India Ratings affirms Sheela Foam's LT rating at 'AA' with 'stable' outlook

Sheela Foam said that India Ratings and Research has affirmed the company's long-term rating at 'IND AA' with 'stable' outlook.

The agency has, meanwhile, assigned IND A1+ rating at the companys short-term debt facilities.

India Ratings and Research stated that the rating affirmation reflect SFLs strengthened market position in the Indian organised mattress segment, led by a much larger scale of operations in terms of revenue and profitability as well as an improved distribution reach post-acquisition of Kurlon Enterprises Limited (KEL; mattresses manufacturing company).

India Ratings has taken note of the delays in the realisation of synergies at SFLs level post-acquisition of KEL along with a slower run rate observed in revenue as well as EBITDA level than Ind-Ras expectations.

This had led to elevated credit metrics during 9M FY25, slightly higher than India Ratings expectations for FY25.

However, India Ratings derives its comfort from the synergies likely to come in over FY26, leading to better cash generation and net leverage reducing below 1.5x by end-FY26; along with the companys adequate liquidity position to cover its debt obligations over FY26-FY27.

The agency further said that a significant improvement in the revenue as well as profitability while reducing the consolidated net leverage below 1.0x could be positive for the ratings.

However, a decline in the revenue and profitability or an elongation of the net working capital cycle on a sustained basis and any significant debt-funded acquisition, leading to the consolidated net leverage remaining above 1.5x beyond FY25 on a sustained basis could lead to a negative rating action.

Sheela Foam is a leading manufacturer of PU foams in Asia Pacific. The company has secured a dominant position in key industries such as mattresses, automotive, footwear, lingerie, and furniture. The company specialises in the production of a diverse range of foam-based home comfort products, such as mattresses and furniture cushions.

The scrip rose 1.65% to currently trade at Rs 766.70 on the BSE.

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