Sheela Foam Ltd

Dear Shareholders,

It is an absolute privilege to share with you the Annual Report for the financial year 2023-24. As I reflect back, the year has been a momentous year for us with a significant highlight being the acquisition of Kurl-on and investment in Furlenco. With the aim to consolidate and improve our market position across the country in mattresses and foam-based products, this strategic acquisition enables us to diversify our clientele, expand our geographic footprint, improve capabilities and leverage the Power of Plus.

We are synergising ideas, dreams and actions to emerge as an entity committed to excellence and quality. At Sheela Foam, we have always prioritised meeting the diverse needs of customers. As we embark on a new journey, our resolution to innovate, deliver and excel has become stronger than ever.

Together with Kurl On, we take pride in being the top player in the Indian branded mattress market, holding a 29% market share. Over the years, we have grown from strength to strength. We remained efficient and strategically aligned our endeavours with our long-term goals. Through streamlining processes, optimising operations and utilising advanced technology, we deliver products that surpass industry standards. With Kurl On coming in, our operational footprint and dealership touchpoints have strengthened across the country, enabling us to service our customers faster and more efficiently

Our brands hold a significant portion of the market and live up to their commitment to pushing the boundaries of innovation and technology to deliver the best sleeping solutions. Our carefully designed products meet the global quality benchmarks and have been successfully delivering on our promise of "comfort".

Demonstrating Resilience

Operating in a complex environment is a common challenge for businesses today. In 2023, the global economy was rattled by persistent geopolitical turmoil, accelerating climate emergency, energy concerns and surging inflation. Furthermore, the race to regulate Artificial Intelligence (AI) is creating volatility, causing uncertainty in the wider economy. AI is a disruptive concept with unknown wide-reaching implications

With the acquisition of Kurl-on and Furlenco, we are emerging as One, a force whose growth potential is limitless. We are poised to embrace challenges and capitalise on the opportunities that lie ahead.

which may affect the business, positively or negatively. All these factors influence every individual across the globe, and we are no exception. At Sheela Foam, our agility has enabled us to adapt to market developments, meet varied customer requirements, face challenges, and emerge as a leader in the industry. Profitability is at the core of our philosophy and we aim to thrive in this environment while maintaining and growing our profitability.

To thrive in these circumstances requires agility and the zeal to overcome any hurdles.

Establishing our Expertise

We, at Sheela Foam, have established our brand legacy and carved a niche in the industry. Our recall value and reputation are a testament to our expertise in delivering personalised sleep solutions to our valued consumers. As the Indian mattress market is anticipated to grow in the upcoming financial years, buoyed by favourable industry trends, we are steadily expanding our capabilities to outperform our peers.

Our extensive supply chain network and vertical integration enhance our competitive edge. For instance, with the Jabalpur manufacturing plant, we aim to explore the traditional unorganised mattress market, which accounts for 64% of the total Indian mattress market. This will be a great step in expediting the transition from the traditional to unorganised to organised market, which is a prime driver of our growth. Further, we have developed a diverse range of products that enables us to serve a wide range of customers, ensuring a loyal customer base across various industries.

Additionally, we have built a robust network of distributors, retailers and multi-brand outlets to guarantee delivery of our products to every corner of India. Moreover, with the aim of expanding our geographic footprint, we are leveraging our local sales network to extend our presence in both semi-urban and rural areas.

At Sheela Foam, we recognise the crucial role played by technology in driving a company's growth to new heights of success. We incorporate advanced technologies in our operations to streamline processes and improve our efficiency even when dealing with large volumes. The setting up of Jabalpur plant with Variable Pressure Foaming (VPF) technology is a live example, enabling us to produce more cost-effectively and environmentally friendly. This technology also allows us to compress foam to a larger range, enabling economic transportation across the country. With the growing popularity of e-commerce platforms and the rise in digital marketing, we are focussing on online segment with dedicated sales team. Our intent is to grow our presence in this segment and increase the wallet share of online sales in our overall sales figure.

The acquisition is accelerating the growth of our businesses. It has given us a strong market presence in the South and East of India, enabling us to lead the branded mattress segment across the country with both the Sleepwell and Kurl On brands. It has provided opportunities for expanding our sales channel and penetrating areas where we were either not so strong or not present. The acquisition has created a scale that will help us to be more efficient in terms of cost and thereby more competitive in the market.

Kurl On acquisition has also given us a strong position in the environment-friendly coir-based mattresses market. This is step forward in our initiative to promote environment friendly products and contribute to conserving the environment.

We have also invested in the furniture rental company Furlenco, acquiring 35% stake. This enables us to venture into the huge furniture market, which is approximately four to five times the size of our existing market. Furniture is a product complimentary to our cushioning business and we believe it will be another growth engine for Sheela Foam Limited going forward.

Our Robust Performance

In the year under review, we demonstrated robust financial performance. Our combined revenue amounted to Rs. 2,982 crores, compared to Rs. 2,873 crores the year before, our EBITDA Margin for FY24 is 10%. The profit before tax (PBT) for FY24 is Rs 255.93 crore whereas it was Rs. 273.09 crore for FY23.

Our Sleepwell brand volume grew by 31% in Q4. Additionally, following the acquisition of Kurl-on, the brand volume grew by 17%. Despite an increase in marketing expenses, our standalone EBITDA margin was higher by 1%. As of February 2024, Furlenco achieved profitability and remained PBT positive.

Volume growth was seen in the foam business across geographies. The total revenue from operating in Australia for FY24 was Rs. 408 crore which is a decrease from Rs. 438 crore in FY23. The EBITDA margin for FY24 was 6% down from 9.3% in FY23. The total revenue in Spain for the year under review was Rs. 328 crore which is a decrease from Rs. 395 crore in FY23. The major reason of reduction in revenue was falling raw material prices. Expansions in capacity at both Spain and Australia have been completed and we expect to see volume growths in both these geographies.

Committed to Sustainability

Sheela Foam Limited is committed to environmental stewardship. We are undertaking relentless initiatives to conserve and rejuvenate the environment by efficiently managing energy, water usage and waste. We are addressing climate concerns by decreasing our carbon footprint throughout our entire value chain. We have implemented measures such as the compressed foam packaging method to reduce emission on transportation. Use of foam waste in producing rebonded foam and mattresses significantly reduce the waste. As a responsible organisation, we use green technology to produce top-quality foam using a Variable Pressure Foaming(VPF) machine.

We have consistently executed well-planned measures to reduce energy consumption and utilise recycled water from the Sewage Treatment Plant (STP) for gardening and flushing. Sheela Foam's corporate office premise is a LEED-certified building.

At Sheela Foam, our strong sense of purpose to contribute to a healthier future has always been ingrained in our corporate DNA. ESG practices are not just mere letters on paper for us; they play a fundamental role in our operations.

Way Forward

As we look forward, we aim to focus on our brands. Favourable demographics, increasing disposable income, and expansion in key industries are expected to drive the growth of the Indian mattress sector. At Sheela Foam, we aim to further propel the Power of Plus. We understand that true success comes from growing together. Thereby, with the acquisition of Kurl-on and investment in Furlenco, we are emerging as one, a force whose growth potential is limitless. We are poised to embrace challenges and capitalise on the opportunities that lie ahead.

Finally, I would like to conclude by extending my heartfelt gratitude to our shareholders, partners, customers and employees for their continued support and trust. Together, let us march ahead to another year of quality comfort and accelerated growth.