Earnings Call Transcript - XNSE:SFL 2026-11-03

Operator

Ladies and gentlemen, good day and welcome to Sheena Foam Ltd. Q2H1F1-27 Earning Conference Call hosted by MK Global Financial Services 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 after the presentation concludes. 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 now hand the conference over to Mr. Devanshu Bansal from MK Global Financial Services Limited. Thank you, and over to you, Mr. Bansal.

Devanshu Bansal, Head of Investor Relations

Yes, hi. Good afternoon, everyone. I would like to welcome the management and thank them for this opportunity. We have with us today Rahul Gautam, Chairman and Managing Director, Tushar Gautam, Vice Chairman and Joint Managing Director, Rakesh Chahar, Deputy Managing Director, and Amit Kumar Gupta, Group Chief Financial Officer. I shall now hand over the call to the management for the opening remarks. Over to you, gentlemen.

Rahul Gautam, Chairman

Thank you, Devanchu. I just want to make a little correction that Tushar Ghatam is not available at this time. Good afternoon, ladies and gentlemen, and thank you for joining us to share our results for the second quarter Q2 and the first half, that is H1, of this year. I hope you have had the chance to go through the numbers and the presentations. Let me begin with the environment first. As it has already really shaped this quarter, from February onwards, this has been an absolutely unprecedented kind of time for our industry. On a ballpark, the crude is up by about 50%, and our two key raw materials have moved even Since mid-February, polyol, our main chemical or main raw material, is up by 65% and TDI by 33%. Sustained increases of this kind have simply not been seen before. The war has disrupted the entire supply chain and logistics. Some of the facilities in the Middle East have been partially destroyed and others are restricted because of the Hormuz blockage. Additionally, the festive season, which was in late September last year, moved into October this time, resulting in a shift of demand from Q2 to Q3. However, we recognize that these are the times where the strength of a leader shows. Our first responsibility, when things get this hard, is to keep serving our customers. And that is what we did. We kept material flowing through supplier relationships that have been built over decades. At a time when many of the smaller, unorganized players simply could not source or hold their prices. With the strength of the brands, they've had the advantage of being able to pass these increases onto the market and eventually to the consumer. The consumer has his own affordability benchmarks also. A customer who comes in with about $20,000 to spend on a mattress can stretch a bit, but not to the full impact of the large price increase. The same money now buys him a slightly lower category of the product, and that change impacts us even when values may hold up. With demand still soft, we have chosen to spend more and not less on our brands, advertising, and consumer schemes. We went out and launched the great Sleetwell Festival across the country. It has turned out one of the strongest schemes we have ever introduced for our consumers. This does take off some profitability in the near term, but it has built a healthy pipeline of demand as we go into the festive quarters of the second half. The outcome is that even after a margin hit, we have held our profitability in absolute terms. In a quarter like this, protecting the core of the business while still investing in it was important to us. The numbers tell this story quite clearly. On a consolidated basis, revenue for the quarter grew by about 19% to a level of 1,045 crores. The first time that we have crossed the 1,000 crore revenue number in Q2, and also our third consecutive quarter of a 15% plus crore. Our operating edita for the quarter was 87 crores, almost the same as we delivered in the corresponding quarter a year ago. So that was 46 crores, and that is about five times of last year. Coming to the half year, revenue grew about 22 percent to a level of 2,076, 77 crores, And the operating EBITDA grew 23% to a 200 crore mark from 162 last year, at a margin of 9.6%. And I must also add that the fat rose to rupees 109 crores, that is more than 6x last year. Though we clocked higher gross margins than the first quarter of this year, our investment in brand and marketing kept our operating EBITDA margins muted. I now want to spend a little time on Furlengo because I believe it genuinely changes the picture of our group. From 1st 1st October this year, Tverlengo has become a subsidiary of Shilafo. This is not a sudden step. It is something we have worked towards for some time and widen our reach, our scale, and the very nature of what we do. Let me explain the business because it is very different from our existing business. Tverlenko is primarily a furniture rental company. It gives people in our cities access to well-designed furniture and that too on a subscription basis without having to own anything or everything. I think nobody would want to rent these things. That is what we have always been thinking. But today, it is not only the floating population. It is people who simply like a change, who want their furniture kept in good shape, who move homes or move cities, are indulging in this offer. However, Perlenco offers them a catalog of more than 300 products. It is present in more than 30 cities. It has a subscriber base of more than 200,000 or 200,000 subscribers, and it runs a disciplined asset-based model keeping the asset utilization much above 90%. That discipline is what makes it profitable. What this business has done in a short time saves a great deal about our ability to spot value and build it. When we invested in FY24, Verlenko had a revenue of about 139 crores and had a subscriber base of 70,000. It was also losing close to 130 crores a year. Thank you. The same in the first half for Farlenko. The revenue has grown about 34% and 34% to 229 crores, and EBITDA was also up by about 69% to a level of 89 crores, and its active subscriber base has grown 35% over the previous year. This is a space whose time has come. Furniture rental is finding real acceptance, and particularly with the younger and Gen Z consumers, who value flexibility far more than ownership. The capital markets have taken a note, as well as one of the players in this space, having listed recently. All of this changes what Sila4 as a group is today. We have enlarged our B2C portfolio in many growth areas, a house of more than 13 brands, held together by one idea that has guided us from the very beginning, the science of comfort for all the consumers that we deal with. The group today stands on primarily four pillars. First is mattress, where we serve every kind of a customer from mass to premium to luxury. Sleepwell and Curl-On sit at the premium and economy end. Tarang and Aram give us depth and reach across the value segments, and Chatham and Wells and Nature's Rest take us into luxury. Second pillar is furniture, in both rental and retail. Likewise for Lenko, and alongside it, our entry into branded furniture retail, also under the flagship brands of Scapell and Karla. The third category or the third pillar is foam and cushioning. Our technical and industrial foam business under B2B category as well as B2C with brands such as Parafoam and Jumps, HR, etc. work well in this area. This caters not only to consumers, but to a much wider set of industries, with applications ranging from automotive to footwear, and our form has long been a benchmark across all of them. And the fourth is the international subsidiaries and the IT initiative that we have. Our business abroad, Joyce in Australia and Interplast in Spain, and our enterprise technology and digital solutions companies, TACO, have all been doing extremely well. Sheila Foam today is a broad-based consumer company with brands at home and abroad across categories, channels, price points, and markets. As these pieces come together, we expect the combined group to close this year at a revenue of around 5,000 crores with an EBITDA of roughly 600 crores, a margin little above 12%. I must also add that the international businesses remain strong and profitable. In Spain, the revenue grew well. We took on new customers during the quarter, and their volumes will begin to show from the second half. The cost of winning and servicing did weigh on Spain's margin this quarter, but that, to my mind, is money well spent for the growth ahead. For behalf, Spain has already delivered an EBITDA margin of over 10%, actually 10.7%. In Australia, Joyce did well and ran well at the operating level, with an extra margin of also 10.7% in the quarter and 13.4% for the half-year. The reported profit for the quarter has pulled down by a one-off provision we had to take against one of our key customers, Hay-Edge Beards, going into administration. We expect to normalize this very soon. Our newer growth engines also continue to do well. On the D2C and e-commerce side, we are strong and continue to grow at a healthy pace, led by our own website, brand.com. The U2O business, which is the unorganized to organized business, which takes us from the unorganized to the organized market and has now reached more than 10,000 touchpoints or dealers and has grown by about 41 percent. And Staco, as I mentioned, our technology company, keeps growing well while holding a healthy return margin of around 28 percent. Let me close here. This was a quarter that tested us on every front, and I believe we managed to handle it reasonably well by standing with our customers, investing through the cycle, and holding the profitability of the business to the previous levels.

Speaker 10

Thank you, sir. Ladies and gentlemen, now let me take you through the financials for the quarter and the first half of the current financial year. On a consolidated basis, revenue from operations grew to 1045 crores, a growth of 19% over a similar quarter last year, held by both growth in matrices as well as home, and a very strong growth in Australia and Spain. Operating Ebitda for the quarter was 87 crores at a margin of 8.4%, broadly splat against 87 crores a year ago. Reported EBITDA was 83 crores. As Rouser explained, the pressure came from the sharp price in polyol and TDI prices and the higher expense behind the Great Clifford Festival. Pat for the quarter was 46 crores against 10 crores last year, close to 5 times, helped by both operations and by lower finance cost and depreciation. Cash EPS for the quarter was Rs. 8.3. For the half-year, consolidated revenue grew by 22% to Rs. 2,077 crores from Rs. 1,696 crores. Operating EBITDA grew by about 23% to Rs. 200 crores from Rs. 162 crores at a margin of 9.6%. The operating leverage of the first quarter was partly offset by raw material inflation. Paid for the first half rose to 109 crores from 17 crores last year for the similar period, and EPS grew to 18.7 from a diluted EPS of around 9.8 rupees last year. On a standalone basis, revenue for the quarter grew 17% to 7.81 crores, with EBITDA at 61 crores at a margin of 7.8%. For S1, this year, standalone revenue grew by 18% to 1452 crores, and EBITDA grew 5% to 129 crores. At the segment level, for the first half, matrix grew by 11% and home grew by 26%, with volumes broadly flat, reflecting the pricing actions and the festive season. Thank you.

Operator

We will now begin the question and answer session. Anyone who wishes to ask a question may press star and 1 on their touchstone telephone. If you wish to remove yourself from the question queue, you may press star and to you. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question comes from the line of Harshit Khadga from RoboCapital. Please go ahead.

Harshit Khadga, Analyst — RoboCapital

Hello, thank you for the opportunity. Am I audible?

Rahul Gautam, Chairman

Yes, please.

Harshit Khadga, Analyst — RoboCapital

Yes, sir, thank you. So, for the past two quarters, we have had another income of 22 crores, right? So, can you give the breakup of this other income, and what kind of other income can we see in H2FY27?

Speaker 10

So, other income includes all incomes which are not directly related to operations. We have an investment of around 110 crores, so the return of approximately 10 to 12% per annum is a part of it. If there are any asset sales during a quarter, any sales, any gain or loss which comes because of any revaluation, etc., those are all form part of the other income. They cannot go to operating income. Historically, we have seen that other incomes remain in the range of rupees 10 crores per quarter, and going forward, we anticipate that it will be of similar range.

Harshit Khadga, Analyst — RoboCapital

Right. Okay. And, sir, in the opening commentary, you mentioned that, you know, you will do 5,000 crores of top line with 600 crores of EBITDA. So, what was the timeline for that?

Speaker 10

So, let's understand, first of all, where this 5,000 crores comes from. We currently, in the current year, are anticipated to do somewhere around 4,300 to 4,400 crores in Shilafoam consolidated as it stands today. For Lanco, this year is anticipated to do around 500 to 600 crores. So, these combine together to go to 5000 crores. On the EBITDA side, if you see, we last year did around 400 odd crores. This time, maybe we'll do 50 to 100 crores of it more. 200 crores will be done by Perlanco. So, when we add it, it gives to a number of 600 plus crores. So, that is what we have said, that the current run rate will be post-Farlampo consolidation. All right, understood.

Harshit Khadga, Analyst — RoboCapital

And, sir, in SILA, we are doing like 11% EBITDA margins. So, can we see an uptick in the margins, let's say, for, you know, to 12% or 13% in the next two, three quarters?

Speaker 10

So, yes, that was what was anticipated. But currently, with the increase in raw material prices and the quantum of increase that has happened, I think we traded a little bit between the volume of business and the profitability that we can get out of it. We basically focused on absolute profitability that we can get. So the margins are compromised a little bit, whereas in the absolute terms, the profitability is retained. I hope that if the Middle East situation stabilizes and we see at least some level of normalized level of raw material prices, we would see double-digit level of EBITDA. Currently, it's not double-digit. It is consolidated level 9 to 10 percent, and if the situation comes to a situation similar to pre-February, I think somewhere around 12 percent would be a reasonable level of profitability that we should see, and this is without Ferlenco. If you add up Ferlenco, it will be 3 percentage points more.

Harshit Khadga, Analyst — RoboCapital

All right, sir. Understood. Thank you. All the best. Thank you.

Operator

Thank you. The next question comes from the line of Ravi Purohit from Securities Investment Management, Private Limited. Please go ahead.

Speaker 3

Yeah, hi. Thanks for taking my question. So, a couple of questions. One is, so how does this consolidation happen with Farlenko? What is our current stake in the company? And I think there are some convertibles also pending in that company, right? So, if you could just kind of help us understand a broader, you know, picture of how does this consolidation come about?

Speaker 10

So, for Lenko, we hold around 43% on a diluted basis in For Lenko. There are certain private equity investors also there. However, they have given up their special rights in the current quarter, It gives us an absolute control over the company, and that in itself gives us a right to consolidate or to treat it as our subsidiary. So that was done from 1st of October onwards. So consolidation you will see in the third quarter. It will be a line-by-line consolidation both for P&L and balance sheet, and in P&L, the minority interest will be reduced at the bottom. So both line and EBITDA will be added. On CCPS, so generally in startups, the equities are issued in the form of CCPS. So there are many CCPs earlier issuance when it was done maybe five years, seven years before, and to some extent to us as well, the equity was issued in the form of CCPS, but they are convertible into equity shares at any time at our discretion. So whenever we look at our assets, we look at a fully diluted basis. And that is 43% currently.

Speaker 3

Okay. But as things stand, today we own 35%. So the consolidation numbers will be proportionate to 35 and 65, right? It's only when these get converted will...

Speaker 10

So I'll explain that. Accounting perspective, you consolidate only on the basis of percentage of converted equity shares that you hold. As I mentioned that you also hold some CCPS, and other investors also hold some CCPS. So, from an accounting perspective, currently, we consolidated only 35%. That's how the standards finite. But in reality, on a fully diluted basis, our stake is 43%. Going forward, yes, on a line-by-line basis, 100% consolidation will be there.

Speaker 3

Okay. And below line, the remaining minority interest will get deductible, basically? Yes, yes. Okay, okay. And the second question is on, you know, the expenses which have gone up. I think, you know, R&D had mentioned that we had kind of gone ahead and spent money on market building and, you know, ad spend and promotions given the run up to the festive season. But if you could just share some insights on, you know, what are the areas where we've kind of, you know, spent these. And also, I see a significant bump up in the employee expenses. So, if you could just kind of share some thoughts on the significance. Because at the gross margin level, the gross margins have actually been, you know, held up quite well. So, you know, RM impacts the gross margin. But in this quarter, they don't seem to have been impacted that much. So, the impact on the EBITDA margin is actually between gross profit and the, you know, between employee expense and other expense. So, if you could just spend some time helping us understand the movement in employee expenses as well as the other expenses, that would be helpful.

Speaker 10

Yeah. So, I'll take other expenses first. So, in four quarters of the year, the level of investments that we make in advertising are different. In the first season, they were the highest. So, in the third quarter, you will see the highest level of advertising or marketing expenses, and this has been similar in the previous years as well. In the second quarter, it is higher than first quarter. So, we were anticipated to do a definite level of marketing expenses, but because of the current situation, we believe that it would be beneficial if we spend some on marketing and create a niche for our time. So, we have spent around 15 to 16 crore rupees additional on advertising in the current quarter, what we were anticipated to do. In other exercises, if you see, relative to similar quarter last year, we are higher by around 8 crore. And relative to first quarter, we are higher by 15 crore. So, the difference is mainly the impact of advertising cost. As far as manpower are concerned, manpower has two parts to it. One around 8 crores is because Australia and Spain are converted into Indian rupees, and you would see that both the top line as well as the port lines have gone up subsequent to the depreciation of the Indian rupee against the Euro and the Australian dollar. So around 8 crore impact is because of conversion from Euro and Australian dollars to Indian dollars. That's not an actual expense upward. And around 8-9% would be the impact of the yearly increments that are there. There is no other incremental manpar cost going up. So effectively, the thing that you see here, 112 to 132, 22 crore, 8 crore is only a difference in foreign exchange, and the expense has gone up by only 12 crore.

Speaker 3

There were some provisions that we had mentioned in one of the overseas subsidiaries.

Speaker 10

What are those provisions relating to? Yeah. So, one of our customers in Australia, which we have mentioned, AS Beard, went bankrupt, went into administration around six months back. That administration has been decided by the administrator, and we had to take a haircut of around 38% on the outstanding to them, which amounted in the Indian rupees to around 7 crore rupees. So, we had to provide those 7 crore rupees between the first and the second quarter.

Speaker 3

Okay, okay. So, right now, when you adjust for this 83 and 87 crores, essentially, the difference is this number.

Speaker 10

Sorry, can you please repeat?

Speaker 3

The operating EBITDA, which we have reported in our presentation, 83 and 87, the normalized is 87 and the reported is 83. This 4 crores is the difference of this, right?

Speaker 10

Yes, because this is a one-time expense and it won't re-ecker in the next quarter. So, we had given you both the numbers so that you can have an idea of sustainable level of profitability of the company.

Speaker 3

Right. The last question, generally, so, you know, I think over the last one year, we have, you know, maintained that we are looking to hit 13-14% Ibiza margins, right, maybe by next year. Now, does it look realistic? In fact, we had even at one call, I think, mentioned that we are looking at even 14% to 15% EBITDA margin size. So, does it look a reasonable number if things stabilize today that we should look at? Or do you think we will have to keep spending this on ad spend and marketing? And if you could just share some, you know, medium-term thoughts on, you know, how should we look at our margin path?

Speaker 10

Yeah, so let's understand the P&L a little bit. If you see my current gross margins are in the level of 38%, right? Historically, I have seen between 40% to 42%. And why this difference is still there? Because some of the institutional customers that you have, especially automotives and others, and also in the matrix segment, you can increase price to a definite level. So we started increasing price as we reached to a definite level, and now since it has gone up, we still recover the cost of raw materials. But recovering margins becomes a little bit challenge. And this being a temporary phenomenon, we also look at it from the perspective of stability of our customers. So, as soon as, I believe, as soon as this has receded or normalization comes in, in oil prices or the logistic prices across the globe and goods start moving freely, we should at least recover those margins. So, even if you add 2% to 3% to our current margins, you find that we are well here. We had mentioned before the start of the war or the last year, the margins that we have mentioned. Next year margins, as you mentioned, we had said, yes, we will do between 13% to 15%. Had it been a very normal situation, definitely we would have done that. We were on track to that. Now it depends how much the current situation prevails. If it prevails like this, I believe it's difficult to achieve, but if it normalizes it, we will try to achieve it. We will strive to achieve it, for sure. Okay, great.

Speaker 3

Thanks a lot and all the best. Thank you.

Operator

Thank you. A reminder to all the participants, please restrict yourself to two questions. The next question comes from the line of Ritesh Shah from Investec India. Please go ahead.

Ritesh Shah, Analyst — Investec India

Hi, sir. Thanks for the opportunity. I have several questions. Sir, first is, how should one appreciate the gross margin holding up on a sequential basis? That's the first question. I think you touched upon price elasticity to some extent when we recovered the raw mat increases, which essentially, if I could infer, it is that we tried to pass through everything on the raw mat side. But you did indicate that recovering margins is a challenge. So how are we looking at it, gross versus EBITDA or volume versus profitability? That's the first question.

Speaker 10

So, Vitesh, I think I will answer your first question first. We still have our unit economics designed in a manner that our gross margin should be 42% plus. Of course, that should improve as a percentage of B2C business in the overall business mix improves, which is our intent as well, and we have been making efforts towards that as well. However, and when post-February it started, we also tried to maintain that, but as I mentioned in the answer to the earlier question, that it's a trade-off. We can go on increasing prices, not taking care of the volume, and we can increase unlimited price and maintain our margins, but that will have a hit on the overall volume that will be there. So we always need to strike a balance between them. Had it been a permanent phenomenon, we would have pushed it and established that, but since it is a temporary phenomenon, it doesn't make sense to lose business for a short period of time and then lose the growth that we could have achieved on it. As far as elasticity is concerned, I think there is high level of elasticity, which we have tested in the current quarter. We never increase price to this extent. We were always cautious that any price increase would lead to a reaction in the market, and that might be detrimental to us. But this time, we rent all out and increase prices, rather not once, but multiple times, since raw material prices keep on increasing 10, 20 rupees every 15 days. And that experiment has been quite successful, and we believe this has also given us confidence to ramp up our margins and not think too much about losing businesses or things like that. This current situation is abnormal. 50% price increase in raw material becomes, to some extent, unaffordable also, especially on the part of the consumer. So I don't think, I think, yes, we have lost a little bit on margins. Maybe a 15% growth, we should have earned 15 to 20 crores of EBITDA more. But I believe when you do business, it's the right thing to pass off these temporary phenomena and then look to work from the base of strength and gather both the business volumes as well as profitability. As regards volumes are concerned, and we have seen it several times in the business. I still remember three years before we were growing in volumes by 10% to 15%, but raw material prices were continuously coming down because of which our top line was almost flat. So I think there is some level of relationship between the affordability of the customers and the volumes that remain in the business, and that reflects itself from time to time. If for a period of five years, I think you will look at it, you will find that two-thirds or three-fourths of the growth that would have come would have come from volumes, and one-third or one-fourth would be from value, which would be a normal scenario, I believe. But, yes, extreme situations will tilt it towards one side at one point of time and towards the other side at the other point of time.

Ritesh Shah, Analyst — Investec India

Thanks for the detailed answer. Just a follow-up over here, sir. Sir, will you provide volume growth for this E-PAL brand? So, we do indicate for e-com and U20. How much would be for, say, outside of e-com and U20?

Speaker 10

See, the way we look at it is a little bit different. Today, if you see the times, it is of omni-channel, where you generate the leads online and then you make the sales offline. You drive the customer to the online, offline stores to have actual touch and feel of the product, and on the online segment, they go and try to understand about the products, the different features, what benefits it will give, the different type of materials that you use, and what price levels he can expect for different products. Now, he may choose to buy it online, or he may go to an offline store and choose to buy it there. So I would say that we don't look at the growth in the two channels differently. Ultimately, it is a fleek sell of the Curlone brand that sells. And hence, we would suggest that we also look at it from the perspective of the overall brand and not through the channels from which it is sold.

Ritesh Shah, Analyst — Investec India

Let me ask you the question very directly. What I was trying to understand is how are we thinking on the volume backs Because for Sleepwell brand, Ecom, and U20, I think the underlying products are different. Given the underlying products are different, the TDI plus polyol cost for all the three buckets will be very different. And hence, the cost curve increase will be very different for all the three channels. So, just wanted to understand how the pricing strategy is to extract better volumes without compromising gross margins.

Rakesh Chahar, Other

So, Rikesh, I'll come in here. So, what has happened with the multiple price increases that our prices, there is a large size of market which is below a price point of 10,000 rupees. So, with these multiple price increases, we have gone above that and we are sitting somewhere 11,000 to 11,000, 12,000 plus. So we have recently adopted a technology wherein we'll be making a support layer which will go into the product, which we plan to position around less than 10,000 rupees with a margin similar to what we have in the mid-segment. So there will be no margin dilution while we will get the customer base at that price point. So that's the strategy for getting the volume back. So, we were also focusing on premiumization, that is one end of the activity that we are doing, and at the same time, also, the sub-10,000 price point market, which is, to my mind, even now, it is about almost 40% of the market is lined in.

Ritesh Shah, Analyst — Investec India

Sir, just a follow-up last one. Sorry for interrupting, Mr. Shah.

Operator

Please rejoin the queue for more questions.

Speaker 11

Thank you.

Operator

Thank you. The next question comes from the line of Dixie Jain from Ingrid Research. Please go ahead.

Dixie Jain, Analyst — Ingrid Research

Hi, thank you for taking the question. My first question is regarding the festive sales. So, as last year Navratri were in Q2 and this year it came in Q3, so what has the response been so far, Hash? Have you been able to see a volume uptick in the festive season days that have gone by? This is the first question.

Speaker 10

So, Dixie, I don't think we can comment on the current quarter on this call. We can only comment on the last quarter.

Rakesh Chahar, Other

But the market has definitely picked up overall. I mean, what we saw in September, the October definitely, and the going forward, the marriage season,

Dixie Jain, Analyst — Ingrid Research

The second question was regarding the volumes of U2. So, this particular quarter, we did not see a very good growth in the U2 segment, even though the base for U2 in itself is very low. So, going forward, have we increased the touch points in Q2 as well? What is the plan going forward to keep up the volume momentum for this segment?

Rakesh Chahar, Other

So, two points there. One is that, as I said, the U2O also had price increases. So, we did vacate some sweet spots, which were at the price range of about 8,000, 9,000. So, that is one. And as a response, what we have done is to increase the distribution depth. So that is one. And second, we are also introducing a product with a new technology, which will keep our margins intact. And we again cover the price point, which we indicated. So these two actions should bring the volume growth back for you too.

Dixie Jain, Analyst — Ingrid Research

How much is the total price increase we've taken in the last one and a half years?

Speaker 10

So, since the advent of the Middle East War, we have taken around 35-40% price increase in home and around 25% in midriff.

Dixie Jain, Analyst — Ingrid Research

Okay. Thank you for taking the question.

Speaker 10

Thank you.

Operator

Thank you. A reminder to all the participants, please restrict yourself to two questions. The next question comes from the line of Rahul Agarwal from Ikigai Asset. Please go ahead.

Rahul Agarwal, Analyst — Ikigai Asset

Yeah, hi. Good evening. Thank you so much. I also had multiple questions, but I rested it for you. So, firstly, just on the festival shift, how should we look at mattress volume growth for second half? You know, first half has been flat, YOY. Second half, should we look at double digits? Any sense, any outlook can you give us?

Speaker 10

So, hi, Rahul. So, this all, Rahul, will depend on how it pans out. If it remains like this, if you see more disruptions in the Middle East and further increases in raw material prices, I think the strategy will continue to remain to protect profitability or the margins, which may have some impact on the volume. But if it remains flat or maybe starts softening, yes, what you are saying should be, should be a reality.

Rahul Agarwal, Analyst — Ikigai Asset

Okay. Secondly, when I look at next year, you know, fiscal 28, if things go back to normal, what happens is volumes will pick up, pricing will go down, and then revenue growth goes down to single digits. Is that correct understanding or how do you look at the business for next year?

Speaker 10

So, interesting, Rahul. I think the current 15% to 18% top-line growth that we see is because mainly of the price increases. So, if prices go back to the same level, which I don't believe would happen yet, prices will go down, but they will stabilize somewhere between the current levels and the levels pre-February. And if that happens, you are right, some portion of the growth that has come in will be eroded. And some portion of growth will come from increase in volumes or the incremental efforts that we will make. The intent will still remain that we should have a 15% growth on a CAGR basis, on a year-to-year basis. And we feel that all the initiatives that we have done should be sufficient enough to give us 15% growth, irrespective of the environment. So if the environment loses, it will be volume growth more. If the environment doesn't lose, then it will be valued.

Rahul Agarwal, Analyst — Ikigai Asset

Got it, sir. And lastly, on the minority interest, what is the percentage of minority interest we should assume to deduct after we 100% consolidate on 9 by 9?

Speaker 10

So, it will depend on what the equity conversion, somewhere between 35 to 43 will be ours. So, 100 minus 35 or 43, whatever is ours, will be the minority interest that will be reduced in other comprehensive income, not some kind.

Rahul Agarwal, Analyst — Ikigai Asset

Right. I just wanted to confirm that. How much should we take as minority interest right now from an accounting standpoint?

Operator

Please rejoin the queue for more questions.

Rahul Agarwal, Analyst — Ikigai Asset

It's just a follow-up. I'm not asking any questions.

Speaker 10

No, no, please. I'll answer your question. So, suppose the equity conversion at that time is 40%, that is, we hold 40% of the converted equity share. The minority percentage will be 60% of fat of Forlenco. Does that answer your question?

Rahul Agarwal, Analyst — Ikigai Asset

Yeah, that's fine. That's fine. Thank you so much and wish everybody a festive greetings to everybody.

Operator

Thank you. A reminder to all the participants, please restrict yourself to two questions. The next question comes to the line of Keshavgarh from Countercyclical PMS. Please go ahead. Sir, my first question is on Forlenco.

Keshavgarh, Analyst — Counter-Cyclical PMS

Sir, I wanted to understand the business model. Is the understanding correct that Furlanco first manufactures the furniture and then capitalizes it on its books and then rents the furniture? Is that understanding correct?

Speaker 10

Yeah, so earlier, I think five years back, they used to take assets on lease and then rent it out. But now, since their capital position is quite good, they buy the assets, book it as fixed assets in their books, and then rent it out.

Keshavgarh, Analyst — Counter-Cyclical PMS

So, in which case, EBITDA is pretty meaningless because finance cost is the main cost in a rental business. So, I mean, and secondly, by consolidating Ferlenco, in which we hold in the best case between 35% and 43%, why not just take our share of interest in associate? And even though we are controlling it, we can just add our share of profits rather than full consolidation, which will just distort the picture for the whole entity, in my humble opinion.

Speaker 10

Thank you, Keshav, for your opinion.

Keshavgarh, Analyst — Counter-Cyclical PMS

Sir, now, secondly, out of 600 crore EBITDA for this year, what is the contribution from Perlenco that is expected?

Speaker 10

So, as I mentioned earlier, also to reply to one of the questions, the 600 crore is our under pro forma basis, so 200 crore is Perlenco, and 400 to 450 crore will be ours, the existing seal of our consolidated.

Keshavgarh, Analyst — Counter-Cyclical PMS

Understood, sir. Sir, so out of this 450 crore, around 50 crore is the debt?

Operator

Please rejoin the queue for more questions. Thank you. A reminder to all the participants, please restrict yourself to two questions. The next question comes from the line of Shantanu Basu from SMIFS. Please go ahead.

Speaker 11

Hi, good afternoon. Thank you for the opportunity. Most of my questions have been answered, barring one. So, that is with respect to the debt outlook. So, what would be the debt outlook for the company FY27 and how much do you expect to pay up? And what would be the closing debt figure for FY27 and beyond FY28 as well?

Speaker 10

Yeah, so Shantanu, that I will explain in two parts. One is at the current Shilafoam consolidated level, we have around 600 crores of net debt as on day. By the end of the year, we expect it to be somewhere between 500 to 550, and this I am referring to consolidated debt. But since Perlenco will be consolidated, Perlenco will have a net debt of 250 crores. So it will be somewhere around 800 crores on any beta of 600 crores.

Speaker 11

Okay. Okay. And FY28 onwards, how much do you expect to pay?

Speaker 10

So from our existing Sheelapom consolidated, whatever fee cash flow is generated, which would be somewhere between 150 to 200 outcrores, that will be used to reduce debt. So, Perlenko, of course, uses up whatever cash it draws because it is anticipated to grow at more than 30%. So, there would be no reduction in net that there may be a 50 crore reduction or so. So, you will still find maybe a 200 crore per annum reduction you can take. Okay. Thank you. Thank you.

Operator

Thank you. The next question comes from the line of Resham Jain from VVD Asset Managers. Please go ahead.

Resham Jain, Analyst — VVD Asset Managers

Yeah, hi. Good evening. So, I have one question on the overall investment in Ferdinand and the value creation through that. Rahul Sajid mentioned initially that there is one other listed company in the similar space. So, how would you unlock value for shareholders through Farlenko, given that it is going to be 43% subsidiary and there will be a lot of minority interest in that company? So, is there any timeline which you are thinking about VC?

Speaker 10

So, I think, thank you, Resham. The very first task that we had in hand was to turn around Farlenko. So, listing is also maybe proposed for the next year, but that is also a consequence of the private equity holders that are there, and they have a right to go public to have an exit route. Otherwise, listing was also not needed. So, I understand where you are coming from as to how the value that has been created in Perlanko will ultimately be benefiting the investors. This is a little bit complex topic. We have started thinking on it, and maybe in some time, we will be able to tell you as to how we anticipate to give it. To be honest enough, till now, we were only focused on creating value in the company.

Resham Jain, Analyst — VVD Asset Managers

Okay, right. The second part is, again, related to Carlenco, but the strategies which you can get in the core Shilafoam and Cargon business in terms of furniture, because I did saw in your press release that you are looking to enter the furniture business within the core brand business as well. If you can explain what will be the strategy around that, that would also be helpful.

Speaker 10

For sure, for sure, Risham. So, with Perlanko coming to our goal, we have a unique advantage. Though they are a furniture rental company, but they still have the entire value chain for furniture designing, furniture manufacturing, logistics control for the suppliers, and handling consumers in that particular segment. Farlenko also makes some part of its furniture, but most part of its furniture is outsourced. They get it manufactured on an outsourced basis. With Farlenko being there, we are now using them as our back-end. They will design furniture for us. Of course, there is a full marketing and sales team here in Sheila Foam, which will coordinate with them and do the marketing and sales for those products. But as far as manufacturing and designing is concerned, manufacturing is concerned, and logistics support is concerned, that will be entirely given by Furlanco. This will be beneficial for both the companies. We will not need to invest a lot of capex for starting this business, and we will have unlimited potential to grow in case the market supports us. And at the same time, it will be a good opportunity to Furlanco to make some extra money on the sales that they will be doing for us. So that's a modus that we have adopted, and we have already launched Leepel and Curlon beds and recliners in the online segment, and very soon it is going to be available in some of our stores, which we will gradually expand.

Resham Jain, Analyst — VVD Asset Managers

And that's it. Thank you, and all the best.

Speaker 10

Thank you, Rishan.

Operator

Thank you. The next question comes from the line of Deekshan Gupta from GeoJet PMS. Please go ahead.

Speaker 10

Hi. Am I audible? Yes, yes. Please go ahead.

Speaker 3

Yeah. So, I just, my question is on Furlanco. So, I just want to know, like, could you disclose some economics, like, whenever you take a furniture, So, what is generally the payback period for that furniture, and, like, what is the kind of IRR that you generate on it?

Speaker 10

So, I can tell you that for the company, the return on their assets, return on capital employed is around 25% currently. But as far as payback or IRR is concerned, you understand that this is a competition-sensitive industry, and those type of KPIs cannot be disclosed.

Speaker 3

Okay, and are this Ferlenco manufacturers' own furniture also, or is it just like buying most of it from outside?

Speaker 10

Sorry, please repeat your question.

Speaker 3

I was asking that, does Ferlenco

Keshavgarh, Analyst — Counter-Cyclical PMS

make its own furniture, or does it buy most of it from other players?

Speaker 10

They make around 20 to 30 percent of their furniture, and the rest they outsource. They, in the past two, three years, if you see, the major investments that they have done is on rentable furniture because capital was limited and we were the only suppliers of capital to them. Of course, going forward, they would improve this ratio and maybe some percentage of manufacturing comes in-house. But yes, outsourcing will remain there and that will remain a major portion of their manufacturing capability. Yes, but you have to strike a balance because manufacturing facilities will need a lot of capex, and on outsourcing basis, it is also good economics. It's rather, if you calculate the cost of capital and the depreciation that occurs, I think outsourcing, if you do it on a volume, with volume, it's more efficient. And secondly, you are also working in an industry which may see it's good times or the bad times. So you don't want yourself to be flooded with a lot of capacities which might lie vacant in a bad period.

Speaker 3

Understood. Thank you so much.

Speaker 10

Thank you.

Operator

Thank you. The next question comes from the line of Rishi Modi from Modi Advisory. Please go ahead.