Sheela Foam Limited (SFL) Q1 2027 Earnings Call Transcript

Ladies and gentlemen, good day and welcome to the Sheila Holmes Ltd. Q1 FY27 Earnings Conference Call, hosted by Dollar Capital Markets Private Ltd. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions at the end of today's presentation. Should you need assistance during the conference call, please signal an operator by pressing star, then zero on your touchstone phone. Please note that this conference is being recorded. I would now like to hand the conference over to Ms. Savita Singh from Dollard Capital Markets Limited. Thank you, and over to you, ma'am.

Thank you, Manav. Good afternoon, everyone. I am Savita Singh on behalf of Dollard Capital. Welcome you all to the Q1 FY27 Earnings Conference Call of Sheila Foam Limited. I would like to thank the management for giving us this opportunity to host the call. Today from the management team, we have with us Mr. Rahul Gautam, Chairman and Managing Director, Mr. Tushar Gautam, Vice Chairman and Joint Managing Director, Mr. Rakesh Chahar, Deputy Managing Director, and Mr. Amit Kumar Gupta, who is the Group CFO. I will now hand over the call to the management team for their opening remarks. Over to you, sir.

Thank you, Savita. Thank you very much. Good afternoon, ladies and gentlemen. At the outset, let me thank you all for joining this conference call to discuss our operational and financial performance for the first quarter of FY2027. I trust you have had the opportunity to go through our results and the earnings presentation, which has been uploaded on our website. This year has begun on an excellent note for us. I am happy to share that for the first time in the group's history, Sheila Foam has reported a consolidated revenues of more than 1,000 crores and EBITDA of more than 100 crores in the first quarter of any fiscal year. The group recorded a pack of 62 crores for the quarter, a substantial jump year-on-year. For the first quarter of this year, our standalone Indian business delivered revenues growth of 20% and standalone EBITDA growth of 13% on an year-on-year basis. Within this, the mattresses' value grew by 15% and the volumes by 6%, while our foam business grew by 26% in value and 4% in volume terms. Despite the challenges of a volatile raw material crisis amid the ongoing Middle East situation, we delivered EBITDA growth and a higher absolute EBITDA compared with last year's first quarter. The moderation in margins was on account of the sharp fall in raw material prices during the quarter. Foam witnessed higher growth than mattresses, which pulled gross margins down. However, this growth was cash-attractive and supported better EBITDA generation. One might argue that in a falling-round environment, we too could have chosen to moderate our home growth to protect margins. However, we took a different view. Sinafone did not become the industry leader by optimizing for a single quarter. It earned that position by being a partner its customers can depend upon through every phase of the cycle. Consistency of supply is a commitment we do not compromise with, and it is precisely why we continue to carry inventory and serve our customers without introduction. This is what distinguishes us from the unorganized sector, which tends to produce foam only when it is opportune to do so, that is, when raw material prices are low. For us, leadership means standing by our customers most reliably at the very moment others choose to step back. We are among the finest research houses in the country in polyurethane foam, and our foam serves as a brand and a benchmark in the furniture and other foam-based industries. While it is our constant endeavor to increase our market share in mattresses, we will always pursue opportunities that generate incremental cash flows. Our e-commerce business continues on a strong, strong growth journey. Sales on our websites, which we call as brand.com, grew by 69% year-on-year basis, while sales on platforms grew by 19% year-on-year. The categories registered an overall year-on-year growth of 30% in Q1 FY27, with volumes growing by 23%. We are focused on increasing our category share and expanding the breadth of our portfolio. We are also poised to enter the furniture segment under our flagship umbrella brand, synergizing and leveraging Furlampo's design, manufacturing, and logistic capabilities. As a first step, we have launched SofaBed under both the Sleepwell and Curl-on brands, and the early market response has been encouraging. Scaling this business is a natural extension of our existing strengths. Our extensive EBO and Cocoa network provides a ready physical footprint to take these products across the country, while our own brand websites and platforms will drive our online presence. By building on existing infrastructure, we are able to pursue this opportunity in a capital-efficient manner, keeping incremental investment to a minimum. Our U2O, that is the unorganized-to-organized business, has now expanded to nearly 10,000 dealers across the country. This vast and growing network helped us clock 81% year-on-year growth with volumes growing by 19%. This substantial growth was driven by the expansion of our portfolio with the introduction of 5- and 6-inch mattresses in the category, which have been received exceptionally well by brand-new conscious consumers moving up the chain and resulting in bitter category realizations. Coming to our foreign subsidiary, both Australia and Spain delivered an exceptional operating performance during the quarter. In Australia, Joyce, revenue grew by 31% to 120 crores, with an EBITDA margin of 12.8% for the quarter, compared with 6.8% in the quarter one of last year. In Spain, the revenue stood at 133 crores, a growth of 54% over last year, with the EBITDA margins improving to 14.7% compared with 5.7% in quarter one of last year. Some small part of this growth could be attributable to currency changes as well. The improvement in performance is due both to the strategic yield improvement program and supply chain restructuring initiatives implemented over the last year, and to the fact that our international businesses carry higher inventory, allowing lower-cost inventory to run longer, thereby clocking higher gross margins. In addition, the frequency of home price changes in international markets is much lower than in India, which allows higher prices to sustain for longer periods. On Furlanco, the business continues to do well and is deepening its presence in newer cities. Its acquired subscriber base has grown by 36%, while revenue rose by 38%, and the EBITDA grew by 65% year-on-year. Our IT business, Staco, also continues to evolve and grow exceptionally well. It registered a revenue growth of 67% in Q1 FY27 over last year, while maintaining a healthy EBITDA run rate of around 28% to 30%. The user base of our flagship ERP product, Presence360, has cost 3.2 lakh users, reflecting its wide acceptance and strong market traction. Coming to ESG, it gives me immense pleasure to share that in 2026, SheenaFoam received a category upgrade to strong in the crystal ESG ratings. Also, in the ST Global Corporate Sustainability Assessment, Scenafoam moved up to 61st percentile this year from 51 percentile last year. Separately, as assessed by Sustainal Attics, our company received a category upgrade of risk rating, and Scilaphone's industry rank improved to 218 from 351 a year earlier. Thank you. We have anchored our efforts to a clear sustainability 2030 roadmap built around four United Nations' sustainable development goals that are most material to our business. On the environmental front, we continue to expand our renewable footprint through captive solar generation and revamp processed around water and waste management. These are not one-off measures, but a structural shift in how we consume energy, water, and materials. With that, I will now request our group CEO, the CFO, Mr. Amit Kumar Gupta, to take you through our financial highlights. Over to you, Amit.

Thank you, sir, for your input on our business and strategy. An update on the financial. Our profitability in Q1 continues growing on a strong trajectory supported by healthy top line and EBITDA growth. For the first quarter, our consolidated revenue grew by 26% year-on-year to 1,032 crore, and consolidated EBITDA grew by 45% to reach 109 crore. Milestone for the group, as addressed by Rahul J. earlier, EBITDA margin expanding by 139 basis points to 10.6% from 9.2% in Q1 of last year. This was driven primarily by enhanced sales, better value realization, and a robust, tightly driven cost structure. On a standalone basis, revenue grew by 20% year-on-year to $761 crore, while EBITDA grew by 13% to reach $68 crore. As appraised on our last call, with the closure of our derivative hedging instrument, there will be no mark-to-market impact on the derivative, and hence our poor EBITDA is now the same as our reported EBITDA. With that, I will request the moderator to open the floor for questions and answers. Thank you.

Thank you very much, sir. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and 1 on their touch to be telephone. If you wish to remove yourself from the question queue, you may press star and 2. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. We have our first question from the line of Ritesh Shah from Investec. Please go ahead.

Hi, sir. Thanks for the opportunity. Congratulations for a good set of numbers. So, first question is on the inventory policy that we have, specifically for Australia and Spain, we have seen commendable gains on gross as well as EBITDA level. I just wanted to understand, is this something sustainable, or was there an advantage of, say, low-cost inventory that we have? And how much is the inventory that we hold for, say, overseas basket as well as the India region right now?

For the Indian region, we have invented for 15 days, 30 days at the moment, and when the fluctuations are too much, sometimes it just goes up a little bit. But both for Australia and Spain, they are a little different. See, on a long run, stable conditions, it just doesn't matter. But in this period, which has been oscillating quite a bit, the inventories made a little difference. So Australia had a little bit of a longer inventory. It always has. Spain also had the largest inventory, which is normally carrying, and that had the advantage during this period. Okay.

Yes, fine. So, my second question is, basically, U20, we have done phenomenally well. Basically, the gap between value and volume is huge. You did indicate two new SKU launches. Is it possible to give more teller over here, like U20 will be like what percentage of our total volume of pricing, rough math indicates now it would have mowed up very sharply closer to 2,000, 2,100 rupees per chance per mattress. Possible to give some flavor over here on the contribution of mattress at the company level and the price increases that we have witnessed gradually?

Amit, can you take that?

So, Ritesh, I'll take you a little back. When we launched the U2O category, we launched it at a very, very lower price, because we believe that in the region that we are selling, we should be giving it on an acceptable or affordable pricing level. However, once the material was on the floor, there were two challenges that you say. One, the channel margin support were lesser than what we were giving here. And secondly, we had a stretch level of profitability, whereas demand was coming from the market, and what feedback we got from our channels was that even if we increase the price, this is going to work well. Primarily because it was a fine, full-foam mattress with very good fabric. So the suggestion was that you continue with the product, you continue with the good quality, but you may increase a little bit of price. So we had taken a price increase last year, and hence, even last year and this year, it reflects that the value growth is much higher than the volume growth. However, this is now sustainable. The channel is settled. As you have seen, we have now 10,000 dealer coins across the country, primarily covering the entire Indian subcontinent. And going forward, this would be the level of the pricing that we have. But yes, during a year, there was this difference between the volume and the value.

Possible to quantify percentage volumes from mattress from every Indian, given it's growing also pretty strongly? Would it be closer to 19-20% now?

No, volumes would not be. We don't give out volumes or value separately for different categories within the mattress. It is a combination of U2O, online, and offline mattresses.

Okay, fine. Lastly, on standalone volume growth, Rahulji, are you happy with that number of 6% or is it more a reflection of the market conditions and competitive intensity? What is our desired level over here? And some comments on margins over here, taking into account the synergy part of the equation, I think until last quarter, there was 40 crores of synergy benefit, which was still pending, subject to new machines being installed. Any update over that would be helpful. Thank you.

So, I think your first question is whether we are happy or satisfied with the volume growth on a stand-up basis in India. I would say that standing around 6% at the moment, I would say it should be another 2% to 3%. A sub-10% would be happiness, while the industry, according to us, has grown closer to 5%. And so that is, although we are ahead of the industry, but I think closer to 10% would be more satisfactory. On the second question was on the margins part. I would say that this is an area of, or this has been in times of very high volatility. So, just to come to any kind of conclusions on being satisfactory or happy about the margins, it may be better for a little more stability to come in, and then we will have a look at it.

So, just to add to what Rahulji has said, see, you know, the raw material prices were fluctuating in the range of 40% to minus 20% in this particular period. And it was very, it is very difficult for a player like us who also carries inventory to maintain margins in such a period. So, though we streamlined our purchasing, we tried to reduce the impact as much as possible and purchase it to the maximum on the spot. But at the same time, the voyage time still comes. So, what we did was we tried to find out what are the other avenues from which we can generate additional money. And there was foam, like Rousey also mentioned in his speech, that we sold an incremental quantity of foam because some of the layers were at the back. Some of them were not having raw material. Some of them were not getting or things like that. We were able to sell a little bit of more foam from which we could accrue cash. So if you see on a cash basis, our EBITDA still grew on a standalone basis by 13%. And what we were looking, say, 15% plus sort of a growth, you will see that from a cash perspective or a EBITDA perspective, we have still maintained that level. But yes, in terms of margin, in such turbulent period, margins tend to fluctuate both on the positive as well as the negative side.

And on the synergy side of the equation, what is spending, what is already baked up?

So, as I mentioned last time, there is only one 40 crore worth of energy that is outstanding. And this also I mentioned last quarter that the machine has already come. It is under installation. Maybe some impact you see during this quarter, but full impact could be visible in quarter.

Sure. I'll just squeeze in two questions. Rahulji, if one had to strip out e-comm and mattress volume growth. Sorry to interrupt you, Thish. Sure, I'll join back with you. Thank you so much. Thank you.

Thank you, Ritesh.

Ladies and gentlemen, in order to ensure that the management will be able to address questions from all participants in the council, please limit your questions to only two per participant. Should you have a follow-up question, we request you to rejoin. The next question is from the line of Ritesh Cheda from Lucky Risk Manager. Go ahead.

Yes, sir. Any comments between last three years growing in a double-digit volume in India business and a single digit in quarter one? Any comments there in terms of comparison of demand? Similarly, on margins where there is some reductions. Any comments there? That's one question. Second, on the Furlanco side, the JV profit, associate profit seems to be reduced. QOQ, so any comments there as well?

So, on the Furlanco, let's take the third first question. I'm going to do it.

So, Furlanco, if you see, in the last quarter, because the company became profitable for the The first time, it was in losses since its inception. So there were certain deferred tax assets which were recognized, which was added to net profit. So out of the 60 crores net profit that it declared, around 33 was the net profit from the operations, and the remaining 27 crores were from deferred tax assets. This year also, there might be some deferred tax assets recognizable because the profit levels will be higher, and hence the projected profits will be higher. But that exercise is done at the end of the year and would be visible, if any, in the fourth quarter. So if you refer to operating profitably last year, it would again be, say, in the range of nine-odd growth per quarter. So first quarter, they had a little bit of expenses. It is a little bit lower, but during the full year, definitely they would be achieving additional profitability at that level because of the increased volumes that are expected at the company level.

So, just terrifying here on Furlanco itself, you are saying quarter one, there is no operating profit growth, but for the full year, there will be operating profit growth. That's one observation. And 9 crore is some quarterly number of operating profit that you mentioned. And second, on a QOQ basis, the contribution that comes here in our P&L, difference is a function of deferred tax assets, deferred tax assets which gets recognized at the end of the year. Hence, it should not be looked QOQ. Correct? These are the two observations.

No, so a little bit different. It is not a degrowth from the last quarter. So, we hold around in terms of the portion that we get out of the net profit is 35%. So, 35% of 9 crores will be approximately at the same level what we have reported this year. So, it is not a degrowth. But yes, defer tax effect is the comment that you received is correct.

So, Parlanko has grown for quarter one, correct? Yes, yes. And on India business. The question on India business was, we have a single digit volume growth and margin reduction in quarter one vis-a-vis, you know, we were clocking double digit volume growth until the exit of last year. Where, you know, all the other categories, when you see the general consumption, etc., and all the other companies with respect to consumption, the growth has only accelerated. So, any comments?

So, in value terms, our growth has also accelerated. So, if you see, we have reported on 15% and 26% growth in revenue terms. Volume growth, whenever there is price hike of such a quantum, there is always a balance between the price that you charge and the volume that you can sell. So, if the price had been like 10-15% sort of an increase, the volume growth would have been double-digit again. So, we are pretty confident that as this volatility subsides, we would again be on the same trajectory, and for the year, definitely, we hope to get double-digit growth overall in both form as well as in metric volume.

And on the margins?

Yeah, margins are, I think, margins, if you take out the variance in gross margins because of the raw material volatility, we are better in margins than what we even reported in quarter four. So, as soon as this volatility subsides, I think you should be able to see those margins.

Oh, thank you.

Thank you. A reminder to all participants, please restrict yourself to only two questions per participant. Should you have a follow-up question, we request you to rejoin the queue. Next question is from the line of Pankaj Tibrewal from Vicky Gai Invest. Asset Manager, please go ahead.

Good evening, Rahul. Good evening, Amir. First of all, congratulations on a decent set of numbers. And this is the comeback we all shareholders were expecting for the last couple of quarters. Do we think now that the volatility in terms of profitability, which we saw for the whole of last year, most of them, is something behind you?

A little louder. The voice suddenly seems to have gone down.

Yeah, can you hear me now?

Much, much better. Thank you.

Yeah. So should we assume this to be the new normal for Sheila in terms of the profitability And from here on, we escalate. And the second question is that the return on capital is still lower on an overall basis. How should we think from a next couple of years perspective that the return on capital should move and where we should settle down and which would make us satisfied overall from a return on capital? And last question is on the balance sheet. Can you give us some color on how the balance sheet will look like towards the FI27 end? Will it be a debt-free balance sheet? We will have some debt left. How should you think about from incremental growth perspective? So these are the three questions. And also, I didn't hear this time on the 15% target on the margins. Can you give us some color on that? So a couple of questions on that, right?

Thank you, Pankajee. Thank you. So I think the first question was on the volatility that is existing or we are experiencing at the moment, and what would be our response to whether this will continue or this will be the new normal that we have to live in? And our expectation is that at least for a couple of months, this volatility will be there. And my expectation is October or up to even November that this would be. I know it is related to the war, and anyway, the war is not over as yet. But even after it is over, for a couple of months, we would expect that this, because it has disrupted the supply chains and the other things during this, you know, both the loops of Suez Canal and the state of Hormuz, et cetera, being blocked. The expectation of profitability, I would say we are doing our best. We expect it to be better than what we are seeing this time. Whether it will accelerate to the end of the year, maybe another quarter and I will give you a better answer to this. But, will it be better than this? Yes, of course it will be. On the return of capital and the balance sheet part, I will ask Amit, you respond, and to the question on the debt, how will it lie?

Sure, sir. And I think to your question, what will be the trend in the next two to three years, the growth and profitability trend should be similar. And if it continues to be similar, definitely it will have a very, very positive impact on return on capital employed. We hope in the next three years, we should be able to reach somewhere around, say, 20 to 25% range in return on capital employed. Currently, I believe it is around 10 odd percent if I'm not mistaken. Thank you. at the overseas level. So, we will take another one year to close out the debt in India. International debt, of course, will be paid over five years with its own tax flow, which it will be generating on a regular basis. I think, Pankaj, you have answered. 15% target, yes, there is no change in stand on the margins. We have a target of 15% to get a margin for Great.

Thank you, and wish you all the best, and I hope the last two quarters' performance has clear it, and we deliver better numbers going ahead also. Thank you. Thank you, sir. Thank you.

Thank you. We have our next question from the line of Dixie Jain from Incred Research. Please go ahead.

Hi. Congratulations on good numbers. My first question was regarding The foreign operations. So for Australia and Spain, what will be the sustainable growth rate that we can see from here for the next two years? Also, what would be the sustainable EBITDA margins without the gains from inventory currently and also foreign exchange fluctuation?

So, foreign operations, definitely this quarter has been exceptional for them. Combined, they are at around 13-13.5% sort of an EBITDA margin. But yes, whereas volatility has hit us adversely in India, it has been positive for the international operation. However, these are not as an ongoing sort of event. So, as we expect improvement in India, there would be some moderation of these profitabilities overseas. And as communicated earlier, our international operations, though as they are in matured economies, should be growing at around 5% on a Euro and Aussie dollar basis in their respective countries and should have EBITDA margins ranging between 10% to 12%. In fact, this year it should be higher because already the momentum has gotten from a higher level. One other thing, we have done certain improvements in Spain, which has fastened their growth rate. They are able to cater to more industries now, and they have certain programs which are giving them higher volume. So I would not be surprised if they clock a higher growth rate as they have done in the first quarter. They have done a total of 12 million euros in the first quarter, whereas they used to do around 9 to 10 million euros on a regular basis. So it's a 20% growth in euro term, so 20% plus growth. They might be clocking a little higher level of growth. Overall, if you see, last year we did around 800-850 crores with both the operations combined. And this year, we are very confident of cropping 1,000 crores and any bit of, say, around 120 odd crores.

Okay, thank you. So, my next question was regarding the 41 new stores that we opened. What is the capex that we invested for these stores? How big are these stores and what territories have these stores opened in?

So, we already had 22 stores, which were continuing from last year. So, we have upgraded them, and the plan is to take this number to 50 stores. So, there are already about 42 stores are in operation. As far as the CAPEX is concerned, Amit, you would like to come?

So, per store, we invest a capex of around 27 lakh rupees, and another 20 to 22 crore rupees is spent on the working capital. On a store, Cocoa store, I'm saying, in terms of franchisee stores, it is very, very small. But in terms of Cocoa stores, we have an investment of around 50, sorry, not crore, 50 lakh rupees per store, and opening up, say, 50 odd stores would cost around 25 crore stores. Territories. Currently, we are covering the urban areas, the key urban areas, where our competitions also have that sort of a store. So, we also need to give those sort of ambient size, etc. These stores are generally around 2,000 square feet size. So, we are opening in those areas, and I think for another few stores, we will continue to open in four urban areas, these Poco stores.

And what are the sizes of these stores that we open?

Around 2,000 square feet. It ranges from around 1,800 to 3,000 square feet, depending on different places and the cost of real estate in both places.

Okay. Thank you. Thank you for taking the question.

Thank you.

Thank you. We have our next question from the line of Garvit Goyal from Serene Alpha. Please go ahead.

Hello. Am I audible?

Yes, we can hear.

Yes, and congratulations, good set of numbers, sir. It is on question of volume growth. Some of part is answered already, and the part I want to know that, do you expect any volume recovery over the coming quarter, or it's some near-term softness likely to continue?

So, there would definitely be volume recovery. I would say we would go back higher than what the volume clock lasted. So, just understand it from the perspective. The third quarter is the best quarter, which is the festive season, and the fourth quarter is the next best quarter. So, just compare it on a YOY basis the respective quarters. If you see, first, second quarters are generally a little bit lower. So, this year also, we are pretty confident that we will exceed the volume growth of last year.

Okay, okay. Good to hear, sir. And another question is on cost side. Like, could you give us an update on TDI and polyol price stand today? And how much of a recent spike has already been absorbed into our cost basis versus what's still flowing through? Also, is there any structural gap between when cost rise and when you are able to reprise it? So, does that lag itself, becoming a margin-based, volatile price environment?

So, currently, the prices are very volatile. So, it is not moving in one direction. Like, when the Iran war started on February 28, in March, we saw huge spikes in the prices. But from April onwards, the prices started coming down. Now, the war has again reignited about a month back, and the prices have gone up again. So, very difficult to say as to what is the quantum of increase in prices. But I can assure you that whatever is the quantum increase in prices, we are doing commensurate price increase for our customers. A little bit of risk for us only because of the, if the volatility is very high, it moves very fast from top to down, then we may have certain in-channel inventory, in-pipe inventory like on the high-field, Thank you

for the

opportunity and congrats on a good set of numbers. I have a few questions. We had guided for 12-13% EBITDA margins for FY27 and around 13-14% for FY28. Do we still stand by that guidance given the current operating environment?

No, so we guided for 11-12%. We never guided for 13% for the current year. Yes, we do stand for it, but looking at the current volatile environment, it's very difficult for us to comment on it. But we are pretty confident that we are on the same track.

So, what would be the levers for margin improvement if, you know, the condition pays down?

So, you see, our gross margins have come down by more than what we had, like, more than the margin we have to achieve. So, even if it goes up by 2% we would be there. We would be better than what we have committed. So, it is simply volatility to go away.

Okay. Second question would be on any new product launches or initiatives that we are planning to undertake to sustain growth in the near long term.

So, yes. One is that we have also introduced a set of new products, which is to increase our ASP. And we have also started consumer-led promotion. So, that's also something that we tried out, and the results were quite encouraging. Going forward, the strategy is more on the consumer side, where you will be increasing our spend towards the consumer, which will draw footfalls because we already had a large footprint of EBOs, and working on the conversion. So, there are programs which are also running to improve the conversion in the flow.

Okay. Also, on the new products introduced over the past few years, how have they performed and what contributions they make to revenues and how do the profit margins look like? I additionally also wanted to understand the strategy behind launching mattresses exclusively for the e-commerce channels as seen in this quarter's presentation. And what role do you see these channel-specific mattresses playing in future growth and profit margins?

So they would be, they would definitely positively impact the profit margins. That is one of the reasons for introduction of products. The performance of the new products normally is good because that's the reason in the first place that we introduced them. Existing products, because of price increases, competition activities, they at times lose the value-to-money equation. So it's an ongoing process, but this time we had also tried to simplify the portfolio and make it more compelling.

We'll move on to the next question from the line of Vikshan Gupta from GOG PMS. Please go ahead.

Good afternoon, sir. So, I just wanted a clarification, like, the gross margins were hit more because of the foam segment or because of the mattress segment or an equal combination of both? It was because of raw material price movement. Okay, so segment-wise, it would be like equally distributed because the raw materials would be the same.

So foam segment uses more foam, whereas matrix uses proportionately much lesser foam. So you can say that from a margin perspective, matrix would have been less than the foam segment. But yes, it was primarily the, foam was the primary reason because it uses those input materials, And what

percentage of the COGS does TDI and polyols form?

If you refer to COGS, it would be as high as 70 odd percent, 65 to 70 percent. Okay.

And just last one from my side, so directionally, the share of, is there any trend like the share of premium, mid-premium or economy mattresses has grown?

So, I would say that we have ASP, which is reflective of these various segments. The ASP has marginally gone up, and therefore, it would be easy to say that there is some premiumization that that is already happening.

Okay. Understood. Okay. Thank you so much.

Thank you. We have our next question from the line of Vach Tolanki from RSP and Ventures. Please go ahead.

Hi, good afternoon. So, my question is on the overseas companies that you told that both the companies carry higher inventory because that's why the GP margin is not lower. So, how much of inventory is still pending with these companies so that like when the new polylonal DNA prices will defect, maybe in Q2 or it will carry forward to Q3?

So, the impact, so they will come to normal levels in Q2. Of course, now we are managing the inventory very closely. So, we have also reduced some level of inventory at those places. Of course, we cannot reduce it to a large extent because the voice time is more. But yes, in the Q2, they should come to normal. You should see normal inventory level, normal levels of raw materials.

Okay. And the second question is on employee expense, like quarter 4 is a very high employee expense. Was there any one-off in quarter 4?

So, generally, if you see, last year in quarter 4, our growth was very high, which increased the growth rate for the entire year. Now, we had not taken provisions for those incentives in the first three quarters because they were not becoming due at those levels of profitability. But in the fourth quarter, because of higher level of profitability, the growth for the year became higher. Because of this, those incentives became due, and hence, we had to provision them.

Okay, okay. That's from my side. Thank you. Thank you.

Thank you. We have a next question from Lionel. Navi, from I Thought PMS, please go ahead.

Good evening, sir. I hope I'm audible. Yeah, congratulations on a great set of numbers. So, just one simple question. So, basically, I was wondering if Rent-O-Mojo, the company just filed for DRSP, would you consider them a like-for-like competitor, or would you say there are substantial differences that you'd like to highlight between Furlanco's business and Rent-O-Mojo?

So, we are in the same area of business, but if you see, Rento Mojo is more on the mass segment, whereas Perlenco is more on the premium segment. So, Perlenco as a brand is more premium, and the second difference is, Rento Mojo does a lot of utility. So, the proportion of utilities to furniture in their overall sales mix would be higher, whereas in our case, furniture components will be higher. So, we should be categorized as some level of premium to rent-a-mojo, but yes, the area of business is the same.

Thank God, it's very true. Thank a lot for the clarification, sir.

Thank you.

Thank you. We have our next question from the line of Arjun Agarwal, an individual investor. Please go ahead.

Hello. Am I audible, sir? Yes. Congratulations, sir, on a good set of numbers in this volatile environment. But actually, I'm new to your company. I just want to know, is the integration finally done with the Carlon? And are all the synergies as expected during the time of acquisition are playing in line with that? This will be my first question, sir.

Yes, so integration is almost complete. I would say it's 96-97%, whether on the back-end front or the upside of it or the front-end side of it. Then on the capital side, where we have reduced the number of operating units down to 12 from a total number of 21, and the integration of the HRs, the human resources, as well as the integration of the IT side. All that is complete. Regarding the synergies, I would say that about 80% or so, 75-80% already have been realized, and there are some 15-20% which are on the way to getting realized.

Thank you, sir. Glad to hear that. Sir, I just want to know one more thing. Regarding the market share that we currently hold as a combined entity in the Indian metrics market, and what we envisage for the next two to three years means launching of the new products and which segments are we targeting? Because as per best of my knowledge, we are pioneers in our individual segments, both Sleafel and Carlon. So what will be the next growth phase for next two to three years, being new product launches and other things? Thank you, sir.

And as far as market share is concerned, unfortunately, it depends on how you define the market. But if we look at the organized mattress market, we would have a combined share of close to 20%. And looking at the future, we see that once the integration is complete, we would now start taking advantages of each brand and each zone and each area and the support of the other brands to grow for both Slippel and Curl-On. Therefore, next two years, the synergies of growth will be realized post the integration, and that's how we see ourselves.

Okay, sir. Thank you. Thank you for your answer. And, sir, if you just can spend two minutes regarding the new product launches, are we trying to enter the segment that means the matrices that can be fully rolled on and delivered online or something different, some new products that we are targeting.

Also, we are already doing that, rolling the mattress of compressing a rolled mattress and sending to the consumer. We are doing that on the e-commerce side. We are present on both the EBOs and MBOs and on-ground and offline and online. So, segment-wise, we are present in virtually all the segments. We do have a segment which is a U2O segment where we cater to people who are stuck with the unorganized sector. So, at the moment, on the mattress side, we do not foresee any new areas or any segments or subsect segments that we would be introducing. But we do see synergies of furniture with Fernanco that will be available and that will be introduced into our stores in the coming time. There would be areas of absolute luxury and higher-end products. There would be accessories like pillows and mattress toppers and accessories, bedding accessories that we intend to grow. So that's how this scenario is going to look in the next couple of years.

Thank you. Thanks a lot, sir, and all the best. And thank you for being so candid. Thank you, sir.

Thank you. We have a next question from the line of Akash Shah from UTM Mutual Funds. Please go ahead.

Yeah, I said thank you for the opportunity. Sir, just wanted to ask, now Furlanco products will be present in how much percentage of Sheila Fomes stores?

So, currently, we are in the process where we are ranking up the number of stores. Our first target is to reach 100 stores. We are at around 40 to 50 stores where Perlenko per meter has been put in a shop-in shop sort of the format. However, we intend to expand India. The number of stores currently is very difficult to say. Wherever Perlenco sees their sort of a micromarket which fits into their way of, their philosophy of selling, I think if those stores, they would put up their stores. Overall, in India, you know, we have 3500 exclusive brand outlets. But yes, Perlanko will be present only if it makes sense for them.

Understood. Right. And, sir, also just wanted to understand this. Sir, how the management team, I mean Rahul, sir, Tushar, sir, Rakesh, sir, Amitriu, So, how the responsibility would be divided between the top management team, if you can just very quickly share if possible.

So, Akash, I'll just give you a very broad picture on that. So, Rappi, sir, is looking after the sales and the operations side and the supply chain. Tushar, sir, is looking on the newer products and newer growth areas that we have. Together, we solve all the problems that come out of it. And Amit, sir, is, of course, looking after the finance and accounts and everything related to that. As far as I'm concerned, I'm coordinating all this and looking after some of these services which go into this organization, Questions like human resources, like IT, like marketing, and that's how we divide the work.

Sure, sir. Thank you so much.

Thank you. Ladies and gentlemen, that would be the last question for the day, and I now hand the conference over to the management for closing comments.

Thank you, Manav. Thank you, Shavita. It has been an interesting session, and thank you for all the people who congratulated us on the performance, and we expect and we are happy to receive their good wishes and blessings for the coming quarters. As usual, the questions have been incisive, and we always learn from them and think that we can do in the future. So with those words, once again, a big thank you, and hope to see you next time. Thank you very much.

Thank you. On behalf of Dollar Capital Markets Private Limited, that concludes the conference. Thank you for joining us, and you may now disconnect your line.

Thank you.