Ladies and gentlemen, good day, and welcome to Sheela Foam Q4 FY 2026 earnings conference call hosted by Investec Capital Services (India) Private 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 touchtone phone. I now hand the conference over to Mr. Ritesh Shah, Co-Head of Research Analyst, midcaps, materials, and ESG from Investec Capital Services (India) Private Limited. Thank you, and over to you, sir.
Thank you, Shailendra. Thank you all for joining on to Sheela Foam Q4 FY 2026 and FY 2026, next conference call. We have with us Rahul, Chairman and Managing Director. We have with us Rakesh, Deputy MD, and Amit, Group CFO. I would request Rahul to start the call with initial remarks, post which we'll have a Q&A session. Over to you, sir. Thank you so much.
Rahul
Please go ahead, sir. Line is open.
Yeah. Hi. Yep. You can open the lines for the management. Rahul will have to start with the comments, please.
Yeah. The line is open. Thank you.
Yeah.
Sir, we are unable to hear. Ladies and gentlemen, please be on line. Participants, the management line is back. Over to you, sir.
Hello, Rahul.
Ji.
Yeah. Hi. Hi, sir. I think you got disconnected. I would request you to start the call with initial comments, post which we'll have a Q&A session, sir. Over to you, sir. Thank you.
Yes.
You can then.
Okay. 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 quarter four and the financial year ended March 2026. I do hope you've gone through the results and the earnings, which have been uploaded on the website. FY 2026 has been a year of implementation of the benefits of the Kurl-On acquisition and its integration with Sheela Foam. Both Sleepwell and Kurl-On brands delivered strong growth, and our Foam segments also recorded commendable momentum. The broad-based performance has translated into a healthy growth across both revenue and profitability. I am pleased to share that the company achieved several milestones in FY 2026, including highest ever annual foam production, highest ever top line, and the highest ever EBITDA.
This reflects the strength of our integrated platform focused on execution and a continued commitment to a profitable growth. We are also cautious and remain watchful of the evolving situation in the Middle East and its potential implications for raw material availability and the supply chains. The company, till now, was able to navigate this environment without any material disruption. I hope that we continue to do that. Our longstanding supplier relationships, both in domestic and international markets, ensured continued availability of key raw materials such as polyol and TDI. This ensured that the customer servicing without disruption and also increased the top line in quarter four. This reflects the resilience of our sourcing network and the strength of our supply chains relationship. For Q4 of last year, our Indian operations, which are now our standalone business, demonstrated a revenue growth of 24%.
For a full year FY 2026, the growth was 11%. The volume growth for full year was around 15%. This should also further show positive movement as selling prices are bound to be higher in FY 2027 as compared to FY 2026, and we are all aware that the higher raw material prices will be contributing to that. The core EBITDA margins for Q4 climbed to 11.5%. For full year of last fiscal, the core EBITDA margin stood at 10.7%. This indicates that we are already in a 11%-12% bracket and should move further onwards with growth. The Kurl-On acquisition has moved beyond integration and is now visibly contributing to the group's operating performance. Our business segments have also shown healthy growth during the year.
Mattress volumes grew by 13% year-on-year in quarter four FY 2026 and by 12% for the full year. Value growth in the mattress segment was 13% in Q4 and 10% for FY 2026. Growth during the year was well distributed across both Sleepwell and Kurl-On, supported by deeper distribution, sustained brand investments, sharper channel execution, and the benefits of a more integrated operating platform. On the retail side, we added approximately 600 net new showrooms during FY 2026. This further strengthens our market reach. Kurl-On showroom expansion, particularly in Northern India, continued to gain encouraging traction. Alongside this, we also continued to develop adjacent home comfort categories, including pillows, as part of our broader effort to deepen consumer engagement across the comfort portfolio. Our e-commerce business also continued to scale strongly during FY 2026.
Sales on our own websites, which we call as Brand.com, grew by 136% year-on-year, and sales on platforms grew by 39% year-on-year. This performance has been driven by a focused digital strategy, targeted consumer marketing, a sharper online portfolio, and better alignment between product pricing and fulfillment capabilities. The My Mattress proposition and our online-led consumer initiatives have helped strengthen our direct engagement with consumers. Our unorganized to organized business, which we earlier used to refer as STI or Small Town India or Small Town India Initiative business now operates through 8,400 dealers and reaches over 5,000 towns across 24 states. In FY 2026, this U2O business delivered volume growth of 65% and value growth of 111% on a year-on-year basis.
This growth has been supported by continued product innovation and by strengthening deeper distribution reach in the markets. In foam business for Q4 FY 2026, volumes grew by 34%, while value growth was 36%, aided by better price realizations. For the full year of last fiscal, volume growth was at 18%, while value growth stood at 14%. This growth was supported by a broader customer pipeline, disciplined market development, and a continued focus on higher value applications. Overall, our India business delivered a strong FY 2026 performance driven by the strength of our brands, expanded distribution reach, sharper channel execution, and sustained operating discipline. The year also demonstrates that growth and profitability can move together when the business is integrated well and execution remains consistent.
I'm also pleased to share that the board has recommended a dividend of 20% for FY 2026, subject to approval of shareholders. This is significant milestone for the company as the profitability of the business has enhanced after successful integration of Kurl-On and with significant reduction of debt levels, the group has strengthened its cash generation profile, enabling it to share profits with shareholders. This marks the first dividend recommended by the company since listing. For that matter, forever. This is the first time the dividend is being recommended. Both Australia and Spain have delivered stellar operating performance during the year. In Australia, Joyce revenue stood at INR 422 crores in FY 2026, and EBITDA margins improved to 10% for the full year, which is a significant improvement of almost 400 bps over FY 2025.
The improvement in profitability profile was due to implementation of strategic yield improvement programs, renegotiating prices with key customers, and supply chain restructuring institutionalized in last year. In Spain, revenue stood at INR 391 crores in FY 2026 and EBITDA margin of 10.4% for the full year as compared to 8.4% in FY 2020. As we clearly see in both Australia and Spain, the EBITDA margins have increased. On Furlenco, I am happy to share that business is expanding and is well poised on its growth journey for FY 2026. Furlenco reported a revenue of INR 370 crores, a growth of over 60% year on year. The company clocked a PAT of close to INR 60 crores compared to INR 3 crores in FY 2025, thereby marking significant improvement in its performance.
Furlenco has been able to achieve this growth while maintaining a stringent cost discipline and fiscal prudence. I have spoken in our last call about integrating Furlenco and Sheela Foam's omni-channel network and establish Furlenco's presence across Sleepwell and Kurl-On stores, I am happy to share that we have seen encouraging response from customers visiting our 40-plus integrated stores, wherein they are able to get offerings from both Furlenco and Sheela Foam. We are constantly increasing such integrated stores and hope to cross 100 stores during current year. Next, our IT business, Staqo, has also continued to evolve as a differentiated digital capability within the group, with its solutions now supporting enterprise workflows, analytics, and technology-led decision-making across sectors. During FY 2026, Staqo delivered a revenue of INR 70 crores.
We see Staqo not merely as a technology subsidiary, but as a strategic digital asset that strengthens the group's broader capabilities in automation, data intelligence, enterprise efficiency, and artificial intelligence. Coming to ESG, our focus remains on embedding sustainability into the way we operate rather than treating it as a separate initiative. During FY 2026, we made steady progress across our identified priorities. Strategic priorities, with continued emphasis on energy efficiency, responsible resource management, waste reduction, workplace inclusion, and of course, fire safety. We have already operationalized a 500 kW solar power plant at our Jabalpur facility and are progressing with over 1,000 kW of additional solar capacity across other manufacturing locations. We're also able to augment gender diversity in our workforce to around 8% during the year. These actions reflect our commitment to building a more responsible, inclusive, and efficient operating platform.
Our responsibility extends beyond business performance to the communities we serve and the lives we are able to touch. Our CSR agenda continues to be anchored around two key areas where we believe we can create meaningful and a lasting impact: emotional wellness and skill development. Through our emotional wellness initiatives, we are able to touch hundreds and thousands of lives across the country, thereby helping build wider awareness and a sustained national conversation around preventive emotional wellbeing. In skill development, our programs across armed forces preparation, fashion designing, paramedical training, and software development are focused on equipping young men and women with livelihood-linked capabilities. These initiatives reflect our belief that true value creation is measured by the positive and enduring impact that can be created on the society around us.
With this, I will now request our Group CFO, Mr. Amit Kumar Gupta, to take you through our financial highlights. Over to you, Amit.
Thank you, sir. Thank you for your inputs on our business and strategy going forward. Just to update on the financials, just some numbers here. Our volumes and profitability for Q4 and financial year 2026 continued strong trajectory supported by healthy growth and sustainable margins. On consolidated basis, revenue grew by 24% year-on-year in Q4 to INR 1,050 crores. For financial year 2026, the consolidated revenue grew by 11% YoY to INR 3,821 crores. On a standalone basis, revenue again grew by 24% YoY in Q4 to INR 819 crores, whereas in the financial year, it grew by 11% YoY to INR 2,962 crores. Our consolidated core EBITDA stood at INR 121 crores for the fourth quarter, growing by 90% on a year-on-year basis.
Core EBITDA margins improved by around 400 basis points to 11.5% from 7.5% last year. FY 2026 consolidated core EBITDA stood at INR 414 crores. For the first time, we as a company have crossed INR 400 crores by growing by around 46% YoY with a margin expansion of 261 basis points to 10.8% for the year. This improvement was driven by incremental sales, better gross margins, and disciplined control over operating our fixed costs. I am pleased to share that the consolidated PAT for Q4 stood at INR 92 crores, representing a seven times increase on a year-on-year basis.
For financial year 2026, the consolidated PAT stood at INR 161 crores, growing by around 78% YoY. If you look at the yearly figure of INR 171 crores, out of this INR 144 crores came in the last two quarters only. In the first two quarters, we had certain impacts of mark to market on the investments that we have put in government securities. During the last two quarters, we have done INR 144 crores, which means a run rate of more than INR 70 crores per quarter. With the expected growth, we expect to continue the momentum going forward. During financial year 2026, the company also reduced net debt by INR 156 crores, reflecting the underlying cash generation of the business and continued focus on balance sheet discipline.
At the time of Kurl-On's acquisition, the consideration paid was higher than the tangible value of the assets. This is generally the case when you acquire a strong brand which provides returns over a longer period of time. However, to look at the returns from a shorter period of time, when we exclude the intangible portion of the investment and calculate return on capital employed, we see that it currently stands at around 18%, which even before Kurl-On acquisition was around 17%. This demonstrates that our return matrices have also improved in comparison to what it was before Kurl-On acquisition, and we are only in the midst of our journey. With this, I request the monitor, moderator to open the floor for questions and answers. Thank you.
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 the touchtone 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.
The first question is from Rahul Agarwal from Ikigai Asset. Please go ahead.
Hi, sir. good evening and thank you for the opportunity. Congratulations, for a decent performance. Rahul, just firstly to start with going forward, you know, fiscal 26 was a year of hard work to get this growth and profitability back. I think to keeping the momentum, you know, going from here on, what are the top two, three things, you know, you're spending time on or your team is spending time on in terms of, you know, both staying ahead of competition, and at the same time improving, you know, the return on capital for the business. If you could share your top-down thoughts for the entire business overall, how you're looking at next two, three years, that will be really helpful. That's the first question.
Amit, do you wanna answer that?
Yeah. Rahul, as I outlined in our earlier conversations also, during these calls, we had taken a target that we would be first we trying to reach at a growth rate of around 15%+ . Now, since raw materials have increased last year, this should be better than 15%. First and foremost thing is how we can strengthen our different product lines and our different business lines to deliver the growth that we have committed to the market and consequently improve the profit line. Also going forward, we will be looking into very complementary business lines which are related to us, and some of them we have already initiated. For example, the pillow segment.
That's a market of around INR 100 crores. We till now were giving out only pillows as free along with the mattresses. Now we will be treating it as a separate category and building it upon. Thirdly, the two segments, which are the E-commerce segments and the B2C segments, will continue to be our strong focus areas because these are the areas which we need to penetrate deeply, not only to maintain our leadership status, but also to grow further in this country, which has around 85% of its market currently occupied by unorganized and traditional mattress segment.
I think not on a one or two year, but on a three- to five-year horizon rate, our objective would be to get into related product category so that we are a full product player and increase our penetration across the country. Maybe Rakesh has something to say. That's fine?
No, that's fine.
Yeah. Fine. Fine. That, that would be sufficient, Rahul. In case you have anything addition to ask, please let us know.
Sure. Thank you so much. It gives some clarity. Second was I just wanted to touch upon the input cost inflation bit of it. If you could just talk about, you know, where are TDI and polyol pricing right now, and how do you plan to pass it through, both for Mattresses and Foam segments. We just talk about, you know, what kind of price increase are we looking forward to, across segments and, is that sufficient enough to, you know, let the margin actually sustain or maybe expand going forward? That's my last question.
That's like a extremely difficult question and probably multiple questions put all together. Rahul, the pricing of TDI and polyol is like a crystal ball gazing at the moment.
It's not moving only in one direction, but it's also moving in both directions and moving in large quantities. What used to be some INR 2, INR 3, INR 4, INR 5 , INR 10 a kilo in a year that you would see something moving up or down or up and down, now you suddenly have INR 40 and INR 50 at a time happening multiple times in a month. To handle that, we are learning how to do it, but thankfully, some of our segments help us, like the B2C segment. There are some others which are stable but also move slowly, don't move along with the raw material market, which is a B2B segment. There is also the Industrial segment, which moves even quicker than the raw material. It's a mixed bag.
It's something that we can't say that we have full handle on, but should be able to sail through. Believe that as soon as the war kind of finishes off, these oscillations or volatility will reduce. You are asking what the future of these prices of the raw materials would be. They are definitely at a high level at the moment. I can only give you a last five years average where polyol should be and where TDI should be. Polyol should be around 120+, TDI should be around 240 or something like that. At the moment they are both above that. Very difficult to predict. I cannot add anything more. Yeah. Rakesh, you wanna add?
I can just say that we have been also able to pass on the cost increase due to raw materials across all the channels. The B2C side, the industrial foam side, and partly also on the B2B side. We see a opportunity also for a margin expansion, which we've experienced in March and also going forward that opportunity exists. As the raw material, like Rahul rightly put it, the raw materials definitely are looking downwards now, but it's a very volatile situation. I mean, it's a function of both availability and the pricing. While it is going down because of the demand, but the moment somebody picks up a good quantity, it starts looking northwards.
it is, it's a play of supply chain currently.
Right. Rakesh, could you quantify the price hike?
Currently, TDI, the main supplier is GNFC. Their price is about INR 275, and polyol is around INR 180.
Rakesh, I was actually asking about the price hike taken for our Mattresses and Foam. What is the pass-through you've taken so far? That's what I was wanting to know.
Rahul, very difficult to give in percentage terms. They are different for different categories, as Rakesh just mentioned, that in mattresses we have been able to take decent ones, B2B a little lesser. That industrial segment, yes, we can pass on immediately. But yes, polyol and TDI on an average increase between 25%-35%. Depending on how much foam is consumed in different categories, we have been able to increase prices to offset those price increases and to some extent maintain our margins also.
Got it, Amit. Thank you so much. I'll get back in the queue. All the best for the next year.
Thank you.
Thank you. Ladies and gentlemen, a reminder to all, please limit your questions to two per participant so that management can address more participants. Should you have a follow-up question, we would request you to rejoin the queue. The next question is from Arjun Khanna from Kotak Mutual Fund. Please go ahead.
Thank you for taking the question, and congratulations. Good, better set of numbers this time around. The first query is just on the marketing expenses, because you've been bringing that out historically. I didn't quite catch it in this presentation. How much would we have spent in the fourth quarter, and how much would we as a percent of sales would be for FY 2026?
Rahul.
Arjun.
Sorry, Arjun. For the entire year, it should be around 4.5%.
Okay.
Almost similar to what we did last year.
Sure.
For the last quarter-on-quarter is a fraction that moves on. I think it would be a little lesser because for Q3 is the highest percentage we spend upon, so maybe around 4 odd %.
Fair. Helpful. Sir, the second question is on the depreciation side. Just wanted to understand, post these changes, what outlook do we anticipate for FY 2026? What should be the number we should work with?
27 or 26.
27. Sorry, 27.
Yeah. Arjun, I think, at a consolidated level, we would be looking for a depreciation based on current assets, and I am not commenting.
Right.
Incremental depreciation we might have.
Perfect.
For capital investment that we do next year should be around INR 140 crores-INR 145 crores at a consolidated level.
Sure. This quarterly, run rate of 35 essentially one can annualize, this number.
Yes. Yes, you can.
Sure. The final bit on CapEx for next year, what's our outlook?
Sir, including maintenance, and some debottlenecking capacities, because we have grown by around 15% in volume this year, and we anticipate even a higher growth in the next year. We will need certain debottlenecking CapEx at certain of our facilities to meet this volume. We should be somewhere between INR 125 crore-INR 150 crore.
This is including, maintenance CapEx?
Everything.
Sure.
This is including marketing CapEx, which is for opening of new stores. This is maintenance CapEx for all our plants, both in India, Australia and Spain. This is also any new CapEx we need for debottlenecking. Everything included.
Perfect. Thank you so much for answering these questions.
Thank you.
Thank you. The next question is from Deepali Kumari from Arihant Capital Markets. Please go ahead.
Thank you so much, sir, for giving this opportunity. My first question is, the unorganized to organized segment showed a massive growth. How scalable is this market across many states where you do not yet have the major presence?
Sorry, Deepali, you were not very clear. Can you please we could understand that you too have shown a high growth, but after that, what you said, please can you repeat?
My question is, the unorganized to organized segment showed a massive growth. How scalable is this market category across many states where you do not yet have the major presence?
Sorry, ma'am, Deepali. ma'am, you were not audible. Please join back the queue. The next question is from Amit Mehendale from RoboCapital. Please go ahead, sir.
Thank you. My first question is on the margins. Is it fair to say that, in the backdrop of escalation in raw material prices, our margins, EBITDA margins will be under pressure in Q1 or Q2?
Sorry, I could not get your question. Can you please repeat?
Yeah, in backdrop of raw material prices, you know, our EBITDA margin should be under pressure in Q1 or Q2, right? Because Q4 must be, we must be having stock at old prices. The inventory may be there, the raw material inventory. Q1 and Q2, we may have to use the inventory which is bought at higher prices. I'm assuming that there'll be some pressure on the EBITDA margins in Q1 and Q2.
No. If you see our gross margins, see what happens is whenever there is a raw material price increase, it is not that we instantly can increase the price of our products to the consumers also. It's a process which takes around 10- 15 days, and same is the quantum of inventory that we have. The higher price inventory almost maps up with the increase in the prices, and that's why you see there is no, not a very material increase in gross margin in the quarter as, in, as compared to the fourth quarter last year. It would be almost a 50-100 basis point improvement. Technically, there was no impact of lower raw material prices when these prices went up.
Similarly, in the first and the second quarter, we don't expect any impact of higher raw material prices. I don't say there might not be 50, 100 basis points. There can be, because the prices are very volatile currently. Not more than that. What leads to EBITDA margin, and which has been done in the fourth quarter is an increase in volume. We are a 30%+ contribution margin business, and whenever there is an increase in volume, that directly flows to the bottom line, strengthening the EBITDA margin. That's why, that's the reason why we will be focusing on growth with which we have done last year, and we will be doing in the current year.
Right. I was just trying to figure out, I mean, if the polyol prices have gone up from, say, INR 120- INR 180, I'm sure we won't be able to pass on such a large increase. I mean, even a like 20-25% increase is difficult to pass on. How are we confident?
I'll take that. I think, what Rahul mentioned as INR 120 was the ideal price for polyols. INR 120 was the price in January. The price started rising from February, and then there was a sharp spike towards end of February when the war started. The polyols price had gone up to INR 220. What Amit is saying is, when it was rising, we were able to take price increasing. Now, the highest price that is, it has gone up to is INR 220, and currently it is at INR 180. It is oscillating between INR 200 and INR 180. The part price increase has already been taken, therefore it will not impact the margins going forward.
Okay, great. The last question.
So, uh-
Yeah.
No, go ahead, Amit.
Understood. Thanks. My last question is on Furlenco. What is the plan, you know, for, say, in the next three, four years? How do we see that business growing and how, you know, any long-term plans there, three-, four-year plans?
Furlenco already is at about INR 370 crores. Next year's plan is about INR 500 crores, and it's tracking well. I think two things that we look forward to. One is that when would be a right time for doing an IPO. We will take our decision somewhere in the next three to four months' time.
Right. My last question is on the debt levels. If you could, you know, what could be our debt levels for next two years, 2027 and 2028?
To answer that question, I'll divide the debt between two parts. One, the debt which is outstanding on the Indian books, and the second, the debt which is outstanding in Spain and Australia. Spain and Australia is around INR 350 odd crores.
INR 700.
That is INR 350 crores, which is self-liquidating. It's being paid off from the cash flows of Australia and Spain itself. The other INR 300 odd crores is in India, which, I think if you see or utilize the entire cash flows, what we are anticipating should be paid in the next one to 1.5 years.
Okay, great. Thank you very much.
Okay, thank you.
Thank you, sir. Participants, we request you all to please limit your questions to one per participant. We have next question from Mr. Pritesh Chheda from Lucky. Please go ahead.
Sir, I couldn't get the answer on Furlenco. First, Furlenco is now around materially INR 60 crores profit the company, and we have around about 60+% holding. What is the course of, you know, business plan there and what kind of ROE that business operates at?
First of all, we don't hold 60%. I'll just correct that number. We hold around, on a fully diluted basis, we hold around 43% in Furlenco. We are the largest shareholder, and we hold majority on the board and the shareholder meeting. These two. Yes, we have done INR 60 crores PAT in the current year. ROE for the company will be different, but I can say that we have done a total investment of around INR 430 crores for our investment. Even if you take INR 1,000 crores basis that, which is divided into debt and equity, I think it's a metric that can vary. What is important here is return on capital employed.
The assets that Furlenco has deployed and the type of EBIT that it is getting, the return on capital employed is around 30%-35% for Furlenco. Our returns, of course, will come mainly through the valuation of the company since we are a shareholder. That will depend upon what price the company gets listed.
This company is going for IPO?
Not currently, but there are plans to go for IPO once it reaches a threshold size, which as Rahul just mentioned, maybe then, one year from now or maybe a little bit later than that.
Okay. On the, on the debt and the interest cost part, so you said that the debt of India will be repaid in 1.5 years?
Yeah. The cash flow generated will have capacity to repay the India debt in 1.5 years, since it is around INR 300 odd crores.
Whether we will pay or we will utilize that cash for further growth in the business, that's something different. Because these are immaterial debts. If you see debt to EBITDA, it is less than one.
Can you give out the interest cost for the next two years? You know, that would be helpful. The way you gave out depreciation cost, maybe you could give out the interest cost.
At a consolidated level, as I said, if you add up, you will have a debt of around INR 600 crore-INR 700 crore. The interest cost for the debt would be INR 35 crore and another INR 15 odd crore for bank charges and other things. At a consolidated level, finance cost should show a figure of around INR 50 odd crore, until and unless we do major changes in the capital structure.
Okay. Done, sir. Thank you.
Thank you.
Thank you.
The next question is from Ritesh Shah from Investec Capital Services. Please go ahead.
Yeah. Hi, sir. Thanks for the opportunity. Sir, first question is on U2O. If you look at the full year, volume growth is around 65% and 111. Sizable difference between value and volume over here. Sir, if you could provide some color on why this gap, what is it that we have changed over the last one year? That's the first question. The volume growth is 61%.
65%, and value growth is 111%.
Great. Ritesh, what has happened is that we have introduced a higher model. Earlier when we had launched this product, we had launched with only one model. Now we have introduced another model at a higher price point. That is one. Second is there also has been a price increase in both the models. It is a result of that.
Sure. Sir, what would be the volume contribution by percentage, for U2O on the total volumes that the company does?
Ritesh, I'll have to get back with those, these numbers. We generally don't disclose the distribution of metrics between different categories. I'll have to get back with those figures. I'll talk to you separately on that.
Sure. Sir, just over here, would it be margins accretive or higher than what we report at standalone basis over here, specifically for U2O ?
margins would be more or less, not lower than the offline mattress and much higher than the e-com. It would lie somewhere in between.
Fair enough. Sir, would you like to comment something on e-com? Basically, again, it has done quite well, 52% value growth. If you could highlight what is our thought process over here, because historically we did very well, then we scaled it back. Again, we are back on the panel over here. How should we look at this part of the business?
Ritesh, we are on two sides. We are put additional focus on the Brand.com side. That is one as a platform. Second is we have also put focus on Kurl-On. Both these put together has led to a substantial growth on the Brand.com side. Also on the platform, Kurl-On was lagging behind, so we had to make some changes and in terms of our play in the on the platforms. That has also yielded good results. It's a combination of these two things which has led to this growth.
Sure. Just last question. What is the motivation of changing the depreciation policy right now?
Ritesh, I think depreciation policy was very skewed. Whenever we used our foaming machines last, if you see an example of our foaming machine in Greater Noida, it has been installed for last 22 years now, and it's functioning well, producing around 25,000 tons of foam or rather more than that per annum. Generally these machines last for very long, around 40-50 years. If we follow the written down method, then potentially it depreciates the mean to the extent of 70%-75% in the first three, four years, which does not reflect the actual amortization of the asset on the revenue that it generates. It skews the things. Secondly, the second biggest part of our assets is generally plant, building and related assets.
Lands don't get get depreciate. Even buildings have a life of 40- 50 years. Just to align the cost of depreciation, which is allocated to business on a year-on- year basis, in line with whatever, with the useful life of that particular asset and what value it delivers over 40, 50 years, we have realigned the policy to reflect realistic figures.
Yeah. Sir, I will call you for this separately. Sir, just last question. I think we had INR 40 crore of some synergy savings which were still pending. I think we had given a number of INR 160 + INR 40. INR 40 was pending. It was contingent on certain new machines. If you could just provide some color on the timelines of the incremental synergy pending benefit and by when the machines will come. Thank you.
You are right, Ritesh. We had said that we will realize a total synergy of INR 250 crores, out of which around INR 190-200 we had done till two quarters back. INR 40 crores was to come from some new machines which were imported with a new material of malleable fiber to be used as a comfort layer. That is currently under installation. It is delayed by a quarter and a half. I think by the mid or end of this quarter, that will be installed and we might see that scaling up in the subsequent quarters.
Thank you, sir. I'll join back with you. Thank you so much.
Thank you.
Thank you. The next question is from Rishi Mody from RDM Advisory LLP. Please go ahead.
Yeah. Hi, sir. Am I audible?
Yes, sir, you are.
My first question, we've seen impressive volume growth in technical foam and comfort foam in this quarter. Just wanted to check for any one-off B2B orders in technical foam or any inventory stocking up by the channel in lieu of price hikes due to crude volatility.
As per the annual picture of both B2B and the comfort foam. We started putting more focus on these two segments, and there were some structural changes in the distribution and also the way we were approaching the market. One is a function of that. Overall, we have grown in both these segments upwards of 15%. Quarter four, there has been a spike, which is primarily two reasons. One is whatever steps we had taken to build this business further. That is one. Second, when the war broke, we were in a much better position to continue serviceability in the market. There were smaller players who were finding it difficult to maintain their supply chains.
Those orders also got shifted to us. If you see on an annual basis, I mean, these businesses are now at a level of a 15% growth on an annual basis. Our plan for the next year is also on the similar lines.
Okay. This customer gain that we have done, right, say people who weren't able to supply to these guys, now we've gotten them as our clients or incremental volumes from existing clients who were buying from somewhere else. Is that also continuing like, maybe because we're giving better pricing or they have reverted back to their existing suppliers?
Sure. As I said, we had taken these two as also focused businesses where some changes had to be made, which took some time. That was irrespective of the war and the scarcity of raw material. Those actions were already started getting implemented and showing results. As far as this was concerned, the March and the month of April is concerned, this is where some customers who have moved out also started buying. Obviously we will retain them, and that's what the plan is going forward.
Okay, got it. My second question was on the international piece, right? I'll split it. Australia, our gross margins have expanded quarter-on-quarter, while also other expenses have increased, quarter-on-quarter, INR 50 crore in Q4 versus INR 42 crore expense in Q3. Just, is this some reclassification or could you help me understand that? Also on the Spain piece, the gross margins, are they firmed up around the 32% gross margin mark? The fixed expense as a percentage has come to about 20% of our revenue. How much of that is fixed versus variable? In case say things, like I'm just trying to assess the sensitivity here.
Sure. Let's start with Australia. Australia has shown a steep increase in gross margin in the current year. Current quarter, I would say, not the year. Two reasons. One, yes, efficiency measures have been, they are on for last one year or so. EBITDA margins we achieved there last year were 6%, we were on an improvement spree throughout the year. The methods that were applied was, one, creating efficiency with the wastage that they created, and secondly, taking price hikes with the customers, which had not been taken for a very, very long period.
This a little bit of disruption in the raw material prices created a little bit of plus and minus in Australia. I think to some extent, maybe around 54%-55% odd, Australian margins have improved. There may be aberration of 3%-4%. You should be able to see 4%-5% higher than the normal margins it used to had in the past. As far as the fixed costs are concerned, I would request you look at it as a percentage of total revenue because the exchange rates have gone differently. When you convert Australian dollar into rupee, which was 55 a year before to 65 now, it's a different scenario, right? Fixed costs reflect only that portion.
When we move to Spain has been a real surprise because Europe was going through challenges, so the pricing realization that could be done in Spain was much better. I would not say 30%-33% would be a stable sort of margin, but I can comment that around between 30%-32% would be a stable margin. It will not revert to 28%, 29%, which we had seen in the past. Yeah, that way the profitability will remain there.
Is there still scope for cost optimization there or that 20% other expenses is going to largely remain around that 20% mark?
Some minor improvements may happen, but broadly it would remain the same. Yes, turnover improves because there is a very strict cost control there. If you see the fixed cost structure between Australia and Spain is very small. Scope is always there, but I would not say any material sort of a scope there. Our intent with both Australia and Spain is also not to go to a profitability of 16%, 18% because we know those type of profitabilities don't survive in those countries. Intent is to retain it between 10%-12%, which to some extent is feasible in these countries and possible.
Okay, got it. We were planning to.
Thank you, sir. Rishi, sir, please join us.
Yeah, just a quick question. It's a continuation on the international piece only. You all were planning to sell or you all were exploring whether to sell off the international business. Is that still in the plans or we are now gonna continue with this business as is?
I think one of the investor conferences I had mentioned is that we are open to that, and I think our position remains the same, that we are open to that, but that doesn't mean that we are switched off from it. We will pursue that and wait for right person to come at or the right party to come at the right time. At the moment it's we still do whatever is necessary to maintain that business.
Got it. Thank you. That's it from my end.
Thank you, sir.
Thank you.
Participants are requested to limit your questions two per participant. We have next question from Pallavi Deshpande from Sameeksha Capital. Please go ahead.
Hello, can you hear me?
Yes, we can.
Yeah. I just wanted to understand, just going back to the previous, you know, inventory question and, you know, the channels talking on that comfort foam, technical foam. Because the raw material prices have increased so much, are we saying there was no channel stocking in this quarter?
No. Pallavi, as Rakesh already mentioned, that the higher volume was because of two reasons. One, the work that has been done throughout the year with the new customers. Second, because some of the players, smaller players have gone out of business and that business came to us. There, we don't anticipate any major channel stocking. Foam is a very bulky material. You can't go beyond a volume to stock foam. It's very difficult. We don't anticipate any choking or blocking of the channels and resulting in any challenges in the subsequent months. It was a genuine demand in the market, which the existing suppliers of those customers could not fulfill, which we went ahead and fulfilled. That was some part of the growth.
The rest part of the growth was our own efforts and what we had been doing in the past.
Thank you. The next question is from Pritesh Chheda from Lucky. Please go ahead.
Sir, just one question and a slightly broader observation. What specifically since the last two years have we brought in for the volume growths in the India business, improving? And, you know, if you could articulate that and the sustenance of the same. We have our double-digit number this year as well. Some key points there, sir.
Yeah. See, there were multiple things. One, very sharp focus on all these. Once we took over Kurl-On, it was a new animal for us. A very different sort of a company, though we used to sell the same products, but the companies were very, very different. The way it sold, the way it produced, the way it managed the business. We struggled with it for a year or two. I think you all are witness to that how we struggled. That also led us to more detailing and more focused on our existing business. We identified certain priorities for ourselves, which we had reflected in our commitments to the market also. Of course, we could partly meet them.
Going ahead, we hope to meet the full commitment, which was growth on one side and profitability on the other side. A very profitable growth sort of a model. The entire focus and energy of the organization was shifted to these two. The discussions that now we have, the opportunities that now we explore, the push that we give to the market, each and every category what we study and try to see what best can be done. I think the level of working and the level of dedication in those have gone up, and the focus of the organization to long-term planning has solidified, which also gives us the confidence to tell you that this growth is going to continue in future. Nothing else.
I don't think raw material has changed, I don't think market has changed, customer has changed, or anyone has changed. Yes, our way of looking at the business and putting targets in front of ourselves has changed.
Any channel related changes? Since both the brands are operating in different geographies but trying to also have aspirations in their core geographies, any changes there?
The brand-wise focus continues because they both have evolved in their own way. That is one which we have put more focus on. Second is also on the white spaces for channel expansion. Last year also saw a massive expansion covering many areas where we were not represented. There is also a system to look at our channel partners, where we are also getting more and more accountability on that side. Since they are because we have now integrated both the brands under the channel partner, that piece is also being looked at very closely, being monitored and accountability fixed there. I think sum total of all these things is we are getting better as far as the channel is concerned.
Market shares?
Market share, there is no recent study that, there is association who used to do it. Our belief is that I mean, we can sense that, at least for the both the brands and with the U2O kind of initiative and e-com, the organized sector play is improving. Which from last couple of years was on the other direction, where the unorganized was kind of growing at a faster rate than organized. We are seeing this change, now moving more towards organized side.
Okay, sir.
Thank you. The next question is from Vignesh Iyer from Sequent Investment. Please go ahead.
Thank you for the opportunity, sir. Wanted to understand on the TDI part. If I heard you right earlier in the call, you said that GNFC is a player who is the biggest supplier of TDI, but they had their own factories closed during the war. Also what we heard that one of the biggest, probably the biggest player in China and world, and they had also stopped supplying TDI from China. How have we managed to procure the required amount of TDI quantity?
You're right. I mean, GNFC was shut down first on a technical reason, and then later also because of the in the month of March, because of the natural gas energy. But the shutdowns were temporary in nature, and during that part, the traders who import, who cater to the balance 40% of the market, they had increased the rates. The material was available, but it was available at a much higher price. That is one part. Second, we had about few months back, we had also taken a in-principle decision to also hedge our risks. We had introduced a new supply partner and who was very supportive during this time, and we were able to meet the requirement.
We did not have any stock-out situation, though we had to pay a little more for TDI at few times during the month.
Okay. I mean, was this new supplier Chinese?
It's a mix of both the Korea. There was some material from Japan which was coming in and also from China. China also has more than one manufacturer. There are a couple of manufacturers who are there. Some of them, they bring in the material on their own and they supply it locally as per the pricing of the market. Some you can import directly. It's a mix of both.
Right. Got it, sir. That's all from my side, sir, and all the best. Thank you.
Yes. Thank you.
Thank you. Ladies and gentlemen, we will take this as our last question. I would now like to hand the conference over to Mr. Ritesh Shah. Please go ahead, sir.
Yeah. Thanks, Shailendra. Thank you all for joining onto the call. Rahul, if you would like to please have some closing remarks. Thank you so much for your time here.
Ritesh, thank you very much for conducting the call. As usual, it has been lot of incisive questions, and let me just say that we continue to learn as you question us, and we keep answering that. With that, I would just wish you all all the best. Have a great weekend, and we will soon meet again in another quarter. Thank you very much.
Thank you.
Thank you.
Thank you.
Thank you all.
On behalf of Investec Capital Services (India) Private Limited, that concludes this conference. Thank you for joining us and you may now disconnect your lines. Thank you.