Shares of Sheela Foam rise after the acquisition of Kurl-on
The acquisition will enable Sheela Foam to become an undisputed market leader and accelerate Sheela Foam’s growth and profitability.
Sheela Foam shares rose 15 per cent to Rs 1,363.55 on BSE in Tuesday’s intraday trading after the company said it had acquired a 94.66 per cent majority stake in Kurlon Enterprises (KEL), maker of Kurl-on mattresses , at a valuation of Rs 2,150 crore.
It has also announced its decision to acquire a 35 percent stake in furniture rental company Furlenco, also known as House of Kieraya Ltd, for Rs 300 crore.
The deal is likely to close on November 30. It also bought a 35 percent stake in online furniture brand HOK Furlenco for a share valuation of Rs 857.14 crore. The investment must be completed by August 30.
The stock rose 22 percent in the past two trading days. At 9:28 AM; it quoted 8 percent higher at Rs 1,278 on the BSE, compared to a 0.5 percent rise in the S&P BSE Sensex. The stock reached a 52-week high of Rs 1,710 on 5 September 2022.
The acquisition will enable Sheela Foam to become an undisputed market leader and accelerate Sheela Foam’s growth and profitability. The infusion of prime cash into Furlenco marks its entry into the fast-growing online furniture e-commerce business with digital first play to help Sheela Foam attract new customers. The acquisition and investment will collectively diversify the product portfolio, integrate manufacturing capabilities, create distribution synergies and expand the pan-Indian footprint across both urban and rural India, the company said.
“The deal with Kurlon gives Sheela Foam undisputed leadership in key product categories with the strength of its flagship foam product Sleepwell (consistent quality and innovation); and acquired the power of the Kurl-on brand in rubberized coconut; in which both companies are leaders in their respective product segments. Sheela Foam will now have a combined market share of approximately 21 percent in the modern mattress market in India,” the company said in a press release.
The acquisition will help Sheela Foam diversify and expand its customer base into a pan-Indian footprint. Sheela Foam is the leader in North and West India, while Kurl-on has a larger market share in the South and East region of India, ICICI Securities said in a note.
Sheela Foam and Kurlon Enterprises will now have a combined market share of approximately 21 percent in India’s modern mattress market. They have complementary distribution networks, with Sheela Foam primarily using an exclusive distribution network and Kurlon Enterprises having a strong presence in multiple distribution channels. In addition, their manufacturing facilities complement each other, enabling the combined entity to serve customers more efficiently and reduce logistics costs, Nuvama Institutional Equities stressed.
While the deal is financially attractive, both brands should focus on fueling growth, according to Nuvama Institutional Equities. “This is based on the premise of cost synergies emerging and Kurl-on profitability reviving or exceeding FY20 performance.”
Sheela Foam is the market leader and largest manufacturer of Polyurethane Foam (PU) in India. The company produces various foam-based products for home comfort, such as mattresses, furniture cushions, as well as end-use engineering grades of polyurethane foams in a range of industries such as automotive, acoustics, etc. The main household brands are: ‘Sleepwell’ for mattresses and home comfort; ‘Feather Foam’ a pure PU foam; and ‘Lamiflex’ a polyester foam for lamination.
KEL is engaged in manufacturing and marketing various foam-based and coconut-based home comfort products in the “Sit and Sleep” solution categories, such as mattresses, furniture cushions, pillows and covers.
House of Kieraya Private Limited (HOK) (Flagship Brand – Furlenco) is one of the largest and fastest growing furniture rental companies in India. The company also offers the sale of new and refurbished furniture under the Furlenco & Prava brands.
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