your domestic help. The purpose of that is that. So that's why we are promoting more threefold in an EBO network so that there is minimum cannibalization.
Thank you, sir. I'll join back with you. Thank you so much.
Thank you, Ritesh.
Thank you. The next question is from the line of Shrey Gandhi from Abchlor Investments Private Limited. Please proceed.
Hello. Yeah. Good evening, sir. So yeah, am I audible?
Yes, please.
Yeah. So my question was regarding the Kurlon integration. It is positioned like a major synergy benefits, right? So we have almost received INR 120 crores already realized, and INR 130 crores are expected. So can you just give a breakdown of the synergy timelines and as well as how out of that INR 130 crores, what will be the breakdown through the EBITDA level in H1 and H2? [audio distortion]
Hello?
Yeah. So I think there is some noise coming as background noise. Could you just turn that down? Yes, now it's clear.
Yeah. So the INR 130 crores which we are going to receive with the Kurlon integration. Yeah. So in that INR 130 crores, can you give the breakdown of the EBITDA level? How much will contribute to the EBITDA level in H2 FY 2026?
Yeah. Honestly. Yeah. So see, we have to see the savings and whatever is going down the line to EBITDA in two parts. First part is, are we getting this money from our existing system? So it is not INR 130 crores currently. By the end of the first quarter, we have achieved INR 190 crores run rate of the savings right from the date Kurlon was acquired till this date, till the end of the last quarter.
Okay.
Some part of it is captured in gross margin, and some part of it is captured in fixed cost, like reduction of administrative cost, reduction of manpower cost, overhead. They are below the line, but all of them flow to the EBITDA.
Now, just look at it from the perspective when we said that we will do a INR 250 crore cost saving with new initiatives and benefits of Kurlon integration, they should have got a benefit of around 8%-9% to our bottom line. So we were already at, say, 8%- 8.5% or, say, 7.5%-8%. So they should have taken us to 16%-17%. But that was not the intent. The business also needed a lot of initiative to take it to the next level. It was almost stagnant two years back the line.
So we also needed to spend some money into the business, especially in terms of expansion of channel network, especially in terms of incentivizing people to get the required sales, launching of new products like in the online segment and the SPI, and also strengthening of management teams across the board in the organization. So even at the beginning, we said that out of this saving of 8%, 8.5%, approximately 4%, that is 50% of it, would flow to the bottom line, and 50% would be used by the business to get to the next level. The remaining benefit to the bottom line, which we said that we should be able to reach 15% in three years' time, would be coming from operating leverage.
Once we grow, like this year, if you see, barring the impact of raw material prices, we grew by 8%-10%, right? This is the quarter which is the same quarter last year. Our intent is to take this growth to at least 15% and run that growth in the next three years. Our cash flow has increased by around 4%-6%. This year, of course, we are not allowing it to increase because of the cost saving initiative. But those 15% growth should lead some portion to the bottom line, which together, these two initiatives should take us to a profit margin, EBITDA margin of, say, around 14%-15%, which we had committed in three years.
Okay. So.
Yeah, yeah. And my next question would be, sir, on the mattress segment, the volume growth has been around 10%. However, our revenue growth has been modest, around 9%. So there was a pressure on the realization part, the selling price, right? So what steps we have taken to drive the penetration and improve the revenue realization per unit?
No, so top-line growth in mattress, value growth in mattress is also 9%.
Yeah, 9%. Yeah.
Yeah. So 1% difference may be because there is a higher growth rate in Small-Town Initiative and online segment, which I mentioned to a question earlier as well. But that's not material. See, it may also be because of certain product mix. In some quarter, you sold higher-value mattresses more; in some quarter, you sold lower-value mattresses more. So 9% or 10% does not make a lot of difference. But yes, if you look at our foam segments, which is furniture cushioning, technical foam, and the comfort foam segment, there, the volume growth has been at around 6%-8%, whereas the value growth has been only around 2%-3%, right?
Yeah.
That is primarily because raw material prices have come down by around 10%-12% in the last quarter, and in foam business, whenever there is an increase or decrease in raw material, we have to pass it on, so the nature of that business is different, so when in a falling raw material price regime, the foam business top-line would reduce for the same level of business, but it will be true in the reverse as well, so when the raw material prices rise, that volume growth will be lesser, whereas the value growth will be higher.
If I can just give you one last question, sir. You have consolidated around 18 to 12, around 18 plants post-Kurlon integration. So what's the current capacity utilization at the consolidated level, if you can just tell? And what is the current capacity level, and how do you quantify the cost saving and operating leverage benefits to flow from this consolidation?
Just so I.
Capacity utilization at a consolidated level, yeah.
Capacity utilization is not a very good metric for our business. So generally, we need to be present in each geography and have manufacturing facilities in each geography, which are underutilized, but their primary purpose is to service the market at the lowest possible cost and the highest serviceability. So at the moment, post-Kurlon acquisition, what we did is divided the country into five zones. And each zone has capabilities of making foam and mattresses for both the businesses put together. Capacity utilization in terms of, let's say, okay, on the ground, we might need a bit of maintenance CapEx every year. But any fresh CapEx, we don't see anything before 2029, 2030.
Okay. Thank you. Thank you. Thank you. Thank you so much.
Thank you.
Thank you. The next question is from the line of Nikhil Upadhyay from SiMPL. Please proceed.
Yeah. Hi. Good evening. I hope I'm audible.
Yes, please.
Yeah. First, I think a good recovery in the margin profile we've seen this quarter. Just further understanding, and you mentioned in the call also that our idea is to grow at 15% and probably keep our expenses flat. What I want to understand is that is it that the system has the capacity to sustain 15% growth without much expenses? So is the bandwidth at the employee level or at the expenses level created for a top line of at least INR 900,000 crores? Is that how one should understand our P&L investments over the last four, five quarters?
I think I would repeat what I said in my earlier question. I said that because of the cost saving initiative, my fixed cost will be flat for this year. It doesn't mean that it does not have impact of inflation. There is, of course, 5%-6% impact of inflation on fixed cost every year. But this year, it would amply get offset by the savings initiative. Yes, but from next year onward, the second year and the third year, yes, there could be an inflation of 5%-6% anticipated currently. However, if my top line is growing by 15%, even after absorbing the fixed cost inflation of 5%, a lot of money flows to the bottom line. So ultimately, if that flows to the bottom line, it will lead to an increase in uptake in the EBITDA margin.
Okay. Secondly, sir, you mentioned that at least we are not looking for CapEx till probably 2029, 2030 is the number you mentioned. But if you look at, see, even last four quarters, we are doing an EBITDA of INR 250 crores, but there is a INR 100 crores depreciation and INR 100 crores interest cost. As a result, the profit conversion is only INR 100 crores. The profit which comes is only INR 100 crores. And probably two quarters back, our idea was that we want to bring down the debt by selling non-core assets and at least by INR 200 crores. So where are we on that path of reducing the debt because which eventually reduces the interest cost also? So some ground you can cover on. Where are we?
Sure. So yeah, the assets which were to be monetized were clearly identified before our earlier call, wherein I had committed INR 200 crores. As on date, we have already sold three facilities out of them. They were smaller, so we have monetized around INR 40-odd crore from those assets. There are two bigger facilities which are yet to be monetized, and we are in the process of doing it. Real estate is an easy sell-off, and of course, we have no compulsion to sell it off at a very non-bargain sort of a price. So we may take a little bit of time, but yes, those assets are clearly chalked out for monetization. That was one part of your answer. Do I answer you?
Yeah, yeah. Just a continuation. So by end of 2026, where should our debt be eventually? Even I understand we don't want to do a distressed selling, but even based on our own cash generation, where should our debt levels be approaching?
If you see my current year business, you would find that we should be generating a cash somewhere between INR 150 crores-INR 200 crores from the business. That is something which will go down to reduce the debt. And if this monetization takes place, it will be another INR 150 crores. INR 40 has already been monetized. So we should be able to reduce our debt by around INR 300 crores-INR 350 crores just with this monetization. Now, where would the debt be? Currently, if you see, I have a net debt of around INR 700 crores-INR 800 crores at a group level. If this goes down by INR 300 crores-INR 350 crores, we would be sitting somewhere around INR 300 crores, INR 300 crores-INR 400 crores on a net debt level.
Okay. And last question, you mentioned that we've made some investments in Dubai, and the market is good, and probably we may expand. But this is our beat. Is it we are selling under our own brand? And how is the structure of the market as of now? What's the growth rate, and how many brands are existing? Some idea, if you can share, why does that market excite you?
So, two reasons. One is there are a lot of Indian expats. That is one. Second, there is a space. Those markets are predominantly spring markets. And we feel that there is a case for a value-added foam mattress, which we are very good at in India. So we have initiated some retail formats, and the initial response from the formats, both on the product and pricing, is very good. Because it's a matured market, so the price points are quite high. In fact, our gross margins are much higher than what we realize in India. And this gives us the confidence of scaling the right model that we discover in another two, three months, and then start scaling the process.
Okay. And couldn't we then through a distribution?
We are using Sleepwell and Kurlon, and both these brands are registered in all seven GCC countries.
And it would be through a distributor model, or we would be putting? Okay, fine.
No, we will come back.
This is a direct to the retail.
Okay, fine. Thanks.
We have a platform set up there, yeah.
Sure, I'll come back in.
Thank you so much. We take the next question from the line of Monil Gada from Equentis. Please proceed.
Hi, team. Thank you for the elaborate presentation. Am I audible?
Yes, please. Go ahead.
Yeah. So my question was, you briefly covered over Furlenco, wherein you touched that they're doing a recent raise of INR 100 crores-INR 150 crores. Given Sheela Foam's existing investments over 2022 to 2024, will we be doing any incremental capital infusion in Furlenco? And how do we see going forward turning the company? Do we want to acquire the whole Furlenco like we did in Kurlon's case, or will we be not interfering in their operations?
So thank you. I just want to say that, yes, the current requirement is between INR 100 crore and INR 125 crore. It's around. We may participate a little bit to ensure that we don't get diluted. But otherwise, at the moment, we would let some kind of equity flow in from outside too. We have reasonable, I won't say control, but let's say support in the management of the company. We have majority at the board level. And at the moment, there is no desire right away to acquire the company. We will let it grow, let it go on as it is at a good high growth level. And at the end of maybe FY 2027, take a call as to how, what we want to do, whether it'll go through an IPO process or it'll go through an acquisition process or whatever. But I think it's a little bit early.
Right now, we're just focusing on the growth part of it.
Okay. Thank you. And the last question would be, you said by FY 2027, the revenue would be projected around INR 550 crores. Any projections on FY 2026 numbers for the entity, and how confident are we in Furlenco's ability to achieve those numbers? Any risk we foresee in the path of growth?
FY 2026, our projection is INR 370 crores. We are well on track of that. Whatever few months that have gone by. We don't feel any big challenge towards achieving this goal. This should be on track.
Okay, and last question would be, do we also supply any foam from our entity to Furlenco, and is this at arm's length price, or do we offer some preferential rates, and we're also helping them get a distribution channel access through our firm, so how is that affecting our cost?
So first, on the foam part of it, yes, we do supply some foam. Their needs for foam are not as great as we would think it tends to be. It's a small number, but we supply the foam, and the pricing is all at an arm's length. There is no issue on that. As far as access to our showrooms is concerned for selling their furniture, we just need to appreciate two things. Number one, at the moment, they are a furniture rental company. They do sell some quantity, absolutely. And in the furniture rental part of it, there is a constant demand for cash for making assets which are needed, required for the high growth to be fulfilled.
However, we are piloting a few stores where the Furlenco furniture can be sold, and that's at the moment as an independent entity, except that being part of the same association, we make a few things happen, and looking at it, how does it perform, how does it look, etc. Because some of our showrooms are actually quite a bit of the showrooms do sell furniture, so it's at a pilot stage, but it is something which is a synergy waiting to happen.
Okay. Thank you. I'll get back in a bit.
Thank you.
Thank you. The next question is from the line of Rakesh Mehta from Goodwill Investments. Please proceed.
Good afternoon, and thank you for giving me the opportunity. I have a question on Furlenco. In last call, you mentioned the ARR reached INR 300 crores. First, what would be the split of sale of products versus rental subscription revenue here?
I think the rental would be 95%, and 5% would be selling of the products.
Okay. Okay. Got it. And on this rental subscription revenue, what would be the monthly AOV?
What is AOV?
The average order value for rental subscription. So on this 95% of the revenue, the average order value per month would be around INR 2,500-INR 3,000, I suppose.
That's a tough one to answer, Rakesh. But offline, we can find that out and.
Sure. Fair enough. And also just wanted to cross-check. You mentioned the subscriber grew 40% in Q1. Sorry, 40,000 in Q1. So by FY 2025, it was, if I understand correctly, by FY 2025, it was 100,000. So now the total subscriber base for rental is around 140,000, right? Would the understanding be correct, or?
No, no. I think some confusion. Maybe we missed out. I think that 1,000 was during the last year. So they increased the subscription of 40,000 during the last year, which was a 60% growth over the corresponding last year. So against 2023, 2024, they grew by 60%, which is 40,000 subscribers in 2024, 2025. And now on 2025, 2026, they anticipate to do a similar growth. So I missed quoting Q1 there, but this 40,000 growth figure is for financial year 2025.
Okay. Sure. Understood. And just one last one. There is the.
Rakesh, I would request you to please join back the queue as the other participants waiting for their turn.
Sure. Thank you.
Thank you so much, sir. The next question is from the line of Varun Singh from Alf Accurate. Please proceed.
Thank you for the opportunity. Am I audible?
Yes, please.
Yeah. So firstly, congratulations on a good set of margins, EBITDA margin number. So my first question is on the India mattress business, where maybe the maximum amount of hard work that we are doing to grow, 9% volume growth in this quarter. I mean, you think that this is the impact of maybe some consumer demand slowdown, etc.? And secondly, going forward, like in second, third, fourth quarter, how comfortable you are with maybe 14%-15% kind of a revenue growth? 10% and then 14-15% for next three quarters. I mean, what's your feel?
Yes. So just two comments on that. I think the volume growth numbers that are there at the moment, the only point I'd make is July was better than June. June was better than April. And July is better than June. So the level of growth is accelerating on the back of market share gain onto accounts from other brands as well as unbranded to branded. So we're not depending on demand growth and GDP growth and consumption growth and all of that. The complete strategy around that is on market share growth, irrespective of what the market does. That's one. And like I said, as we are accelerating the growth percentage numbers, both on value and volume, month on month, I think exit run rates at the end of Q2 are the best at the end of Q3. We will be at that 15%-15% number.
Understood. Understood. And secondly, on the realization front, so I had two questions. One is, what's the primary reasoning for revising the base downward by 5%, which makes optically the revenue growth look in the segment around 9%? Because I think compared to earlier numbers, the growth would have been just 4-odd%. I read your PPT, but I couldn't understand the accounting entry. And in that context, the INR 3,900 realization that we have recorded in this quarter, do we think that this is a run rate which should be a fair assumption for other three quarters, or we can expect a better realization for the next nine months? That's my last question.
Yeah. So I guess we have two questions. One is, why did we revise the base from last year? The only thing that we have done is from gross revenue to net revenue, there was an index discount, which earlier we used to allocate equally to all businesses. Instead of allocating equally to all businesses, we have just recalibrated that based on the sales incentives and discounts and all of that to accurately allocate to mattress separately, to foam separately, to B2B separately, to furniture cushioning separately. As you will see, there would be no change in volume numbers. There would only be revenue basis that would have changed on that account. So it's just to make apple-to-apple comparison because if this quarter we allocated on mattress differently than we did last year, we would see different revenue numbers compared to our revenue growth numbers compared to what is accurate.
That's one. On the ASP, so you can take baseline of Q1 as the baseline, and like I said, multiple actions both on the side of volume growth as well as on the side of minimization, whether it is whatever activities we need to do in showrooms and for the consumer for getting ASPs up in showrooms, but at the same time, not losing track of penetration on Tarang, Aaram, e-com, where ASPs would be a bit low. So, fair to assume that, I mean, you might get a few quarters where volume growth is actually higher than revenue growth, or vice versa, or very close to each other. It depends on, for example, Q3 is extremely high for e-com. So you might get volume growth, which is much higher than revenue growth in Q3. But it will come back to normal in Q4.
So those things will keep playing their role.
Got it. Got it. Okay, sir. Thank you very much, and wish you all the best.
Thank you. The next question is from the line of Gopi Kishan from Kumaran Associates. Please proceed.
The last thing, gentlemen, as you mentioned about Furlenco earlier, with the run rate for a year being INR 300 crores, could I get the monthly run rate latest available?
Gopi, you'll have to repeat it.
I think Rahulji already answered that. So current run rate, I can't comment on July numbers, but of course, let's take June numbers projected to 12 months is a INR 350 crore run rate. And growing at whatever, high double digits every month on month.
Right. And the latest active subscriber base?
Sorry?
The latest active subscriber base as of last month?
Active subscriber base, I will get back to you offline. I'm not very sure on the numbers at the moment.
All right. Not an issue.
It keeps changing because you have new subscribers and you have returns and all of that. So you'll get an active subscriber base. We'll just have to get back to you.
Okay. Not an issue. Thank you.
Thank you. The next question is from the line of Suyash Bhave from Wealth Guardian. Please proceed.
Hello. Am I audible?
Yes, please.
Yeah, so regarding our warranties that we give for our mattresses, I have a few questions. First is, what is the duration of those warranties? Second, what all is covered under the warranties, as in do we give returns, repairs, replacements, etc.? And third is, on an average, what is our warranty cost per annum for the last few years?
So let me just quickly respond to that. And I think it's an extremely detailed policy. I'll have someone send it out to you. It's different by model. It's different by brand. It's different for many various reasons. On average, for mattresses, both companies put together wouldn't have warranty claims more than 0.9%, 0.7%, 0.8%, 0.9% per year of sales.
All right. And so do we handle as in do we have returns and repairs or replacements under this? Because from what I understand, handling of mattresses, since it's a bulky material, there would be some logistics costs involved to it as well, right?
There is. But like I said, it's an extremely detailed process. It's been running for multiple years. I'll have someone get back to you offline on the complete policy. In terms of returns, yes. Sorry. In terms of replacement, yes. For the first year, it's a full replacement. Post that, it's pro-rated. So like I said, it's a complex policy. It would be good if you could have a read on the policy offline. And then if you have any other questions, somebody can certainly respond back on that.
All right. I'll follow up on this offline. So I have just one more question regarding seasonality for our business and for our mattresses as a whole. Which is our peak season and which is our most muted season?
So Q2 would be the most muted. Q3, Q4 are high. Q3, of course, would be very high, primarily on account of north, east, a little bit on the west. South is fairly consistent across the year. Yeah. So it depends on the festive season. This year would be a bit earlier. So yeah, we might see some benefit in Q2 as well.
All right, sir. Understood. Thank you. I'll connect offline for the warranty-related questions. Thank you.
Thank you. The next question is from the line of Jayesh Gandhi from HARSHAD H GANDHI SEC PVT LTD . Please proceed.
So my first question is regarding Furlenco, where you said that you are thinking of raising INR 100 crores. What kind of valuation are we aspiring here, sir? I mean, enterprise value for the company?
I think we're still in the process of discovering that as we go out. Like Rahulji said, that we're Sheela Foam will probably put a little bit of equity in to retain its investment. But Furlenco's management is in the process of going out and looking for fresh equity, and in that process, it's still in the middle of the discovery process.
I have two bookkeeping questions. First is, the MTM loss, in which line item in the P&L do we show?
Other expenses.
Okay, and so this quarter, our other income is closer to INR 9 crore versus INR 30 crores year-on-year and INR 60 crore QoQ. What is the other income, by the way?
Other income comprises of two parts. One is the income from the investment. That is the INR 450 crores in cash that we have with marketable government securities. So that comes from there. And the second part contains a lot of items which may be the waste that we sell. There might be certain income not related to operations which comes like sale of assets and pretty similar type of details.
So this quarter, the other income is less mainly because of the income from assets? I mean, income from investments?
So yeah, we park this in Gilt Fund, which if you see any Gilt Fund of any mutual fund, you will find that the value of the paper at the beginning of the quarter and the end of the quarter was almost the same, rather lesser towards the end of the quarter. This happens because at times, the market perceives, expects more benefits from the authorities, the monetary authorities, which get reflected into the price of the bond. But when that does not materialize, it falls. So by May and/or early June, the Gilt Fund fell, which of course will get normalized over the course of the year because it carries a definite coupon. But for the quarter, we did not get that income or had to incur that shortfall during this quarter.
Just one more question. What would be the normalized other income then? I mean, in a normal case, should it be closer to INR 30 crore-INR 40 crore?
No, it won't be. For a quarter, it should be somewhere between INR 17 crores-INR 20 crores. But that also depends, because the nature of the other income, some of the parts, like the gain on sale of assets, that's not which you can predict. There will be certain obsolete assets which you sell off. But our general trend has been that it ranges between INR 5 crores-INR 10 crores apart from interest, and around INR 7 crores, INR 8 crores-INR 10 crores would be from investment.
That's it from my side, sir. Good luck for future.
Thank you.
Thank you. The next question is from the line of Aishwarya from iThought. Please proceed.
Hello sir. Hello to the management. I have one question regarding the new developments that we have made. Now we are also into the technical foam. We are now supplying it to the aero industry as well. I'm solely interested to know on how we'll be getting in the sales, the top-line growth. We have been doing now we are also having Furlenco under the umbrella, and we are increasingly expanding the number of industries where we can supply our product to. Are we actively looking for any more acquisitions? And when I read the previous con calls, I also came across the statement where we said that Kurlon also did some bit of sofa manufacturing and all that. Do we have that in the Kurlon stores available? And how will a Kurlon experience store look like in the future? We have Sleepwell experience stores.
Now you told that we'll have the Kurlon experience stores as well. How will the two be different? And how will the future experience store look like?
Kurlon already has stores. There are about 350, more than 350 stores which are similar to the Sleepwell, the one you were referring. And so we intend growing that number, which I said earlier, and that's going to drive sales for Kurlon. As far as sofa is concerned, yes, Kurlon had a small factory to make sofas. So we have continued with the business, but not making ourselves, but outsourcing it. So that is because now, right now, we have Furlenco as a part of the group. So we intend kind of integrating or taking advantage of this synergy from Furlenco for sofa manufacturing. So that work is under process. And as far as aviation part that you said, yes, we have kind of developed that foam. We are the only company in the country who makes aviation foam. We have started supplying to the secondary market.
We have also attempted to get ourselves certified as a tier two supplier to the Boeing and to Stelia Aerospace. That is also a work in process.
Understood, sir. Just one more question. Since the Kurlon integration has been EPS-exclusive for us, when do we see the shareholders making? When will the company be better for the shareholders? I know once you integrate or acquire a company, it is obvious that EPSs will dilute for certain years. Because of the interest and depreciation, we've seen that the margins are pretty stressed. When do we think that we can come back to the normal levels, the March 2022 levels or something around that?
So we have already guided on what sort of growth we are looking from here and what sort of profitability we are looking from here. I think that should be sufficient to figure out as to how our EPAs will move going forward.
Yes, sir. Yes, sir. I'll look into it. Thank you so much.
Thank you.
Thank you, Aishwarya. Thank you.
Thank you. The next question is from the line of Ritesh Shah from Investec. Please proceed.
Yeah, hi sir. Just one question. Sir, how much was the volumes from Aaram and Tarang this quarter? And on volumetric terms, corresponding period last year, please.
Okay. Yeah. So, Amit, so I think value growth. I think Amit has already said it's about 60% is the value growth.
Volume would be similar. Volume should be similar, yeah.
Sir, earlier we have indicated a number of around 6%-6.5%. Has that number actually moved up? I think we gave a number of INR 18 crores. Amit, you gave that number, I think. But just on a volumetric terms, will it be like 6%-6.5% of the volumes?
Ritesh, just, I'm not getting your question. But to clarify, I can speak out what we have said. Last year, we were at INR 65 crores. This year, current run rate is INR 80 crores per annum. We intend to cross INR 100 crores for the current year. For the first quarter, it was INR 17 crores-INR 18 crores, which I mentioned. That's the statistic. So if you see growth rate on a year-on-year basis, it is approximately 60% what we are targeting this time. Growth rate on a month-on-month basis would be, if you work out from it, 3%-4% sort of a growth rate. Month-on-month should be there.
Right. Sir, I'm looking at the volume contribution of the total mattresses. How much will be Aaram and Tarang? This number earlier what we have given is around, I think, 7% in Q3 and Q4. So for Q1, what that number is?
So Ritesh, I don't have those numbers separately. Maybe we can get in touch and I can give you those numbers.
Sure, sir. No worries. Thank you so much. Thank you.
Thank you. As there are no further questions from the participants, I would now like to hand the conference over to the management for closing comments.
Thank you, Deepali. Thank you for conducting this conference. Let me just begin by saying that Q1 FY 2026 has been a robust performance. We look forward to it getting better and better as we move along. I just want to thank each one of you for all the questions. It has been learning as usual for us. And if for the paucity of time or any other reason or otherwise, we have been unable to answer the questions, please feel free to reach out to Tushar, to Rakesh, to Amit, or myself. And in the meantime, till the next call, I would just say thank you very much and Jai Hind and all the best.
Thank you. On behalf of Arihant Capital Markets Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your line.