Sheela Foam Limited (NSE: SFL) Q1 2026 Earnings Call dated Aug. 06, 2025
Corporate Participants:
Unidentified Speaker
Rahul Gautam — Executive Chairman
Amit Kumar Gupta — Chief Financial Officer
Rakesh Chahar — Director – Sales and Marketing
Analysts:
Unidentified Participant
Rachna — Analyst
Ritesh Shah — Analyst
Nikhil — Analyst
Aishwarya — Analyst
Presentation:
operator
Ladies and gentlemen, good day and welcome to the Sheila Foam Limited Q1 FY26 earnings conference call hosted by Arihan Capital Markets Limited. 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 touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Ms. Deepali Kumari. Thank you. And over to you, ma’.
Unidentified Speaker
Am. Thank you. Hello and good afternoon to everyone. On behalf of ariane Capital Markets Ltd. I thank you all for joining the QS FY26 earnings conference call of Turkish. From the management we have Executive Chairman Mr. Rahul Gautam. Managing Director Mr. Tutar Gautam. Deputy Managing Director Mr. Rakesh Chahar. Group CFO Mr. Amit Kumar Gustav. So without any further delay I would like to hand over the call to Rahul sir for their opening remarks. Thank you. And over to you sir.
Rahul Gautam — Executive Chairman
Thank you Deepali and thank you Aryan for hosting this call. Good afternoon ladies and gentlemen. As is our practice, we begin with our vision statement. So I’m going to start with the recitation of that. Our vision. We will continue to be recognized as a leading organization in quality comfort products while practicing values of integrity, reliability, proactivity and transparency to do business with a smile for customer delight and a commitment to society. Thank you very much at the outset. Let me thank you all for attending this conference call to discuss our operational and financial results for Q1FY26.
I do hope you have gone through our results and the earnings presentations which have been uploaded by the exchanges. Q1 FY26 saw a robust growth across all the relevant parameters. Let me begin by the operations. Our Mattress volumes in Q1FY26 grew by 10% year on year. While Sleepwell registered a growth of 22%. Curlon registered a growth of 6%. This should have been more. It’s an accounting issue based on the integration process that we have been going through. This growth was possible due to steps initiated for integration of Kernon. Both Kernon and Sleeper supported each other in their respective strongholds.
There was renewed focus on all the segments and support given by our channel partners. Let me give you some updates on our business and the initiatives taken which will pave the way for deeper penetration across Indian markets resulting in a sustained growth. First, the B2C business, Kerlon has a strong brand recall among the consumers and the strategy is to harness this by deeper penetration into Northern and Western markets apart from increasing presence in its existing strong areas which are both south and east. To further capitalize on the brand strength of Kernon and Sleepwell, we intend to open about 1,000 new showrooms in the current fiscal year.
And let me share with you that in Q1 FY26 we have already signed up for 392 new showrooms out of which 234 are already operationalized. Majority of these showrooms were Kerlon in North and west part of India. With this today we have a strong network of almost 6,000 exclusive brand outlets and more than 20,000 touch points. Number two distributors and dealers are our preferred partners in distribution. Distributors and dealers help in developing strong bonding and enable us to create a feedback on customer preferences and expectations. This helps our research oblique production and marketing teams to customize and develop and position products as per customer preferences.
We will continue to focus on customer delight as a part of this continuous engagement. In Q1FY26 we organized a distributors meet in Delhi and facilitated 33 dealer meets at 11 different locations across India. The interactions enabled channel partners to gain clarity on various benefits and the incentives they would derive out of the various schemes. This helps in further strengthening our channel relationships. Coming to New Products to address the rising consumer demand in the sub 10,000 rupees category whose market is estimated at around 12,500 crores, we have launched new mattress models for both Sleepwell and Curlon.
Our new products have been well received by the consumers and are in the process of being established. Tarang and Aram Mattresses for our small town initiatives, both Slipwal Taran and Karlon Aram are being aggressively marketed and now have presence across 7,000 plus dealers in 4,500 towns. This segment is showing positive results as demonstrated by a volume growth of around 60% year on year thereby achieving an annual run rate of INR 80 crores per annum. We are confident of achieving revenues of 100 plus crores from this value driven initiative in the current fiscal year. E Commerce Business E Commerce continues to be another strong growth oriented value driver segment.
It registered a value growth of 66% year on year on marketplaces and on our own websites. This segment generated a revenue of rupees 200 crores in FY25 and we expect 50% value growth through this channel in FY26. We also have some operations in Dubai and I want to take that up with a lot of Indian diaspora in Dubai. Both Sleepwell and Kurlon brand enjoy strong salience in the region which has encouraged us to establish a strong presence in the Middle east in a cost effective manner. What we started as a small franchise outlet is now growing faster.
We sell our brand mattresses through online and franchise network enabling us to have a strong foothold. Today we have six exclusive brand outlets and seven multi brand outlets. B2B business this includes the three categories under which we sell Foam, Furniture, Cushioning, Technical applications and comfort foam. In QY FY26 we have seen high single digit growth in terms of volume in these segments. Value Growth Conversations Conversions Sorry, value growth conversions were little subdued primarily because of reduction in raw material prices. Deeper penetration continues in comfort foam with onboard of new dealers and distributors in unrepresented areas due to continuous focus on developing newer products.
The company’s dominant position continues in technical form, applications and industries like Automotive, Footwear, Aviation, etc. Supply chain efficiencies because of various cost optimization initiatives like network redesign, truck upsizing, better fill rates and geographical realignment of units and distribution points, we are able to improve our logistic costs despite inflationary pressures on account of increase in tolls, insurance premiums, fuel, CNG costs, et cetera. Post kernogan on acquisition we could reduce logistics costs by more than a percent of sales due to these and other initiatives. Let me now go to the Curlon integration process. We had undertaken a huge exercise post Furlon acquisition to integrate the company with our existing operations.
While it has taken around 18 months, the results have been very satisfying. Number one optimized the channel network which is now a combination of both exclusive brand outlets and multi brand outlets, retaining the strength of each channel type wherever they were existing. This further enhanced the network of each brand across territories of the other relying on existing relationships. Example Expansion of Curlon in the north and west relying on our existing EBO relationships that sleep well enjoyed. Number two Optimizing the operating facilities of both the companies resulting in reduction of facilities from total number of facilities from 21 to 12.
Number three efficiencies in purchase of input materials. The combined volumes helped us to become a more dominant purchaser leading to lower purchase prices. Also, with enhanced volumes it became imperative to experiment and innovate with new ideas of cost reduction which have led to huge cost benefits. Number four Improvement in logistics cost as mentioned above. Number five Improvement in overhead costs as the entire business of the company is managed by one harmonized team instead of two separate ones. The benefits of the same are now reflected in our results both at gross margin levels and at The EBITDA margin level.
Now I turn to Ferlenko. That’s a company that we have invested in and is doing well. Furlenko has shown tremendous growth. More than 40,000 new customers got onboarded resulting in a 60% increase in subscriber base. Parlenko now operates in 29 cities across India. Another key milestone is that for Lenko registered four crore rupees as pat achieved in the quarter first of this year which is more than the full year profitability achieved in fiscal 25. This is mainly due to the operating leverage the company is enjoying with greater volumes. The company is on its growth trajectory to further capitalize on consumer demand.
For Lengo, we’ll raise around 100 to 125 crores of equity which would fuel the expansion and would lead the road to levels of 500 to 550 crores of revenue by FY27. To conclude, I would also like to highlight the noble work of ESG that we have been doing. Out of the 17 Sustainable Development Goals which the United nations has declared, we have adopted four goals as part of our next five year strategy. These goals are number one, Good health and well being, number two, Gender equality, number three, affordable and clean energy and fourth, responsible production and consumption for us.
Protecting the environment, uplifting the social status of the community around us and streamlining our corporate practices will continue to be focus areas in the future. I am sure a strong operational and financial performance combined with our commitment to adopt and implement a robust ESG framework will go a long value in creating will go a long time in creating immense value to all the shareholders. All the above have now set the stage for a next level of growth of Shilaform which has already started showing results in the Q1 FY26 that we have just presented. Now Mr.
Amit Gupta, our group CFO will take us through the results which have been posted. Thank you. Over to Amit.
Amit Kumar Gupta — Chief Financial Officer
Thank you sir. Thank you sir for updating on our business and the way forward. First of all, the financials coming to Q1 financial year 26 results. The key highlights are as follows. India Business constituting of Deep Sell, Curlon and Stacco we reported revenues of INR 644 crores against 612 crores in the corresponding quarter last year which is a growth of 5%. FIOI Core EBITDA is stood at 75 crores against 51 crores in Q1 Financial Year 25 thereby registering a growth of 47%. Core EBITDA margins also stood at 11.7% against 8.4% for the corresponding quarter last year. The growth is on the back of 10% volume growth and both of our premium brands continue to deepen their footprint amongst consumers.
Therefore, EBITDA does not include the forex loss of 10 crore on the hedge we had taken which adversely affected our performance this year. On a consolidated basis for the first quarter we reported revenue of 821 crores against 810 crores for the corresponding quarter last year a growth of 1%. Yu y core EBITDA for the quarter stood at 85 crores against 60 crores for the corresponding quarter a growth of 43%. EBITDA margins were reported at 10.4% against 7.4%. Net profit stood at 7 crores. This difference is primarily in account of claims of 31 crores which were received in quarter one financial year 25 last year the various cost initiatives taken by us for integrating Curlon into our business and increasing efficiencies of both DPEL and Curlon combined are yielding positive results which is reflected in our gross margins which now stands at 43.5% which is almost 400 to 400 basis points above the pre acquisition level.
Curlon integration which has started 18 months ago has finally culminated in higher core EBITDA and EBITDA margins to substantiate in financial year 23. Carlon standalone EBITDA margin was at 6.7% whereas Sheila Foam standalone was at 9.2%. The combined business growth now are improved to 11.1% for these two entities. This was possible because of the various initiatives we had taken as enumerated already enumerated by Ravati. This has resulted into a savings of 190 crores and improvement of core EBITDA margin. We are hopeful that the balance savings of 60 crores would also be realized by the end of financial year 26.
The further improvement in profitability will primarily come from the growth of top line and we are pretty hopeful on this with the festive season coming in. Raw material prices dropped from 196 rupees per kg for TDI between Q4 and Q1 and polyol prices from 117 rupees to 110 rupees per kg for the similar period this has resulted into lower top line growth of our foam segment as these prices are directly passed on to them. If we compare them on an equal input raw material price we will see that even the top line for these categories have increased by approximately 8 to 9%.
To conclude we will continue to focus on cost optimization for further improving our profit margins. With this, I will request the moderator to open the floor for questionnaire.
Questions and Answers:
operator
Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star n1 on their touchtone telephone. If you wish to remove yourself from the question queue, you may press star and two 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 take the first question from the line of Rachna from simcl. Please proceed.
Rachna
Hello? Am I audible? Hello?
Rahul Gautam
Hello? Can you just speak a little louder please?
Rachna
Yes sir. I wanted to know about our matrix realization because we have declined on Y and Y&Q1Q basis despite us taking price hikes of around 3 to 5% around the early fourth quarter 25 across both banks. So what led to this decline in mattress realizations?
Rahul Gautam
Okay, thank you. Thank you. Rasa, Amit, would you take a question?
Amit Kumar Gupta
So if you see we are growing faster on the online segment and the small town initiated segment, the price levels of which are lower than the price levels of the mainline segment on our stores, what we sell, I can tell you that we have not reduced prices of any of our categories. It is only the branded average selling price which is coming out is lower. Because of these two reasons.
Rachna
Okay. And I wanted to know more about the Karang and Aram brand, how they have contributed to the mattress revenue overall in Q1 FY26 and where? And from a long term perspective, where do you see the share of these Karang and Aram brands brands settling at?
Amit Kumar Gupta
So in first quarter we have achieved a run rate of 80 crore rupees per annum. So around 17 to 18 or crore is what we sold for in the first quarter for Tarang going forward this year we have a target that we should reach close this year at 100 crores. The run rate of course by the end of the year will be higher. If you ask me, what is the potential of this? With the quantum of network and the area rural areas in India, which is around 65% of the market being contributed by traditional mattresses, I can say that the potential is infinite.
We will continue to penetrate into these areas and grow on a year on year basis.
Rachna
Okay. And following up to that, if you know the market is large for Tarang and Aram brands, do you think this might dent profitability in the long term overall?
Amit Kumar Gupta
Yeah, I’m coming to that. So I can tell you that this will not impact Profitability Sarang and Aram Kara currently enjoys the same or better level of EBITDA margins than our other products. On an average combined, yes it will be lower than the mainline segment. But if you consider it as overall for Sheila Foam it is well into the profitability range. So we don’t foresee any reduction in profitability. In addition, Tarang and Aram are made at our Jabalpur facilities which has a variable pressure booming machine which makes home at 10 to 15% lower cost. So this is sufficiently compensating for any depletion in profit.
Because we sell in a low price. Market.
Rachna
Lies on the Indian market to the industry tail room.
operator
Sorry to interrupt. Ms. Rachna, your voice is breaking. Ma’. Am. Actually could you fix that?
Rachna
Yes. Hello. Hello. Hello.
Rahul Gautam
Much better please.
Rachna
Thank you so much. Sorry for intervening. My second question was our long term ambition was to capitalize on the Indian market due to the industry trade events and such capitalized on this opportunity. Now given that and I wanted to know more on the export side and as we are expanding in Dubai, are there any plans to scale down operations in Australia and Spain and shift focus towards B2C business in exports as well?
Rakesh Chahar
So. So we are as a GCC country, Dubai and the GCC countries we have start, we have made a beginning. The initial response is very encouraging and we are piloting few formats of retail. Once we get our learning from there then there’s a plan to scale up an entire gcc. So maybe a couple of months down the line we should have a better visibility of the potential that we’ll be able to realize in these countries.
Rachna
Okay.
Rahul Gautam
Yes, go ahead Rachna.
Rachna
And with respect to Australia and Spain, if you could highlight are there any plans to scale down operations?
Rahul Gautam
So listen, our focus is for the last couple of years has been on the B2C business and the India business. And the potential also lies here. So there is no plans to scale down the businesses there. But just as a natural outcome of our focus, the percentage contribution of Spain and Australia to our overall kitty is a reducing number. Australia is a matured market. We all know that. The growths are limited however profitable but limited. Spain continues to grow but the growth rates will always be similar or at best a little lower than that of India.
And India being a large base and a large size, it will continue to grow much faster. So there is no intention but at the same time it will automatically emerge like that.
Rachna
One last question. In our annual report we have talked about the rural focus model. If you could please explain how Is the distribution rooted within this model or what are the levels of distribution and how this model differs from dealer distribution in.
Rahul Gautam
Again, had a period of voice which is not coming through clearly. So you will have to repeat that question.
Rachna
Okay. No. Yes. Am I audible now?
Rahul Gautam
Yes. Yes.
Rachna
Hello? Yes. In our annual report we had talked about the rural focus model. If you could explain how the distribution is rooted within this model or what are the levels of hierarchy in this distribution and how this model first from dealer led distribution in urban market and can this model generate some incremental margins? Also, is this a part of small town initiatives within which Karang and RM mattress products are more focused or some of our legacy SKUs are also distributed through this model?
Rahul Gautam
So for rural distribution we are trying to develop a new distribution with the distributor and the aim there is to for a deeper penetration and also cater to the smaller outlets which is furniture furnishing, handloom outlets. So this same model we’ll also be using for the urban where there are small. Small outlets which sell furniture. Along with furniture they sell mattress. So this distribution is independent of the mainline distribution which is used for errand and kernel network.
Rachna
Okay. This is more like a direct distribution if I understand it correctly.
Rahul Gautam
So it is. It is. It is through the distributor, but independent distributor which is. Which is away from the mainline distributor. So this is another line of distribution that we are creating to avoid any kind of cannibalization.
Rachna
Okay, thank you and sorry for the intervene.
Rahul Gautam
No, thank you. Thank you very much.
operator
Thank you. Before I proceed with the next question, I would like to remind participants that Please restrict your question to two per participant in order to ensure that the management is able to address questions from all participants. The next question is from the line of Ritesh Shah from Investec. Please proceed.
Ritesh Shah
Hi sir. Thanks for the opportunity, sir. I have five questions. I’ll try my luck, sir. First is. Sir, competition is raising money, multiple players. How are we looking to prioritize or balance growth versus profitability? Specifically, you did indicate about the E Com revenue and the target growth for next year as well. If you could please help us understand this better. That’s the first question.
Rahul Gautam
So if I get your question right, you’re saying that how do you balance growth and profitability?
Ritesh Shah
Yes, sir. I mean, yes sir.
Rahul Gautam
Which is profitable growth, you know, that’s what you try to do. Competition is raising money, you said. And at present assume that you are talking because the competition is doing lot of activities, et cetera and we must compliment them. Whatever they are doing is to grow the market. My Belief is that there is enough at the moment. There is enough market which is available and we can, in spite of whatever activities that are happening. I think that’s doing well for this segment for, for us to continue with spreading our distribution with our retail showroom. And the growth will happen with profitability at the moment.
We don’t need to do anything bizarre out of it. I mean just standard business practices will get you that.
Ritesh Shah
Okay, so let me put it the other way. E. Com said you indicated we did around 200 crores last year and you indicated 50% growth. So can this number be higher or is it like given the margin profile, probably is lower. That is where we are comfortable, say at 50%.
Rahul Gautam
No, I don’t think that we are satisfied. But whether we are comfortable or not, I presume we are. A growth rate of Anything upwards of 50% also requires many other things to be fulfilled. There is the logistics side, there is the sizes part of it. There is satisfaction of the systems that both the marketplaces are wanting to do and everything to sort of tick before we can sort of say that a sale has been consummated or closed. Therefore, I think if we try and go beyond 50% or 60% it will not be a sustainable growth.
It will go through the hiccups, it will go through the little ups and downs because one thing or the other would start becoming a constraint. You need 25,000 things for a sale to happen. So I think that this kind, we are able to sustain this and we keep growing. It’s also in quick time, in about two to three years time that you would have a large number that would be there and you would be, you are growing higher than the market size than the market is growing. I mean the markets would be growing at 25%.
And if you’re going at 50%, I would say are we satisfied? No. But comfortable?
Ritesh Shah
Yes. Sir. That’s helpful. Sir. My second question is probably Rakeshji. So we have indicated we look to open around thousand new showrooms. I couldn’t comprehend the answer which you gave to the prior question. So why is this number so high of thousands? And if one had to look at in context of the existing network that we have, which is very, very wide. If one had to look at the effectiveness of the current network versus what we intend to do with thousand new showrooms, how do you put these two pieces together?
Rakesh Chahar
So. Ritesh, this number has come out from a study of the micro market and the gaps therein. The number is looking higher because this, from this year onwards we have taken Carlon expansion as a main driver to grow sales of Carlon in both north and west where it is relatively weak. So in the previous year it was only Sleep well and there was an organic expansion that used to happen once or twice. It used to be higher. But this is being driven more from our Karlon side and even for Sleepville. I mean as the markets also keep evolving.
So we have done this whole exercise once again and there is also a lot of opportunity because of the two brands coming together where the Sleepwell outlet is ready to open a Karnon outlet. That is one phenomena that we are seeing. Second is the Karnon NBO is willing to now become a exclusive outlet. So because this is the first year of this drive and therefore this number is looking high to you, I mean on a normal basis, I mean my assumption is that it will be more say about 400 outlets or so. But this year this is.
There’s going to be a jump in it.
Ritesh Shah
So is this a net number that we should look at? Because you said NBO to ebos. So is this a net number that we are looking at? Or the net number will be lower.
Rakesh Chahar
Will be lower because many MBOs will get converted to the showrooms and which is. Which has a higher than.
Ritesh Shah
Last. I’ll just squeeze one question. You did indicate that we are launching 10,000 rupees per piece for both Sleepwell as well as Carlon. Now is this across channels that we intend to do E. Com as well as the traditional network and basically how would we assure that it doesn’t? Basically when it comes to the shelf placement we have found Aram and Tarang even in tier one cities. So how should we comprehend that there’s the product or the SKU placement is like it doesn’t kill the different market segments.
Rakesh Chahar
So how we are treating this is that as far as EBU is concerned for products less than 10,000 in the urban market we just focus on the placement and then we don’t promote it at the EVO because there the play is to upsell to increase the asp. But there are customers who do enter the outlet and instead of they going out because they don’t have a product of their pocket size so the EPO can offer it. The main purpose is to drive sales through the MPOs for the 10,000 crores. That’s the intent and that’s the reason we have introduced this.
As far as Sarangaram is concerned, I mean the major focus there is again on smaller entries which are basically Furniture outlets. I mean you would have also noticed in micro market there are very small, small furniture outlets. So that’s our focus. EBO will also get Tarang and Aram. But that’s again for you need extra bed for the house or you need for your domestic health. The purpose of that is that. So that’s why we are promoting more threefold in our EPO network so that there is minimum cannibalization.
Ritesh Shah
Thank you sir, I’ll. Chantal Katyu, thank you so much.
Rahul Gautam
Thank you.
operator
Thank you. The next question is from the line of Shreya Gandhi from APP Investment Private Limited. Please proceed.
Unidentified Participant
Hello. Yeah, good evening sir. So. Yeah, am I, am I audible?
Rahul Gautam
Yes, please.
Unidentified Participant
Yeah. So my question was regarding the, the colon integration. It is positioned like a major synergy benefits. Right? So we have almost received 120 crores already realized and 130 crores are expected. So can you just give a breakdown like you know from of the facility timelines and as well as how out of that 130 what will be the breakdown through the EBITDA level like in H1 and H226. Hello.
Rahul Gautam
Yeah, so I think there is some noise coming as background noise. Could you just turn that off? Yes, now it’s clear.
Unidentified Participant
Yeah. So the 130 crores which we are going to receive with the colon integration. Hello. Yeah, so in that 130 give the breakdown of the EBITDA level. How much is it? How much can contribute to next to FY26?
Rahul Gautam
Yeah, yeah. So see we have to see the savings and whatever is going down the line to EBITDA in two parts. First part is are we getting this money from our existing system? So it is not 130 currently kind of by the end of the first quarter we have achieved 190crores run rate of the savings right from the date Cardan was acquired till this date in the end of the last quarter.
Amit Kumar Gupta
Okay. Some part of it is captured in gross margin and some part of it is captured in fixed cost. Like reduction of administrative cost, reduction of manpower cost overhead. They are below the line but all of them flow to the ebitda. Now just look at from the perspective when we said that we will do a 250crore rupees cost saving with new initiatives and benefits of Kurdon integration. They should have got a benefit of around 8 to 9% to our bottom line. We were already at say 8, 8 and a half percent or say 7.58%. So this should have taken us to 16, 17%.
But that was not the intent. The business also needed a lot of initiatives to take it to the next level. It was almost pregnant if you two years back the line. So we also needed to spend some money into the business, especially in terms of expansion of channel network, especially in terms of incentivizing people to get the required sales. Launching of new products like in the online segment and the FBI and also strengthening of management teams across the board in the organization. So even at the beginning we said that out of this saving of 8%, 8.5%, approximately 4%, that is 50% of it would flow to the bottom line and 50% would be used by the business to get to the next level.
The remaining benefit to the bottom line, which we said that we should be able to reach 15% in three years time. Time would be coming from operating leverage once we grow. Like this year. If you see, barring the impact of raw material prices, we grew by 8 to 10%. Right. In this quarter, which is quarter last year. Our intent is to take this growth to at least 15% and run that growth in the next three years. Our increased by around 4, 5, 6% this year. Of course we are not allowing it to increase because of the cost saving initiative. But those 15% growth could lead some portion to the bottom line which together these two initiatives should take us to a profit margin, EBITDA margin of say around 14, 14, 15% which we had. Committed in three years.
Unidentified Participant
My next question would be. Sir, on the mattress segment the volume growth has been around 10%. However, our revenue growth has been modest from 9%. So there was a pressure on the realization party, the selling price. Right. So what steps like you have taken to drive the privation and improve the revenue realization per unit?
Amit Kumar Gupta
No, the top line growth in mattress. Value growth in Mattress is also 9%.
Unidentified Participant
Yeah. 9%. Yeah.
Amit Kumar Gupta
Yeah. So 1% difference. Maybe because we there is a higher growth rate in a small town initiative and online segment, which I mentioned to a question earlier as well. But that’s not material. See it also. It may also be because of certain product mix. In some quarter you sold higher value mattresses more. In some quarter you sold lower value mattresses more. So 9 or 10% does not make a lot of difference. But yes, if you look at our foam segments, which is furniture cushioning, technical foam and the comfort foam segment, there the volume growth has been at around 6 to 8%.
Whereas the value growth has been only around 2 to 3%. Right? Yeah. That is primarily because the raw material prices have come down by around 10 to 12% in the last quarter. And in foam business, whenever there is an increase in raw or decrease in raw material, we have to pass it on so that the nature of that business is different. So when in a falling raw material price regime the home business top line would reduce for the same level of business and but it will be true in the reverse as well. So when the raw material prices rise that volume growth will be lesser whereas the value growth will be higher.
Unidentified Participant
If you can just give me last one last question sir. Like you have around 18 to 12, around 18 plants of post colonial integration. So what’s the current capacity capacity utilization at the consolidated level? If you can just tell and like what is the current capacity level and how do you quantify the cost saving and operating leverage benefits to flow from this consolidation? Capacity utilization at a consolid level. Yeah.
Rahul Gautam
Capacity utilization is not a very good metric for our business. So generally we need to be present in each geography and have manufactured facilities in each geography which are underutilized but their primary purpose is to service the market at the lowest possible cost and the highest serviceability. So at the moment, post curl down acquisition, what we did is divided the country into five zones and each zone has capabilities of making foam and mattresses for both the businesses put together. Capacity utilization in terms of, let’s say, okay, Brownfield, we might need a bit of maintenance capex every year but any fresh capex we don’t see anything before 2029, 2050.
Unidentified Participant
Thank you, thank you. Thank you so much.
Rahul Gautam
Thank you.
operator
Thank you. The next question is from the line of Nikhil Upadhyay from Simpl. Please proceed.
Nikhil
Yeah, hi, good evening. I hope I’m audible. Yes, yeah. First I think a good recovery in the margin profile we’ve seen this quarter. Just further understanding and you mentioned in the call also that our idea is to grow at 15% and probably keep our expenses flat. What I want to understand is that is it that the system has the capacity to sustain 15% growth without much expenses or so is the bandwidth at the employee level or at the expenses level created for a top line of at least 900,000 corrode? Is that how one should understand our P and L investments over the last four, five quarters?
Rahul Gautam
So I think I would repeat what I said in my earlier question. I said that because of the cost saving initiative my fixed cost will be flat for this year. It doesn’t mean that it does not have impact of inflation. There is of course 5, 6% impact on fixed cost every year. But this year it would Amply get offset by the savings initiative. Yes. But from next year onwards, the second year and the third year. Yes. There would be an inflation of 5 to 6% anticipated currently. However if my top line is growing by 15% even after absorbing the fixed cost inflation of 5% a lot of money flows to the bottom line.
So ultimately if that close to the bottom line it will lead to an increase in uptake in the EBITDA margin.
Nikhil
Okay. Secondly sir, you mentioned that at least we are not looking for capex till like probably 2930 is the number you mentioned. But if you look and see if even last four quarter we are doing the EBITDA of 250 crores. But there is 100 crores depreciation, 100 crores interest cost. As a result the profit conversion is only 100. The profit which comes is only 100 crores and probably 2 quarters back. Our idea was that we want to bring down the debt by selling the like non core assets and at least by 200 crores. So where are we on that path of reducing the debt because which eventually reduces the interest cost also.
So some ground you can cover on where are we?
Amit Kumar Gupta
Sure. So yeah, the assets which were to be monetized were clearly identified before our earlier call wherein I committed 200 crores as on date. We have already sold three facilities out of them. Obviously they were smaller. So we have realized and monetized around 40 odd crore rupees from those assets. There are two bigger facilities which are yet to be monetized and we are in the process of doing it. You know real estate is not easy and of course we have no compulsion to sell it off at a very non bargain sort of a price. So we may take a little bit time but yet those assets are clearly chopped out for monetization.
That was one part of your answer. Do I answer you?
Nikhil
Yeah, yeah, just a continuation. So by end of 26 where should our debt be eventually? Like even I understand we don’t want to do a distress selling. But even based on our own cash generation where should I our debt levels be approaching.
Amit Kumar Gupta
So if you see my the current year business you would find that we should be generating a gag somewhere between 150 to 200 crores from the business. That is something which will go to reduce go down to reduce the debt. And if this monetization takes place it will be another hundred forty has already been monetized. So we should be able to reduce our debt by around 300 to 350 crores just with monetization now where would the debt be currently? If you see I have a net debt of around 700 to 800 crores. At a group level.
If this goes down by 300, 350 crores we would be sitting somewhere around 300, 300, 300 to 400 growth on a net debt level.
Nikhil
Okay. And last question. You mentioned that we’ve made some investments in Dubai and the market is good and probably we may expand but this is our. Is it. We are selling under our own brand. And how’s the structure of the market as of now? Like what’s the growth rate and how many brands are existing? Some idea if you can share. Like what and why. Why does that market excite you.
Rahul Gautam
So? Two reasons. One is there are a lot of Indian expats that is gone. Second is the. There is a. There is a space. Those markets are predominantly spring market and we feel that there is a case for a value added format which we are very good at in India. So we have initiated some retail formats and the initial response from the formats both on the product and pricing is very good because it’s a mature market. So the price points are quite high. In fact our gross margins are much higher than what we realize in India.
And this gives us the confidence of scaling the model that we discover in another two, three months and then start scaling the process.
Nikhil
Okay. And couldn’t be done through a distributed.
Rahul Gautam
We are using Sleep Drill and Carlon and both these brands are registered in all seven GCC countries and it would.
Nikhil
Be through a distributor model or we would be putting. Okay fine.
Rahul Gautam
Direct to the retail.
Nikhil
Okay, thank you. Sure. I’ll come back.
operator
Thank you so much. We take the next question. Question from the line of Monil Gadda from Equitus. Please proceed.
Unidentified Participant
Hi. Hi team. Thank you for the long elaborate presentation. Am I audible?
Rahul Gautam
Yes, please go ahead.
Unidentified Participant
Yeah. So my question was you briefly covered over for Leno wherein you touched that they’re doing a recent raise of 100150 crores. Given Sheila phones existing investments over 22 to 24. Will we be doing any incremental capital infusion in the. In Polanco and how do we see going forward turning the company. Do we want to acquire the whole for Lanco like we did in Colon’s case or will we be not interfering in their operations?
Rahul Gautam
Thank you. I just want to say that yes, the current requirement is between 100 and 125 crores. It’s around. We may participate a little bit to ensure that we don’t get diluted but otherwise we at the moment we would let some kind of equity flow in from outside too. We have reasonable, I won’t say control but let’s say support in the management of the company. We have, we have majority at the board level and at the moment there is no desire right away to acquire the company. We will let it grow, let it go on as it is at a good high growth level.
And at the end of maybe FY27 take a call as to how what we want to do, whether it will go through an IPO process or it will go through an acquisition process or whatever. But I think it’s a little bit early right now, now with just focusing on the growth part of it.
Unidentified Participant
Okay, thank you. And the last question would be, you said by FY27 the revenue would be projected around 550 crore. Any projections on FY26 numbers for the entity and how confident are we in for Lenko’s ability to achieve those numbers? Any risk foreseeing the path of growth?
Rahul Gautam
So FY26, our projection is 370 crores. We are well on track of that. Whatever few months that have gone by and we don’t feel any big challenge towards achieving this goal. This should be on track.
Unidentified Participant
Okay. And last question would be we do we also supply any form from our entity to Polanco and is this at Amazon price or. We do offer some preferential rates and we’re also helping them get a distribution channel access through our firm. So how is that affecting our costs?
Rahul Gautam
So first on the foam part of it, yes we do supply some foam. Their needs for foam are not as great as we would think it tend to be. It’s a small number but we supply the foam and the pricing is all at an arm’s length. There is no issue on that. As far as access to our showrooms is concerned for selling their furniture, we just need to appreciate two things. Number one, at the moment they are a furniture rental company. They do sell some quantity. Absolutely. And in the furniture rental part of it there is a constant demand for cash for making assets which are needed required for the high growth to be fulfilled.
However, we are piloting a few stores where the Forlenko furniture can be sold and that’s at the moment as an independent entity. Except that being part of the same association we make a few things happen and looking at it that how does it perform, how does it look, etc. Because some of our, our showrooms are actually quite a bit of the showrooms do sell furniture. So it’s at a pilot stage but it is something which is a synergy waiting to happen.
Unidentified Participant
Okay, thank you. I get back in.
Rahul Gautam
Thank you.
operator
Thank you. The next question is from the line of Rakesh Mehta from Goodwill Investments. Please proceed.
Unidentified Participant
Yeah, good afternoon and thank you for giving me the opportunity. So I have question on Sri Lanko. So in last call you mentioned the ARR reached 300 crores. So first what would be the split of sale of products versus rental subscription revenue Here.
Rahul Gautam
I think the rental will be 95% and 5% would be selling of the products.
Unidentified Participant
Okay, okay, got it. And on this rental subscription revenue what would be the AOB monthly aob?
Rahul Gautam
What is aob?
Unidentified Participant
The average order value for rental subscription, so on. On this 95% of the revenue. The average order value per month would be around 2500 to 3000.
Rahul Gautam
I suppose that’s a tough one to answer Rakesh, but offline we can find that out.
Unidentified Participant
Sure, fair enough. And also just wanted to cross check. You mentioned the subscriber grew 40% in Q1. So. Sorry, 40,000 in Q1. So by FY25 it was if I understand correctly in by FY25 it was 1 lakh. So now the total subscriber base for rental is. Is around 1:1 lakh. 40,000. Right. Would be understanding be correct or.
Amit Kumar Gupta
No, No, I think some confusion. Maybe we missed out. I think that thousand was during the last. So they. They include increased the subscription of 40,000 during the last year which was a 60% growth over the corresponding last year. So against 2324 they grew by 60% which is 40,000 subscribers in 2425. And now on 2526 they anticipate to do a similar growth. So I must write a quoting Q1 there. But this 40,000 growth figure is for financial year 25.
Unidentified Participant
Okay, okay, sure. Understood. Understood. And just. Just. Just one last one. There is.
operator
I would request you to please join back the queue.
Unidentified Participant
Sure. Thank you.
operator
Thank you so much. Sir, the next question is from the line of Varun Singh from Alpha accudate. Please proceed.
Unidentified Participant
Thanks for the opportunity. Am I audible?
Rahul Gautam
Yes, please. Yeah.
Unidentified Participant
So firstly congratulations on a good set of margins number. So my first question is on the India market business where the maybe the. Maximum amount of hard work that we. Are doing to grow 9% volume growth in this quarter. I mean you think that this is impact of maybe some consumer demand slowdown etc. And secondly going forward like in second, third, fourth quarter how comfortable you are with you know maybe 14 to 15% kind of a revenue growth 10% and then 14, 15% for next year three quarters. I mean. What’s your feed?
Rahul Gautam
Yes sir, just, just two comments on that. I think the, the. The volume growth numbers that are there at the moment, the only point I’d make is July was better than June, June was better than April and July is better than June. So the, the. The level of growth is accelerating on the back of market share gain onto accounts from other brands as well as unbranded to branded. We’re not depending on demand growth and GDP growth and consumption growth and all of that. The complete strategy around that is on market share growth irrespective of what the market does.
That’s one and like I said as we are accelerating the growth percentage numbers both on value and volume month on month. I think exit run rates at the end of Q2 at the best at the end of Q3 we will be at that 15, 15% number.
Unidentified Participant
Understood? Understood sir. And secondly on the realization front, so I had two questions. One is what’s the primary reasoning for revising the base downward by 5% which makes optically the revenue growth look in the segment around 9% because I think compared to earlier numbers the growth would have been just 4 odd percentage. I read your PPT but I couldn’t understand the accounting entry. And in that context the 3,900 rupees realization that we have recorded in this quarter, do we think that this is run rate which is. Which would be a fair assumption for other three quarters or we can expect a better realization for the for the next nine months.
That’s my last question.
Rahul Gautam
So two, two. I guess you have two questions. One is why did we revise the base from last year? The only thing that we have done is from net, from gross revenue to net revenue. There was an India’s discount which earlier we used to allocate equally to all businesses. Instead of allocating equally to all businesses we have just recalibrated that based on the sales incentives and discounts and all of that to accurately allocate to mattress separately to form separately to B2B separately to funds cushioning separately. As you would see there would be. No change in volume numbers. There would only be revenue basis that would have changed on that account. So it’s just to make Apple to Apple comparison because if this quarter we allocated on mattress differently than we did last year, you would see different revenue numbers compared to or revenue growth numbers compared to what is accurate. That’s one on the ASP. So you can take baseline of Q1 as the baseline and like I said, multiple actions both on the side of volume growth as well as on the side of premiumization. Whether it is whatever activities you need to do in showrooms and for the consumer for getting ASPs up in showrooms but at the same time not do track of penetration on Tarang Aram e.
Com where ASVs would be a bit low. So fair to assume that. I mean you might get a few quarters where volume growth is actually higher than revenue growth or vice versa or. Very close to each other. Depends on. For example Q3 is extremely high for E. Com so you might get volume growth which is much higher than revenue growth in Q1 Q3 but it will come back to normal in Q4. So yeah, those things will keep playing the server.
Unidentified Participant
Got it, Got it. Okay, thank you very much and wish. You all the best.
operator
Thank you. The next question is from the line of Gopi Kishan from Kumar and Associates. Please proceed.
Unidentified Participant
As you mentioned about being 300 crores, could I get the monthly benefit?
Rahul Gautam
Gopi, you’ll have to repeat.
Rakesh Chahar
I think Rahulji already answered that. So current run rate, I can’t comment. On July numbers, but of course, let’s say June Numbers Projected to 12 months is the 350 crore run rate and growing at whatever high double digits every month on month.
Unidentified Participant
Right. And your latest active subscriber base. Sorry, the latest active subscriber base as of last month.
Rakesh Chahar
Active subscriber base. We’ll get back to you offline. I’m not very sure.
Unidentified Participant
All right.
Rakesh Chahar
It keeps changing because you have. You have new subscribers and you have returns and all of that. So. So you get a active subscriber base. We’ll. You just have to get back to us.
Unidentified Participant
Okay, thank you.
operator
Thank you. The next question is from the line of Suyesh Bhave from Wealth Guardian. Please proceed.
Unidentified Participant
Hello. Am I audible?
Rahul Gautam
Yes, please.
Unidentified Participant
Yeah. So regarding our warranties that we give for our mattresses, I have a few questions. First, what is the duration of those warranties? Second, what all is covered under the warranties? As in do we give returns, replacements, etc. And third, is on an average, what is our warranty cost per annum for the last few years?
Rahul Gautam
Let us quickly respond to that. And it’s an extremely detailed policy. I’ll have someone send it out to you. It’s different by model, it’s different by brand, it’s different by. For many various reasons, on average we don’t. Or mattresses. Both companies put together wouldn’t have warranty claims more than 0.9 0.7, 0.8, 0.9% a year of sales.
Unidentified Participant
All right. And so do we have returns and repairs or replacements under this? Because from what I understand. Handling of mattresses, since it’s a bulky material, there would be some logistics cost involved to it as well. Right?
Rahul Gautam
There is, but like I said, it’s a, it’s an extremely detailed process. It’s been running for multiple years. I’ll have someone get back to you offline on the complete policy. In terms of returns. Yes, sorry. In terms of replacement. Yes, for the first year it’s a full replacement post that it’s prorated. So like I said, it’s a complex policy. Be good if you could have a read on the policy offline and then if you have any other questions we could, somebody can certainly respond back on that.
Unidentified Participant
All right, I’ll follow up on this offline. So I have just one more question is regarding seasonality for our business and for our mattresses as a whole, which is our peak season and which is our most muted season?
Rahul Gautam
The Q2 would be the most muted. Q3, Q4 are high. Q3 of course would be very high. Primarily on account of north, east, little bit on the west. South is fairly, fairly consistent across the year. Yeah. So it depends on, it depends on the festive season. This year would be a bit earlier. So we might see some benefit in Q2 as well.
Unidentified Participant
All right, sir, understood. Thank you. I’ll connect offline for the warranty related questions.
Rahul Gautam
Thank you.
operator
Thank you. The next question is from the line of Jayesh Gandhi from Harshad H. Gandhi Securities Private Limited. Please proceed.
Unidentified Participant
So my first question is regarding Prolengo where you said that you are thinking of raising 100 crores. What kind of evaluation are we aspiring as well? Enterprise value for the company.
Rahul Gautam
I think we’re still, we’re still in the process of discovering that as we go out like Raulji said that we are. Sheila Formula probably put a little bit of equity in to retain its investment. But the management is in the process of going out and looking for fresh equity. And in that process it’s still in the middle of a discovery process.
Unidentified Participant
And I have two bookkeeping questions. First is the NPM blocks in which line item in the P and L. Do we show.
Rahul Gautam
Other expenses?
Unidentified Participant
Okay. And so this port on our other income is closer to 9 crore versus like 30 crores year on year and 60 crores. QoQ what is the other income by the way?
Amit Kumar Gupta
So other income comprises of two parts. One is the income from the investment that is the 450 crore that we have. We park it in government security so that comes from there. And the second part contains a lot of items which may be the risk that we sell. There might be certain income not related to operations. It comes like sale of assets and pretty similar type of detail.
Unidentified Participant
This quarter the other income is less mainly because of the income from assets. I mean income from investments.
Amit Kumar Gupta
So yeah we park this in gilt fund which if you see any gilt fund of any mutual fund you will find that the value of the paper at the beginning of the quarter and the end of the quarter was almost the same. Rather lesser towards the end of the quarter. This happens because at times the market perceived expect more benefits from the authorities, monetary authorities but which gets reflected into the price of the bond. But when that does not materializes it falls. So by May and or early June the gate fund fell which of course will get normalized over the course of the year because it carries a separate coupon.
But for the quarter we did not get that income or had to incur that during this quarter.
Unidentified Participant
Just one more question. What would be your normalized other income In a normal case should it be closer to 30:40 crore?
Amit Kumar Gupta
No, it won’t be for a quarter. It should be somewhere between 17 to 20 crore. But that also depends on because the nature of the other income some of the parts like the gain on sale of assets. That’s not which you can predict there will be certain absolute assets which you sell off. But our general trend has been that it ranges between 5 to 10 crores apart from interest and around 7, 8 to 10 crores would be from some investment.
Unidentified Participant
That’s it. From my side. Good luck from future. Thank you everyone.
operator
Thank you. The next question is from the line of Aishwarya from I thought. Please proceed.
Aishwarya
Hello sir. Hello to the management. I have one question regarding the new development that we have made now we are also into the. You know the technical form. We are now supplying it to the air industry as well. I’m solely interested to know on the dev how we be getting in the sales. The top line growth we have been doing now we are also having for Lenko under the umbrella and we are increasingly expanding the number of industries that we can supply our product to. Are we looking actively looking for any more acquisitions. And when I read the previous con calls I also came across the statement where we said that Kurd Lawn also did some bit of sofa manufacturing and all that.
Do we have that in the colon stores available? And how will the colon experience Store look like in the future. Like we have sleep and experience stores. And now you told that we’ll have the cologne experience store as well. How will the two be different and how will the future experience store look like?
Rahul Gautam
So Carlon already has stores. There are about 350, more than 350 stores which are similar to the three, the one you were referring. And so we intend growing that number which we. Which I said earlier. And that’s. That’s going to drive sales for Karnon as far as so far is concerned. Yes, Karnon had a small factory to make so far. So. So we have continued with the business but not making ourselves but outsourcing it. So that is, that is because now, right now we have Berlinco is a part of Pixel. So we intend even kind of integrating or, or taking advantage of this synergy from Flinco for sofa manufacturing. So that work is under process and as well as aviation part that you said we are. Yes, we have kind of developed at home.
We are the only company in the country who makes aviation foam. The avoidance have started supplying to the secondary market and we have also attempted to get ourselves certified as a. As a Tier 2 supplier to the Boeing. And to think of that, that is. Also a working process.
Aishwarya
Understood. Sir, just one more question. Since the colon integration has been EPS dilutive for us, when do we see the shareholders, you know, making. When will the company be better for the shareholders? I know like once you integrate or you know, acquire a company, it is obvious that EPS will dilute for certain years because of the interest and depreciation. We’ve seen that margins are pretty stressed. When do we think that we can come Back to the. 22-3-22 levels or something around that.
Rakesh Chahar
So we have already guided on what sort of growth we are looking from here and what sort of profitability we are looking from here. I think that should be sufficient to figure out as to how our EPS. Will be going forward.
Aishwarya
Yes, sir. Yes, I look into it. Thank you so much.
Rakesh Chahar
Thank you.
Rahul Gautam
Thank you. Thank you.
operator
Thank you. The next question is from the line of Ritesha from Investec. Please proceed.
Ritesh Shah
Just one, one question, sir. How much was the volumes from Aram and Tarang this quarter and on volumetric terms corresponding period last year, please.
Rahul Gautam
Okay.
Rakesh Chahar
Yeah. So. Amit second value growth. I think Amit has already said it’s about 60% is a value group volume of this help volume should be similar.
Ritesh Shah
Sir, earlier we have indicated a number of around six, six and a half percent. Has that number actually moved up I think we gave a number of 18 crores. Amitji gave that number, I think. But just on a volumetric terms will it be like six, six and a half percent of the volumes?
Amit Kumar Gupta
Just. I’m not getting your question. But to clarify I can. I can speak out 1. What we have said. Last year we were at 65 crore. This year current run rate is 80 crores per annum. We intend to cross 100 crores for the current year. For the first quarter it was 1718 crores which I mentioned. That’s the statistics. So if you see growth rate on an year on year basis it is approximately 60%. What we are targeting this time, growth rate on a month on month basis would be if you. If you work out from it 3, 4% sort of a growth rate month on month could be there.
Ritesh Shah
Right? Sir, I’m looking at the volume contribution of the total mattresses. How much will be. Aram and Tarang this number earlier? What we have given is around I think 7% in Q3 and Q4. So for Q1, what, what that number is.
Amit Kumar Gupta
So Ritesh, I don’t have those numbers separately. Maybe we can get in touch and I can give you those numbers.
Ritesh Shah
Sure, sir. Nice. Thank you so much. Thank you.
operator
Thank you. As there are no further questions from the participants I would now like to hand the conference over to the management for closing comments.
Rahul Gautam
Thank you. Diwali. Thank you for conducting this conference. Let me just begin by saying that QIFI Q1 FY26 has been a robust performance. We look forward to it going or getting better and better as we move along. I just want to thank each one of you for all the questions it has been learning as usual for us. And if for the paucity of time or any other reason or otherwise we have been unable to answer the questions please feel free to reach out to Tusharji, to Rakeshji Ahmed or myself. And in the meantime till the next call I would just say thank you very much and Jai Hind and all the best.
operator
Thank you. On behalf of Aryan Capital Markets Ltd. That concludes this conference. Thank you for joining us. And you may now disconnect your lines.