The manufacturer of ‘Sleepwell’ mattresses, has cemented its leadership position in foam-based home-comfort products and marked its entry into the branded furniture market, by announcing the acquisition of a stake in its rival companies, in two simultaneous deals. These acquisitions will make the company an undisputed leader across major product categories.
Shares of Sheela Foam surged 15 percent on Tuesday’s early trades to reach an intraday high of ₹ 1369.95 apiece after the company’s board approved a buyout of a controlling stake in its competitor Kurlon Enterprises and a 35 percent stake in House of Kieraya Ltd (Furlenco), a furniture rental company. At 12:12 PM, the company’s shares were trading at ₹ 1,259.00 apiece, up 5.49 percent.
Acquisition of Kurlon Enterprises Limited (KEL)
The company informed the bourses that it has approved the acquisition of KEL, an unlisted entity that manufactures foam-based and coir-based home comfort products across the “Sit and Sleep” solution categories like mattresses, furniture cushions, pillows and coverings.
The company does not require regulatory approvals for this transaction and the acquisition is expected to be completed by or before November 30, 2023. Sheela Foam is acquiring 94.66 percent of KEL’s share capital or a little more than 3.46 crore shares at an equity valuation of ₹ 2,150 crores, for a cash consideration.
This acquisition will help Sheela Foam to consolidate the existing fragmented market of mattresses and foam-based products and diversify its customer base. Sheela Foam is a leader in northern and western India, while KEL has a strong presence in the southern and eastern regions of India. Thus, this acquisition will help the company amplify its pan-India footprint and a robust distribution network. Moreover, the companies have many complementary facilities which will help Sheela Foam to serve customers from a lesser distance, reduce costs and facilitate manufacturing synergies.
Acquisition of House of Kieraya Private Limited (Furlenco)
Sheela Foam has proposed to acquire approximately 35 percent of the share capital of Furlenco for a cash consideration of ₹ 300 crores. Furlenco is a leading furniture company with a strong online presence. It operates in cities including Bangalore, Mumbai and Delhi NCR.
This acquisition will help the company to enter the rapidly-growing online furniture e-commerce business and tap new customers. According to industry estimates, the furniture market is much bigger in size than Sheela Foam’s existing playing field. It will help the company to leverage the digital capabilities of Furlenco for its existing products. Sheela foam will also benefit from the company’s Digital-First, Direct-to-Customer e-commerce capabilities and its design capabilities.
Written by Simran Bafna
Disclaimer
The views and investment tips expressed by investment experts/broking houses/rating agencies on tradebrains.in are their own, and not that of the website or its management. Investing in equities poses a risk of financial losses. Investors must therefore exercise due caution while investing or trading in stocks. Dailyraven Technologies or the author are not liable for any losses caused as a result of the decision based on this article. Please consult your investment advisor before investing.
