Welcome to Sheela Foam Limited Q3 FY 2026 Investor Conference Call. Please stay connected, your conference will begin shortly.
Good evening, ladies and gentlemen, I'm Madhuri, moderator for the conference call. Welcome to the Sheela Foam Limited Q3 FY 2026 Investors Call. As a reminder, all participants will be in listen-only mode, and there'll be an opportunity for you to ask questions after the presentation concludes. Should you need any assistance during the conference call, please signal an operator by pressing star and then zero on a touchtone telephone. Please note, this conference is being recorded. I would now like to hand over the floor to Mr. Gulshan. Thank you, and over to you, sir.
Yeah. Thank you, ma'am. Good evening, and very warm welcome to everyone. On behalf of Sunidhi Securities, I welcome you all to our Sheela Foam Limited Q3 FY 2026 Earnings Conference Call. Today, we have with us a management represented by Mr. Rahul Gautam, Chairman and Managing Director, Mr. Rakesh Chahar, Deputy Managing Director, and Mr. Amit Kumar Gupta, our Group CFO. We thanks Sheela Foam for giving us the opportunity to host the call. I would now like to hand over the floor to the management for their opening remark, post which we will open the floor for a Q&A. Thanks, and over to you, Rahul Sir.
Thank you, Gulshan, and thank you, Madhuri. Good afternoon, ladies and gentlemen. At the outset, let me thank you all for attending this conference call to discuss our operational and financial results for Q3 and for the nine months ending December 25. I do hope you've gone through the results and the earnings presentation, which has been uploaded on our website. I'm pleased to inform you that the merger of Kurlon is now complete in all respects, with all requisite filings duly made with the Registrar of Companies. Kurlon has emerged as a significant turnaround for the group. Prior to Kurlon acquisition, SFL, on a consolidated basis, was at an EBITDA margin between 10%-11%. At the time of acquisition, Kurlon's EBITDA was in the mid-single digit.
We have continuously improved Kurl-on's operations and have achieved a consolidated core EBITDA of the combined Indian operations of 10% for the last 9 months, which is completely in line with SFL margins of pre-acquisition of Kurl-on. This we achieved with a 7%+ top-line growth, and we will continue to focus on accelerating this growth going forward. The synergies and integration benefits realized through this acquisition have created a meaningful value for the company, and we are confident that Kurl-on will continue to contribute positively to our long-term growth and shareholder value. Our India business core margins have remained firmly in the double-digit range in Q3, and have been sustained consistently over 10% in the past 9 months as well. This reinforces our confidence to sustain margins while driving growth. Our business segments have also shown a remarkable growth this year.
The volume growth for mattresses has been 11% year-on-year for the 9-month period. Value realization have also been almost at similar levels of 9% during this period, with marginal impact of higher growth in the U2O segment, which is the unorganized to organized segment, which was erstwhile called as FTI. Price increases across Sleepwell and Kurl-on products were implemented towards the end of Q3, and we expect their full impact to get reflected in Q4. On the retail front, we added approximately 600 net new showrooms over the last 9 months, and remain on track to increase to approximately 700 showrooms by the end of the financial year. Kurl-on showroom expansions, particularly in Northern India, continue to gain strong traction, underscoring the brand's consumer strength. In addition, we plan to operationalize select company-owned, company-operated stores over the next 6 months to further gain some retail wisdom.
Additionally, we are developing pillows as a focused growth area, growth category, within the home comfort segment, and with collaborations which are underway. Our e-commerce business grew by 53% year-on-year over the last 9 months, reaching net revenues of around INR 180 crores for the nine-month period, driven by a focused strategy, targeted consumer marketing, and portfolio expansion at value-accretive price points. Our unorganized to organized business, the U2O, which I had mentioned earlier, formerly known as FTI, now operates through over 8,000 dealers in more than 5,000 towns in 24 states. The segment grew by nearly 100% over the last 9 months, reaching a turnover of INR 75 crores by end of December 2025, and reaching a run rate of INR 120 crores, supported by continued product innovation across mass, value, and economy segments.
In foam, volumes grew by approximately 20% year-on-year in Q3, FY 2026, and by 12% over the 9-month period. Value growth stood at 12% in Q3 and 6% for 9 months, impacted by lower raw material prices compared to a similar period of last year. With input costs firming up and reset price increases in place, we expect value growth to be in line with volume growth in Q4. We are continuously expanding our customer pipeline by identifying, investing, and developing new market opportunities to create a healthy sales pipeline. Overall, we remain confident in growth outlook of our India operations, supported by strong brands, expanding distribution, and a disciplined execution, as we continue to focus on sustainability and profitability in the growth. Turning to our international business, our business in Dubai and the wider GCC region continues to progress in a steady and encouraging manner.
We are already present through exclusive retail stores across each of the Emirates, providing us with a strong on-ground foundation. In addition, we have entered into collaborations with leading local large format retail chains, which will further deepen our presence across the GCC over the next 3-6, 3-6 months. To support this growing footprint, we have taken deliberate steps to enhance the responsiveness of our supply chain. I am pleased to share that we have commenced local manufacturing, which we have outsourced for the proprietary Sheela Foam and Kurl-on sleep solutions through a partnership with a UAE-based manufacturer. These initiatives are already helping us reduce fulfillment timelines and improve service levels. Alongside our physical expansion, we have strengthened our digital and e-commerce presence across platforms such as Amazon and Flipkart. Noon... Sorry, Amazon and Noon.com, and our own website-...
which is also in full operation in Middle East. We remain focused on developing the GCC region into a meaningful and sustainable market, guided by prudent execution and long-term value creation. Turning over to Australia and Spain, I am pleased to share that both Australia and Spain businesses have delivered a marked improvement and a clear turnaround in their performance during the Q3 . EBITDA margins for both geographies were around 12% in Q3 and stood approximately 10% for the first nine months of the fiscal year. This improvement has been driven by disciplined execution across multiple levers. We have effectively leveraged our long-standing supplier relationships in India, diversified sourcing from alternate and cost-efficient markets, and maintaining consistent oversight to keep fixed costs and operating overheads well controlled. In Australia, a focused effort on waste reduction has translated into tangible operational and financial gains.
In Spain, improved pricing discipline and better sales realizations have supported the overall performance. Together, these outcomes reflect the commitment of our teams to build a resilient and sustainable international business. As I had shared with you in the previous quarter, that Furlenco had embarked on a plan to raise INR 125 crores of equity to support its next phase of growth. I am pleased to inform you that this initiative received a very encouraging response from the investor community. Sheela Foam also infused INR 30 crores alongside other esteemed investors. This confidence from new investors putting fresh monies reinforced our belief in Furlenco's long-term vision and strategy. This capital infusion would be sufficient to propel Furlenco to INR 500-550 crores top line. Currently, we are already moving at about a run rate of INR 400 crores per annum.
I'm also happy to share that Furlenco continues to progress steadily on its growth journey. As on date, it is at an annualized revenue run rate of 400, which I just mentioned. For the first nine months of this fiscal, Furlenco delivered a PAT of INR 18 crore and generated cash profits of INR 68 crore, which were reinvested for the growth of the business. Furlenco has built a strong, scalable online business model. However, in the Indian consumer landscape, an omni-channel approach, integrating both online and offline touchpoints, has proven to be the most effective routes to scale. Consumers typically begin their purchase journey online, but prefer to visit physical stores to finalize decisions. As a result, leading digital-first brands are now investing significant capital to establish offline presence. Furlenco enjoys a distinct strategic advantage through access to Sheela Foam's extensive retail network.
Together, Sheela Foam and Furlenco have developed a structured program to establish Furlenco's presence across large number of Sleepwell and Kurl-on stores. This partnership enables Furlenco to achieve a rapid, capital-efficient, and diversified offline expansion, significantly accelerating its omni-channel growth. We remain deeply committed to building a sustainable and scalable business and keep leveraging across functional strengths. Staqo, our technology and digital solutions subsidiary, continues to grow and expand to play a critical role in strengthening enterprises' IT, analytics, and digital capabilities across sectors. It remained focused on platform consolidation, process automation, and data-led decision support for business. I'm pleased to share that till date, it has been empowering more than 300,000 subscribers on their enterprise solution, Presence 360. We see Staqo as a key enabler of productivity gains and long-term value creation for the Sheela Group.
Turning to our ESG initiatives, sustainability remains a core pillar of our long-term strategy, and we continue to make steady progress against our selected sustainable development goals. We have operationalized a 500-kW solar power plant at our Jabalpur facility, and are in the process of installing an additional 1,000 kW of renewable energy capacity across other locations. We've also commissioned a 30-kW sewage treatment plant at Nandigram, reinforcing our commitment to responsible resource management. Equally important to us is our responsibility towards inclusive and sustainable social development. Our CSR efforts are anchored around two focus areas: emotional wellness and skill development. I am pleased to share that our skill development initiative has enabled and empowered nearly 64% of participating young men and women across various programs, helping them secure meaningful employment or start their own entrepreneurial ventures.
In the area of emotional wellness, our digital-led initiatives have reached over 562 million individuals, complemented by approximately 250 on-ground workshops, engaging more than 14,000 participants. These efforts reflect our belief that a long-term value creation must go hand in hand with positive societal impact. I will now request our Group CFO, Amit, to take you through our financial highlights. Over to you, Amit.
Thank you, sir. Thank you for your inputs on our business and strategy. Just to update on the financials, our volumes and profitability in Q3 and 9 months 2026 as well are well on our anticipated growth trajectory with a sustainable, with sustainable margins. On a consolidated basis, our revenue grew by 7% on a YOY basis from INR 2,590 crores to INR 2,771 crores, and on a standalone basis, our revenue saw a growth of 6% from INR 2,013 crores to INR 2,143 crores. As already appraised by Rahulji, our mattress volumes continue to grow by 11% for Q3 and 9 months. Our foam volume saw substantial growth of 20% in Q3 and 12% for the 9 months.
Our consolidated core EBITDA continues to be in double digits at 10.9% for Q3, expanding by 220 basis points YOY, growing from INR 84 crore to INR 117 crore. For the nine months ending December 2025, core EBITDA stood at 10.6%. On a YOY basis, it grew 34% from INR 219 crore to INR 293 crore, resulting in margin expansion of around 213 basis points. I'm pleased to share that our consolidated PAT for Q3 2026 was reported at INR 53 crore, a substantial jump of 3-year 3x on a year-on-year basis. Consequently, our nine-month PAT stands at INR 69 crore. This was due to higher profitability along with reduction of our interest cost in Q3 of FY 2026, as we repaid our debt liabilities.
Historically, our business has been a strong and consistent generator of cash. Following Kurl-on acquisition, our fixed asset base more than doubled, resulting in higher depreciation charge and consequently a lower reported PAT. However, this does not reflect the underlying cash generating strength of the business. To provide a clear picture, our consolidated cash PAT, which is defined as PAT plus depreciation, plus non-cash taxes or deferred taxes, stood at INR 209 crore for the last nine months, translating into a cash EPS of approximately INR 19 per share. Additionally, interest costs are declining meaningfully as acquisition-related debt is being repaid, which will further support improvement of reported PAT going forward.
With the uptick in the raw material prices towards the end of the last quarter, along with price increases that we have taken in both mattress and foam segments, we expect additions to both revenue and profitability going forward. As part of asset monetization, we have recently sold the land parcel in Jhagadia, Gujarat. To date, we have been able to garner a total of around INR 100 crore-INR 125 crore from asset monetization, which has all gone to reduce our debt level. With this, I request the moderator to open the floor for question and answer.
Thank you, sir. Ladies and gentlemen, we will now begin the question-and-answer session. If you have a question, please press star and one on your telephone keypad and wait for your turn to ask the question. If you would like to withdraw your request, you may do so by pressing star and one again. Participants are kindly requested to restrict to two questions in the initial round. First question comes from Raghav Maheshwari, from Kamatya Wealth Management . Please go ahead.
Hi, thanks for the opportunity. First of all, sir, congratulations on a great set of numbers. Sir, my first question is on the margins side. Are these margins sustainable going forward, and what drove this uptick in the margins when we look at year-on-year?
Amit?
Yeah. So, we have been continuously improving margins for the last three quarters. As we had been discussing in our earlier calls also, the driver of these are two, one, improvement in our cost structure from the synergies that we had gained because of Kurl-on acquisition, and secondly, a growth in the top line. This, we have reached a 10% sort of a margin, but our journey still continues. And we hope that not only retention, but we should be moving towards improving these margins in the quarters going ahead.
Okay, sir. Sir. Thank you. Sir, next question is regarding the mattress segment, sir. I wanted to understand which mattress segment are you seeing the most of the growth coming in? Like, is it Kurl-on or Aaram or some other price segments?
So, it is coming both from the offline, which is, Kurl-on is growing a bit faster, because the nature of the business is MBO based, and also we have taken a drive on making showrooms for Kurl-on. So that has worked out well. And the second would be on the e-com side, where we have experienced good growth on the brand dot com. So there our growth have been upwards of 50%. And the last but not the least would be the U2O, unorganized to organized. So there also, we have experienced good growth. The accumulation of all this has resulted in the number growth.
Okay, sir, but I wanted to understand, which price segment mattress is seeing the most traction as of now in the current demand landscape?
So our ASPs have gone up on the offline. So basically, we are – see, there, there’s a different approach for the ASPs, where we are driving the ASP. So our ASPs have gone up both for Sleepwell and Kurl-on in offline. And so, so the numbers are going up on the higher side. And this is the ASPs have gone up, and, as far as the e-com is concerned, there also there is a premiumization. Our ASPs in the e-com has also gone up and have also gone up in U2O. So we are basically targeting a little higher premium in all these three segments.
So if I just add to what Rakesh sir has said, the offline segment, the median value is around INR 14-15 thousand, and on the online segment, it's more like INR nine-10 thousand. For the growth to happen, it will always be around the median numbers, yeah. But the constant effort is to keep pushing that up, and that's what we will see in the coming times. You know, that fifteen-
Okay.
going to 16-17, and on the other side, the 9-10 segment going to about 10-11.
Okay, sir. That helps it. And sir, lastly, you mentioned about the rate increase happening in the, I think, last, you know, couple of three-
Raghav, you, you'll have to speak. Raghav, it's not coming through clearly. Just have to speak a little louder, please.
Yeah. So, sir, this is about the rate increase that you were talking about in the initial note. So what sort of impact are we going to see in Q4 numbers because of this rate increase? I mean, can you put it in percentage terms, like how much percentage pricing, please?
So I mean, look, these price increases are not any phenomenal price increases. I generally take the inflation, which is a low number, and some raw material changes that come, but it's of the order of between 4%-5%.
Okay. You know, there's no major impact on this, right?
Not really. No, no, no. And also, please appreciate that as far as mattresses are concerned, anything of the order of this 5% or something like that is not a determining factor for somebody who is buying a mattress. You know, the-
Okay.
He looks at a range, he looks at a price point, and around that, INR 100-INR 200 here and there, that is not impactful. But we are mindful of this, that price should be not exorbitant. They should be within the price segment that you are looking at. And at the same time, we do account for the inflation that needs to be catered to.
Okay, sir. Those were my questions, sir. All the best.
Thank you, sir. The next question comes from Ravi Purohit, from Securities Investment Management Private Limited. Please go ahead.
Yeah, hi. Thanks for taking my question. So now that, you know, the Kurl-on acquisition is done, and I think Merger is also done, and we are seeing benefits, can you just kind of, you know, share, you know, some thoughts on, you know, the combination of this Furlenco investment with Kurl-on and, Sleepwell, all of this put together, how do you kind of, you know, envisage, our, our growth numbers over the next few years? And I think we had maintained or we had spoken about expansion in margins over the medium term. So do we kind of still stick to those ranges of 13%-15% EBITDA margins? So if you could just share some more insights. And also, you know, Furlenco, I think we have made further investments in the last one year.
What valuation have we invested in Furlenco? And you know, what's our long-term kind of plan on Furlenco?
Amit?
Yes. So, you are right. Post Kurl-on acquisition, we had come talk to the investors, and we set ourselves a target of 15% growth with a 15% EBITDA margin, on which we have been sticking very strongly. That journey is currently underway. We are halfway towards it. Our target still remains the same, and now we see it with a little bit more clarity than what we did with the last quarter or the quarters before. So the visibility is now better.
Secondly, on the valuation of Furlenco, the recent issuance was done at a valuation of INR 1,050 crores for the company, in which we participated to the extent of INR 30 crores, and the remaining INR 95 crores were brought in by new investors, which the company had got into the cap table.
Okay, okay. And, Amit, one clarification. So, you know, in our, in our P&L, we have, this INR 180 crore annual amortization and depreciation, right? And we, I think we have mentioned in the previous calls that, we don't need any further CapEx to invest. So how so can you just kind of help us understand how much is the typical maintenance CapEx that we will need to kind of spend every year? So this INR 180 crore depreciation and amortization amount, minus that maintenance CapEx effectively is the cash that comes back to the business, right, in terms of helps in deleveraging.
If you could just quantify and, you know, help us understand how much is maintenance CapEx that we expect to spend every year over the next few years, you know, on the total.
Yeah. So you are right. We have capacity, post Kurlon coming into our fold, we have now capacity sufficient to take us to 2-2.5 times of our current capacity, except for certain debottlenecking CapEx, which we might do, need to do here and there. Some improvement CapEx, which we would always do, which has a payback period of 1.5-2 years, so there are always opportunities in the business, and thereafter, the maintenance CapEx. So with all these together, we anticipate around INR 100-odd crores CapEx in India and around INR 25-odd crores overseas, so a total of INR 125-odd crores, including the efficiency and, the debottlenecking CapEx. Maintenance CapEx should be around 30%-40% of this.
Okay. Okay, okay, okay. And, and sir, I think we had mentioned in the last call that we had reduced our debt by about INR 400 crore in the first week of October. So subsequent to the sale of this land in Gujarat, if you could just quantify how much has our debt dropped off between, let's say, September on 30th September until date, totally?
So, yes, we paid our debt by around INR 400 crore because there were INR 400 crore of cash investments lying in our balance sheet.
Okay.
We had raised more capital at the time of Kurl-on acquisition because it was an acquisition equivalent of our size, and we needed to keep cash on the balance sheet.
Mm-hmm.
But as Kurl-on stabilized, that cash was no more usable, and hence we used it to pay off our debt. So that in the first week of October, which I mentioned in my last call. As regards to your second question, so Jhagadia is, we recently sold, and we also sold two or three properties in Bangalore and around that area. Together, we have got a cash of around 100-125 crore INR, which has fully gone to pay our debt. Now, if you ask me what is the debt levels today, I can tell you that the net debt levels in India is less than INR 300 crore, and overseas is around INR 325 crore. So INR 325 crore-INR 350 crore.
The total net debt at a consolidated level should be somewhere between INR 600 crore-INR 650 crore, including lease capitalizations.
Okay. Oh,
Yes.
Okay. Great, sir. Congratulations once again on a good set of numbers, and all the best for the future.
Thank you.
Thank you, Purohit.
Thank you, sir. The next question comes from Bhavin Rupani from Investec. Please go ahead.
Yeah. Hi, sir. Thank you so much for the opportunity. So now, given we don't have any major CapEx plans in near term, any plans or thoughts to declare dividend?
Good question. And we just finished a board meeting yesterday, so I would say that definitely the whole process is being reviewed, and obviously, we'll take a final call in our, as the year gets over. But I mean I don't know how much I can say, but let's say our thoughts are very similar to yours, yeah.
All right. And given stock price has also corrected over past one year, would management ever look to buyback options? Any thoughts over here also would be really helpful.
Okay.
We have not given any thought to it as of now. Currently, we were involved in improving the businesses and going forward, though, that will be our focus area. We will let you know whenever any of these type of intent is discussed in the company.
Amit, there was something in this budget also, no, about buyback options?
Yes. So buyback is now treated as capital gains.
It's capital gains.
Yeah.
Okay.
All right. Sir, my next question is on Aaram and Tarang. Can you please share, proportion of volume contribution which comes from this category for this quarter as well as last year, Q3?
I think, Rakesh will take that.
No.
This is...
Rakesh will take.
Primarily, let's stick to the last quarter.
No, so, sorry, Bhavin, we have given an indication of how much this category has grown and what is the total value of this category. Beyond that, we have not been sharing information as to volume numbers, not because we can't share, but primarily because it becomes a more detailed information than leads to a very circular sort of a discussion, which we don't want to get into. So my request would be that we will continue to communicate the growth in these two areas and the amount that these two categories bring to us as revenue. But as regards volume, my suggestion would be that we look at a consolidated total mattress volume.
All right. Fair point, sir. One more question on synergies, sir. Of the total INR 2.5 billion of synergies that we have been talking about post Kurlon acquisition. You had indicated almost INR 2 billion is already in the numbers, and balance of INR 0.5 billion was to be reflected by Q4. So what's the status over your, and what is the incremental synergy still pending, which can be reflected in, future quarters going ahead?
So you are right, and we are perfectly on track. INR 200 crore is what we had realized till the last quarter. In this quarter, we had not forecasted, because the remaining synergy of around INR 30 crore-INR 40 crore was primarily on account of the introduction of the new material and the setting up of the machinery, which was already ordered from overseas. That machine is on way and almost on the phase of reaching our facility. We hope to install it by the mid of this quarter. So you may see some results of that in the current quarter, but full results would be available in the Q1 of the next financial year.
However, all this will be done, implemented, executed, and converted by the end of the current financial year.
Fair point. Sir, last question. So you indicated our long-term vision is for 15% revenue growth, 15% EBITDA margins, but, would you like to give any guidance for FY 2027 and 2028 on revenue and EBITDA margins?
So as far as growth rate is concerned, we are continuously working to enhance our growth rate to 15%. Now, very difficult to commit the quarter on which it will be achieved, but we will try to achieve earlier than later. As far as the margins are concerned, as specified earlier, we would be reaching around 14%-15% in financial year 2028. But somewhere in between the current margins and 15% is the next year.
All right. Thank you so much, sir.
Thank you.
Thank you, sir. The next question comes from Rahul Agarwal from Edelweiss Asset. Please go ahead.
Yeah, hi. Thank you so much, and, very good evening to all of you. Few questions got answered, so just to clarify, firstly, on the growth outlook, I still see some gap on volume and value growth of, you know, for the mattress business as well as for the foam business. Any comments on how does it converge going forward? You obviously talked about price hikes, but should we assume that largely volume is going to be equal to value growth going forward, you know, let's say next two years on foam and mattress separately?
Yeah. As I mentioned, and if, even if you see the average raw material price in 2024-25 was higher than what we have seen in 2025-26, around 15%-20%. In mattress, we don't pass a lot, that almost gets absorbed, and that's why you see a parity between value and volume in the mattress segment. But in the foam segment, it has to be passed off to the ultimate consumers, whichever category it may be. So, there is a disparity between the volume and the value growth in the foam segment. The current increase in prices to some extent will offset that disparity, but we are a little bit lower than the average price of 2024-25.
So you may not see them exactly mapping up, but if the price goes up further in the next 2, 3 months, yes, it may. But... And current prices, there would still be some gap, though the gap will be narrowed.
So just on the mattress side, I still see, like, 7% value growth and 11% volume. So what, what, what explains that gap if we are not- we, we basically, not affecting our selling price, but our raw material price is lower?
No, it's not on mattress. It is 7% value growth. Mattress is around 9% value growth and 11% volume growth, if I'm correct.
Yeah, that is right.
Okay, so-
That is primarily-
There's still a gap I was referring to.
Yeah, so there is a 2% gap. See, one or two percent gap monitoring is very difficult because even in the mattress segment, if you see, there are, mattresses which are sold across the segment. So starting right from INR 4,000 to INR 40,000, INR 60,000, INR 70,000 rupees. So it may happen at times that you sell a higher price mattress or a lower price mattress, which may create a 1% or 2% disparity. But, and to some extent, because the volume growth of our U2O segment and the online segment was higher than the offline segment, that also impacts the value and volume growth. But, empirically, if you see, on a year-on-year basis or even on a quarter-on-quarter basis, you will find that there is not much of a difference between the two.
Because on one side there is a U2 and e-commerce segment, and on the other side, we are premiumizing our offline segment, even the e-com segment, what Rahul just mentioned. So the quantum of deterioration because of selling low price segment is offset by the premiumization of the higher segment. So one or two % may be there, but you won't see a material difference between value and volume growth.
Got that. Got that. Just in terms of overall consolidated revenue growth, right? I mean, nine months, I believe, on a consolidated basis, we've grown about 7%. Is that correct, on value basis?
Yes.
Right. So I'm just thinking, when you guide for a 15% growth, you know, over a medium term, let's say three years, are we talking about the same number, like to like, seven to 15 moving up to 15, or are we talking about anything else here?
Yeah, we are talking about 7 to moving up to 15. So based on past year growth, suppose this year we land at X, the next year we anticipate it to be 1.15x.
Okay. Okay, that clears. You know, the second question was on the cost side. I mean, a lot of line items in the PNL are flattening out, on a YOY, QOQ basis. You know, as you said, your margins also are expected to go up further from here on, and there's some bit of savings which are left, to be, you know, benefited from, starting from the new machines. But overall, how do you look at your cost items, you know, going into next two to three years? I mean, will that reflect largely inflation growth going forward? Or, always the company investing more into, you know, marketing, as it relates people and, you know, that should also play out over the next two years.
So, Rahul, this is a function of what is the growth that you achieve. So based on a 15% growth, I can say that in fixed cost, because in other costs, there are both fixed and variable. In fixed cost, it should be pure, pure inflation, plus minus 1-2%. On a variable cost, it would not be fully proportional to the growth in revenue, but yes, it will be higher than, than inflation. So you would see a mixed sort of effect. For example, if top line grows by 15%, you should see a 2-10% growth in the, in the cost.
Got it. So there is still some bit of op level is what we are thinking in term. When the growth goes to 15, maybe we'll get that operating leverage benefit going into next two years, right?
Yeah. So that will come, one, but if the, we this is a very, flexible sort of cost structure, because we have marketing expenses here, which are totally flexible. If the growth is not achieved, we can always scale it back. So if the growth is, say, for example, which we don't even want to say now, the growth instead of 15% is, say, 10%, I think we should be able to retain our cost, at around 6%-7% growth. If you see our cost structure this year, you would not see any inflation except for that, impact of, for, forex instrument. Our cost structure is more or less flat as compared to last year.
So, that flexibility our structure offers, that in case things don't turn out to be good, you can always scale them back.
Thank you, sir. The next question comes from Rishi Modi, from RDM Advisory. Please go ahead.
Yeah. Hi, am I audible?
Yes, please.
Yeah. So, Amitji, first question, for you. We've gotten INR 16 crore other income in this quarter. I remember last quarter you had guided that post the debt paydown, we'll have some INR 7-8 crore per quarter other income. So is there anything which is non-recurring as a part of the INR 16 crore?
So this INR 16 crore has different components. It's wasted sales. There are some investments which in the first week of October, there were also some income from those investments. Then it is 4, 5 heads are there. I would not see them as very volatile. This time it has been good, INR 15.66 crores. But yes, it should range somewhere... It should not be INR 8-INR 9 crores, as I told last quarter. There are certain improvements that we have done to this, so it should be in the INR 10-INR 12 crore range.
Okay, got it. So we can pin down, say, INR 40 crore-INR 50 crore for the coming year, at least on the other income piece.
Minimum. Minimum, you can do that.
Got it. Got it. Second, on the raw material pricing and the price hike, subsequent price hike that we have taken, like, we've taken a 4%-5% price hike, as Rahulji mentioned right now, and you're not seeing an impact on the volumes yet. But, has the market as a collective taken these price hikes, say, the new age players, Sleep Company, Wakefit, Duroflex, all of these guys, or it's us who has led this price hike and others have not followed?
So, on the mattress offline side, most of the brands, including the regional players, have taken price hike. On the home side, which is much quicker, because there have been multiple price increases to offset the raw material increase. Online, where the online price increase has not happened so far. So, online, we are operating at a similar level, and we are just waiting for some more visibility on the raw material before any action is taken. So, right now, online is the only one where the price increase has not been passed on.
All right. And, on the offline piece, the competitive intensity, given, you know, now one of the players is listed and the other one is coming to listing, and they would want to show profitability, has that kind of reduced, in your opinion, or like they are rationalizing pricing, or the competitive intensity still remains high on the discounting front?
So I, I think that there is no change as such, that they have reduced the competitive activity that is, that is there. But I think it will, with some more time, it will play out. I'm assuming that we have also gone through that process that some, I mean, discipline in terms of both top and bottom line does come in. So we are hoping that it will be more level playing field going forward.
Got it. And we haven't vacated any price points. Last time I remember, we vacated some price points, which was exploited by competition. So our range still remains at almost every price point. Is that still the case?
Yes. Yes.
Okay.
We've not vacated any.
Got it. Tushar, I'm assuming you are leading the COCO stores charge. So just, if you could explain what are you all doing differently versus, say, a premium franchise-owned, franchise-operated store? Is this like a large experiential store, and then the order flows through to the franchisee, or the order comes directly to us? How are the unit economics looking for these COCO stores?
This is Rahul answering. The Tushar-
Yes, Rahul.
-is not available at the moment. So, these COCO stores were actually inherited, you know, with the Kurl-on transaction. And they were almost about 40, 50 of them, and then, eventually, closed down a few, and we are currently running 24 of them. The exact format of them is that they are a little bigger. They do sell mattresses, which are both Sleepwell and Kurl-on, and they also sell accessories, which are... So should we call them as experience stores? Probably not. Should we call them as large EBOs? Probably not, because they also sell a sizable quantity of accessories. So I think this format is just evolving. We are going to address the issue, but at the moment there is no crystal clarity on exactly how we want to do it. But they are profitable.
They make a positive EBITDA, and they are lending a lot of information and lot of experience, which, as a company or as an organization, we are absorbing. So I think you should see more clarity on this in another quarter or another couple of months' time.
Got it. Got it. Fine.
Thank you, sir. Participants are kindly requested to restrict to two questions in the initial round. The next question comes from Pranav Doshi, from Antique Stock Broking. Please go ahead.
Yeah, hi. Thank you for the opportunity, and, congratulations on a good set of numbers. So, first of all, on the international business, I just wanted to ask that, let's say, in both Australia and Spain, our other expenses, in absolute terms, they've remained almost exactly the same, while our revenue has increased. So let's say, going ahead, how do you look at the cost structure in these businesses, and, like, what kind of a leverage do you expect going ahead? So is it a one-off or can this sustain going forward?
So, Pranav, there is lesser inflation in those countries, so costs don't increase to that level. Our intent would be to restrict them as much as possible because you don't see every year a 10, 15% growth there. Normal growth expectation would be around five, six odd % from those countries. So to maintain profitability, our intent would be to restrict it. But that being said, there are certain inflationary impacts, so you may see minor increases in overhead costs there.
Okay. So then can we sustain the, like, 12, 12.5 odd % EBITDA margin that we've done in this quarter or is it at the higher end, would you say so?
No, I would say that, in overseas operations, like, even if you see the nine-month average, it is around 10 odd %. So, we anticipate it to be at approximately 12% going forward.
Okay. Okay, great. And just on our EBO strategy, so, what would be the total number of EBOs that we are operating at, as of Q3 FY 2026, as of the end of that?
The total number, if I put both the brands together, Sleepwell and Kurl-on, so that total number would be close to 3,800. Out of which, majority is in Sleepwell, about 2,900. And this, I'm talking about the showroom format, where we have a display, horizontal display, and Kurl-on is about 900. So total about 3,800 is the showroom format there.
Okay.
Then we also have category exclusive dealers in Sleepwell, which is a large number, which is 2,500. But these are small format retail, which are dealing in multiple categories, like handloom shops and also keeping a mattress of Sleepwell. So they... These are classified as EBOs, who don't have a display as such. They just stack the mattresses vertically of our brand.
Right. Right. So, sir, my question was that, let's say even for Q2 in the presentation, we had mentioned that we are operating 5,300 EBOs, and I think that is the number that you've touched upon even today. And even incrementally, let's say we were hoping to add 800 EBOs for the year, and now I think we are, you cut it down to 700. So, like, can you explain what is the strategy and why have we cut down our target, and how are we looking at it?
So we have. See, as far as the Sleepwell is concerned, the, right now, the strategy is to expand the showroom format. So, both for Sleepwell and for Kurl-on. So we had taken a target, like you rightly said, about 800, and we are hopeful of closing at 700. And these will be all different formats. A Shoppe format and a World Gallery format. For Kurl-on, it will be Home and Corner . So this expansion is a key driver for growth, because we even now, our, our penetration in terms of number of outlets is still not there where we want to be. So at least for next three years, I see this drive to continue on expansion.
Okay.
The next question comes from Rishi Modi, from RDM Advisory. Please go ahead.
Yeah, hi. Thank you for giving me the chance again. Rahulji, on if I remember it correctly, you once mentioned that the Australia subsidiary of yours, given it's kind of matured in growth, and possibly on profitability, you were looking to exit or, you know, sell that business. Is that still in the plan or are we seeing something else there?
Number one, things on ground keep changing all the time, and since it's not many companies that operate there, there are primarily three big people. One is us, the other is the main competitor, and the third is a little smaller one. And then we have some 3, 4 other very, very, very small people. The ground reality is changing for sure. So the main competitor is, it appears that he is wanting to exit. He had put up his business for sale about a year back, did not find any takers, and it's a bit of a complex business that he runs. As I said, it is looking like that he's shrinking. So we are watching the situation.
If it's getting us a lot more business, both in terms of volume as well as in value, we may want to. But at the same time, we have, I mean, are we close to the thought? Absolutely not. But this is a new angle to it or a new tangent to it, you know, which is there. So it gets profitable, it gets to pay, it continues to grow. After all, we are heavily invested in there, in two big plants, which are there. So we'll, we'll wait and watch on that.
Okay, got it, got it.
But it is possible that somebody may kind of come along and wants to invest in that business, you know, which may be a larger business than what, than what we run. So we'll wait and watch that.
Thank you, sir. The next question comes from Viral Shah, from Enam Holdings. Please go ahead.
Yes, thank you for the opportunity, sir. So just a clarification to one of the previous questions. You mentioned 15% revenue growth and 15% EBITDA margin. You mentioned this is on a consolidated basis, right, and not just the Sheela Foam and the Kurl-on branded business? So just to clarify.
This is India business.
Only the-
Overseas business... Yeah. Because this is 80% of the business, so it may be instead of 15%, it is 14, 14.5 on a consolidated basis, because overseas business could also be at 10-12% sort of a level. But when we say 15, 15, it is India business, because overseas business can't grow at 15%.
Okay. But, but when you say India business, you include the rest of the part of the business also, which is the technical foams, intermediate grades, and for furniture cushioning, everything.
Exactly.
Okay.
So total Sheela Foam plus Kurl-on.
Okay, perfect. Perfect. Okay, just, thank you for this clarification. Sir, second is on the TDI and polyol prices. Can you just guide what are the, what were the per kg prices in Q3, and how are they behaving currently?
So, Q3 TDI was, towards the end, it was at about 210. And currently, also, it is the same level. But, unfortunately, one of the major suppliers to Indian market, GNFC, they had a shutdown. So because of which, the prices in the market has shot up, because there is a supply gap which is there. So currently, it is people who are getting imports or getting some from GNFC, that is still at about 210. Otherwise, the market price is today upwards of 240. But this is a temporary phenomenon. We are all hopeful that the plant will resume production by twentieth of February, and then I think there should be, again, stability.
Sure, sure.
And-
What are the polyol prices be?
Polyol, polyol is currently again towards the end of quarter three, it was around INR 118-120 at the port. And today it is about INR 123-124. So that's, that's, that's the level to it is operating today.
Perfect. Great. Thank you so much for this.
Thank you, sir. The last question comes from Bhavin Rupani from Investec. Please go ahead.
Yeah, yeah. Hi, thanks for the chance again, sir. So on, foam core and technical foam, this segment has reported 27 and 20% volume growth in Q3. So how should one understand this? Can you throw some light over your reason behind sharp jump over here?
So I think the market is, of course, large and growing. It's a highly competitive part of the industry. We have, let's say I would say we have renewed or reviewed our focus on distribution and a few grades of foam, et cetera, which have made this growth possible. But these possibilities will always kind of exist or may present as an opportunity to you. And that's this part of it. But once this organization or reorganization has taken place, the growth should continue.
All right. That's it, sir. Thank you so much.
Thanks, Bhavin.
Thank you, sir. There are no further questions. Now I hand over the floor to Mr. Rahul for closing comments.
Thank you. Thank you, ladies and gentlemen, for taking out this time to engage in this session. I hope we've been able to answer all the queries to your satisfaction. In case you have any further queries, you may get in touch with our investor relation team or the group CFO. And as always, I must confess that it was a huge learning exercise for us, too. Thank you very much, and have a good day.
Bye. Thank you.
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