Sheela Foam jumps 8% on report it may buy Kurlon Enterprise for Rs 3,250 cr

Buying out Kurlon Enterprise, which makes the Kurl-on brand of mattresses, will help Sheela Foam nearly double its market share, the report by Moneycontrol said

Shares of home furnishing company Sheela Foam rallied over 8 per cent to an intra-day high of Rs 1,270 apiece on the BSE on Wednesday after reports said the company is likely to acquire rival Kurlon Enterprise for a cash consideration of Rs 3,250 crore.

Till 1 pm, the BSE counter had seen traded volumes of around 16,000 shares as against an average of 5,680 shares traded in the last two weeks. 

BSE has sought clarification from the company on the news development. As per a report by Moneycontrol, Sheela Foam will buy 100 per cent stake in Kurlon via two tranches. The deal is expected to be concluded within a couple of months.

Buying out Kurlon Enterprise, which makes the Kurl-on brand of mattresses, will help Sheela Foam nearly double its market share, the report said, adding that with this deal the latter's market share in the organised mattress segment could increase to 35-40 per cent from 20-25 per cent.

Sheela Foam is popular for its Sleepwell brand of mattresses. Around Rs 900 crore could be added to the company’s topline at the consolidated level as a result of this deal, the report said citing a source. 

Sheela Foam is the market leader and the largest manufacturer of Polyurethane Foam in India. The company manufactures various foam-based home comfort products like mattresses, furniture cushions, as well as technical grades of polyurethane foams for end-use in a range of industries like automobile and acoustics.

The company earned 74 per cent of its FY23 revenue from the home comfort business segment and the rest from technical foam segment. 

In Q4FY23, the company reported 1 per cent YoY decline in consolidated revenues at Rs 7,290 million, while its profit declined 7per cent YoY to to Rs 458 milllion amid high raw material costs and lower volumes.  

"We supply to the auto industry, which is doing extremely well. However, as far as consumers are concerned, or the B2C business is concerned for mattresses, they are preferring to postpone their purchases and the footfalls in the stores are extremely low," the management said in its earnings call.