Sheela Foam FY26: Margin rebound, distribution push, and a sharper cash focus

Sheela Foam closed FY26 with a clear improvement in profitability, helped by stronger execution in its India business and better margins at international subsidiaries. For FY26, consolidated revenue from operations rose 11% year-on-year to INR 3,821 crore. Core EBITDA increased 46% to INR 414 crore, taking the core EBITDA margin to 10.8% from 8.2% in FY25. Consolidated PAT came in at INR 161 crore, and management highlighted consolidated cash EPS of INR 35.2 along with net debt reduction of INR 156 crore during the year.

Q4 was particularly strong. Consolidated revenue from operations grew 24% year-on-year to INR 1,050 crore. Core EBITDA rose to INR 121 crore with a margin of 11.5%, versus 7.5% in Q4 FY25. PAT for the quarter was INR 92 crore. On the standalone side, Q4 revenue from operations was INR 819 crore, with core EBITDA of INR 94 crore and a core EBITDA margin of 11.5%.

Management positioned FY26 as a year when the Kurlon integration started contributing meaningfully. The company also called out operating milestones such as highest ever annual foam production and highest ever EBITDA. At the same time, leadership acknowledged the uncertainty around the Middle East and its potential impact on raw material availability and supply chains, particularly for polyol and TDI.

India business: mattresses steady, foam accelerates

Operationally, mattresses remained a steady growth driver. Standalone mattress volumes increased 12% in FY26 and 13% in Q4. Value growth in mattresses was 10% for FY26 and 13% in Q4. The company indicated that Kurlon volumes grew 14% in FY26 while Sleepwell volumes grew 10%.

Foam growth was sharper, especially in Q4. Standalone foam volumes increased 18% in FY26 and 34% in Q4, with value growth of 14% for the year and 36% for Q4. Within foam, technical foam volumes rose 19% in FY26 and comfort foam volumes rose 21%. Management linked the Q4 spike partly to customer gains and to demand shifting toward larger, more reliable suppliers during periods of volatility.

On a standalone segment value basis, the presentation provided a clear split for FY26. Mattress revenue was INR 1,497 crore and foam revenue was INR 1,352 crore, with others at INR 114 crore.

Distribution and channels: showrooms, U2O, and e-commerce

A large part of the growth narrative rests on reach expansion and multi-channel execution. The company reported adding about 600 net new showrooms during FY26. It also pointed to continued expansion of Kurlon showrooms in Northern India.

The unorganized-to-organized initiative, described as U2O, expanded to 8,400 plus dealers across more than 5,000 towns in 24 plus states. Management reported that U2O delivered 65% volume growth and 111% value growth in FY26. On the concall, leadership attributed the gap between value and volume growth to the introduction of a higher-priced model and to price increases across models.

E-commerce continued to scale, led by strong growth on the company’s own websites. FY26 brand.com sales growth was stated at 136% year-on-year and platform sales growth at 39%. Management attributed this to a tighter digital strategy, a sharper online portfolio, and better alignment between product pricing and fulfilment. The company also highlighted the MyMattress proposition as part of its online-led initiatives.

International subsidiaries: margin improvement, with optionality on ownership

International operations showed meaningful profitability improvement in FY26.

In Australia, Joyce reported FY26 revenue of INR 422 crore and EBITDA margin of 10.0%, improving from 6.3% in FY25. Management attributed the margin gains to yield improvement programs, renegotiation of prices with key customers, and supply chain restructuring.

In Spain, Interplasp reported FY26 revenue of INR 391 crore and EBITDA margin of 10.4%, up from 8.4% in FY25.

The company also reiterated that exploring a sale of international businesses is not fully off the table. Management stated that it will pursue the opportunity and wait for the right party at the right time, while continuing to run the businesses as required.

Cash metrics, dividend, and FY27 planning

Sheela Foam emphasized cash-based return metrics such as cash ROCE and cash ROE. For FY26, consolidated cash ROCE was presented at 18% and consolidated cash ROE at 12%. The company also highlighted the difference between reported and cash metrics, largely because goodwill and brand intangibles are significant after acquisitions.

A notable milestone for shareholders was the recommendation of a 20% final dividend for FY26, which management described as the first time the company has recommended a dividend.

For FY27, management shared several operating and financial planning points on the call:

Capex was guided at INR 125 crore to INR 150 crore for the year, including maintenance capex, store-opening capex, and debottlenecking projects across India, Australia, and Spain. Consolidated depreciation for FY27 was indicated at around INR 140 crore to INR 145 crore on the current asset base. Consolidated finance cost was indicated at around INR 50 crore unless the capital structure changes.

Management also spoke about raw material volatility, noting that polyol and TDI prices have become harder to predict and can swing sharply. On the concall, management cited TDI around INR 275 and polyol around INR 180 at the time, and explained that pass-through typically takes 10 to 15 days, which broadly maps to inventory cycles.

Takeaways

FY26 strengthened Sheela Foam’s investment case on a few visible dimensions. Profitability rebounded sharply, distribution and digital initiatives continued to expand, and international subsidiaries delivered better margins. The company also demonstrated balance sheet discipline through debt reduction and moved to shareholder payouts with a first-ever dividend recommendation.

The key variable to watch into FY27 is raw material volatility and how smoothly pricing actions flow through, particularly in B2B categories. Against that backdrop, management’s focus on growth, channel expansion, and operating discipline will likely determine whether the company sustains the 11% to 12% core EBITDA margin zone highlighted in the call.