On purchasing the majority stake in the Kurlon, Furlenco acquisition, Sheela Foam surges 15%; details
In intraday trading on Tuesday, Sheela Foam shares rose 15% to Rs 1,363.55 on the BSE after the firm announced that it has bought a controlling 94.66 percent ownership in Kurlon Enterprises (KEL), the business that makes Kurl-on mattresses, for an equity value of Rs 2,150 crore.
Additionally, it has disclosed its intention to pay Rs 300 crore for a 35% share in Furlenco, also known as House of Kieraya Ltd, a firm that rents out furniture.
The transaction will probably be finished by November 30. In addition, it paid Rs. 857.14 crore for a 35% share in the online furniture retailer HOK Furlenco. By August 30th, the investment should be finished.
The stock has increased 22% during the last two trading days. At 09:28 AM, it was trading 8% higher on the BSE at Rs 1,278 compared to a 0.5% increase in the S&P BSE Sensex. On September 5, 2022, the stock reached a 52-week high of Rs 1,710.
The purchase will speed up Sheela Foam’s development and increase profitability, allowing it to establish itself as the unchallenged market leader. Furlenco’s first investment signals its debut into the quickly expanding online furniture e-commerce market, with a digital first strategy to assist Sheela Foam reach younger consumers. According to the firm, the investment and purchase would together diversify product offerings, combine production resources, foster distribution synergies, and expand pan-India reach in both urban and rural India.
With its flagship brand Sleepwell’s strength in foam (consistent quality and innovation) and acquired brand Kurl-on’s strength in rubberized coir, both of these companies are leaders in their respective product segments, Sheela Foam gains undisputed leadership across major product categories as a result of the Kurlon deal. According to a press statement from the firm, Sheela Foam will now have a combined market share of around 21% in India’s market for contemporary mattresses.
Sheela Foam will benefit from the purchase in its efforts to broaden its clientele and expand to all of India. According to a report from ICICI Securities, Sheela Foam dominates the market in northern and western India while Kurl-on has a larger market share in southern and eastern India.
In India’s market for contemporary mattresses, Sheela Foam and Kurlon Enterprises will now have a combined market share of around 21%. Sheela Foam mostly uses an exclusive distribution network, whereas Kurlon Enterprises has a significant presence throughout a variety of distribution channels. Their distribution networks are complimentary. Furthermore, according to Nuvama Institutional Equities, their production facilities complement one another, allowing the merged company to provide services to clients more effectively and spend less on transportation.
However, Nuvama Institutional Equities asserts that despite the deal’s favorable financial terms, both businesses must concentrate on restoring growth. This is predicated on the idea that cost savings will materialize and Kurl-on’s profitability would rebound or outperform FY20 performance.
In India, Sheela Foam is the biggest and market-leading producer of polyurethane foam (PU). The business produces a variety of foam-based home comfort items, including mattresses and furniture cushions, as well as specialized grades of polyurethane foams for usage in a variety of sectors, including the automotive and acoustic industries. The leading household names include “Lamiflex” for lamination, “Feather Foam” for pure PU foam, and “Sleepwell” for mattresses and home comfort.
KEL produces and sells a range of foam- and coir-based home comfort items for the “Sit and Sleep” solution categories, including mattresses, furniture cushions, pillows, and covers.
One of the biggest and fastest expanding furniture rental businesses in India is House of Kieraya Private Limited (HOK) (Flagship Brand – Furlenco). Under its Furlenco & Prava brands, the firm also provides the selling of new and reconditioned furniture.
