Sheela Foam Ltd Management Discussions

Economic Overview

Indian Economy1

India has reinforced its position as one of the fastest-growing major economies, with GDP growth of 7.7% in FY 2025–26, compared with 7.1% in FY 2024–25. This momentum is supported by steady rural demand and a gradual recovery in industrial activity. Government-led initiatives, including the Production Linked Incentive (PLI) schemes, have provided impetus to the manufacturing sector, while services continue to register robust growth. Sustained public investment in infrastructure has further underpinned overall economic expansion.

Inflation has remained contained, with the Consumer Price Index (CPI) at approximately 3.2% under the revised 2024 base year.2 A lower inflation environment has enhanced real purchasing power, thereby sustaining consumption across both rural and urban segments.

India is accelerating its integration with global value chains, supported by the signing of multiple Free Trade Agreements with key economies. The concluded agreement with the European Union in January 2026 is expected to provide Indian exporters access to a USD 24 trillion market, significantly enhancing export competitiveness and investment flows.3 This is complemented by agreements with the United Kingdom (CETA) and the European Free Trade Association (TEPA), which includes a USD 100 billion long-term investment commitment. Additionally, operational agreements with countries such as Australia (ECTA) and the United Arab Emirates (CEPA), along with the recently signed CEPA with Oman, are strengthening market access, improving supply chain integration and supporting export-led growth.

At the same time, global uncertainties, including geopolitical tensions in the Middle East and volatility in crude oil prices, remain key risks. However, proactive measures such as diversified energy sourcing, strategic trade partnerships and supply chain realignment have helped strengthen economic resilience and mitigate external vulnerabilities.

Outlook

India is expected to remain the fastest-growing major economy over the near term. Growth is likely to be supported by continued government capital expenditure and a recovery in private consumption. Private Final Consumption Expenditure is projected to grow at approximately 7.0% in FY 2025–26, reflecting improving consumer demand.4

Ongoing structural reforms are poised to strengthen long-term growth prospects. These include further rationalisation of the Goods and Services Tax (GST), progress in free trade agreements and continued improvements in the ease of doing business. With inflation expected to remain moderate under the revised base year, the Reserve Bank of India (RBI) is likely to retain a supportive monetary policy stance, supporting credit growth and investment activity. Despite ongoing global challenges such as trade disruptions, geopolitical developments and tighter financial conditions, Indias domestic demand-driven growth model and improving manufacturing competitiveness position it well to sustain stable growth momentum.

Global Economy6

In Calendar Year (CY) 2025, the global economy demonstrated resilience despite persistent geopolitical tensions, evolving trade dynamics and intermittent financial market volatility. Global GDP growth remained steady at approximately 3.4%, supported by stable consumer demand, improving supply chain conditions and continued investment in technology and digital infrastructure. Global consumer price inflation stood at approximately 4.1% in CY 2025 and is expected to increase marginally to around 4.4% in CY 2026, reflecting the lagged impact of monetary tightening by major central banks and ongoing supply-side pressures.

Growth trends remained uneven across regions, with advanced economies recording modest expansion of 1.9% in CY 2025. This was led by the United States at 2.1%, supported by resilient investor sentiment and stable policy conditions, although employment growth showed signs of moderation. Europe expanded by 1.4%, demonstrating stability despite ongoing trade related pressures. In contrast, emerging and developing economies outperformed, registering growth of 4.4% in CY 2025. China remained a key contributor, with growth of 5% driven by public spending and export activity, while several smaller economies continued to face constraints arising from currency pressures, limited fiscal capacity and elevated debt levels.

Regional Focus

Australia7

Australias economy remained stable, supported by moderating inflation and resilient domestic demand, even as growth is expected to ease over the medium term. Inflation declined significantly, with headline inflation at 2.8% and underlying inflation at 3.5%. This has allowed policymakers to balance inflation management with broader economic stability despite relatively tight financial conditions.

The labour market is gradually normalising, with unemployment projected to stabilise at approximately 4.5%, indicating steady employment conditions. Additionally, household consumption and business activity continue to provide underlying support to the economy.

GDP growth is anticipated to moderate from 2.3% in CY 2025 to 1.8% by CY 2026, reflecting a measured slowdown as policy tightening and global uncertainties weigh on expansion. Notwithstanding external risks, Australias economic fundamentals remain sound, supported by stable demand, easing inflation and a balanced policy environment.

Spain8

Spains economy sustained its momentum in CY 2025 amid a relatively subdued economic environment across Europe, with GDP growth moderating to approximately 2.9%, while remaining among the stronger performers within advanced economies. Growth was anchored in resilient domestic demand, supported by employment gains, rising real wages and steady household consumption. Investment activity benefitted from improved financial conditions and continued deployment of European recovery funds.

Inflation eased to nearly 2.5% during the year, reflecting moderation in energy and food prices, thereby supporting purchasing power and macroeconomic stability.

Looking ahead to CY 2026, growth is anticipated to moderate to approximately 2.2% as the economy transitions towards a more stable trajectory. Domestic demand is expected to remain supportive, even as export momentum softens. Inflation is projected to decline further towards 2.3%, indicating improving price stability, while unemployment is expected to gradually ease, supported by structural labour market improvements. While fiscal pressures and external uncertainties remain areas of caution, the overall outlook points to a balanced expansion, underpinned by consumption resilience, easing inflation and sustained investment activity.

Outlook

Global economic growth is expected to remain moderate at around 3.1% in CY2026, supported by continued investments in technology, particularly artificial intelligence, along with relatively accommodative financial conditions across major economies. However, geopolitical developments, especially in the Middle East and the Strait of Hormuz, have disrupted key shipping routes, leading to re-routing of trade flows, longer transit times and elevated freight costs. These developments, coupled with fluctuations in crude oil markets, have introduced uncertainty in input costs, although overall prices are expected to remain relatively stable due to adequate supply conditions. Global trade growth is projected to moderate, reflecting evolving tariff structures and increasing protectionist policies. Inflation is expected to remain moderate, with energy markets continuing to experience supply-side pressures. Overall, while stable growth provides some support to demand, geopolitical risks and policy uncertainty are likely to weigh on global momentum, resulting in cautious business sentiment and uneven growth across regions.

Industry Overview

Health and Wellness Industry

Global9

The global health and wellness industry has evolved beyond the confines of traditional healthcare into a broad, lifestyle-oriented economic segment. Individuals are increasingly allocating resources towards physical, mental and emotional well-being, reflecting a structural shift in consumption patterns. The industry was valued at USD 6.87 trillion in CY 2025 and is estimated to progress to USD 7.19 trillion in CY 2026, indicating steady expansion supported by rising disposable incomes, urbanisation and heightened awareness of holistic health.

Growth has been spread across segments such as fitness, nutrition, personal care, mental wellness and wellness tourism, creating a more integrated and interdependent ecosystem. This shift has been further driven by the rising incidence of chronic illnesses and stress-related concerns. At the same time, advancements in healthcare infrastructure and improved access to wellness services have supported the sectors expansion, making wellness an essential part of everyday lifestyles.

Outlook

Looking ahead, the industry is expected to sustain its upward trajectory, with the global market projected to grow at a CAGR of around 5.3% over the next decade. Sustained demand across segments is likely to support continued value creation, with the market expected to cross successive multi-trillion-dollar thresholds.

Future growth will be driven by deeper consumer engagement, with increasing focus on personalised health solutions, preventive care and integrated wellness offerings. Emerging markets, particularly in Asia-Pacific, are projected to contribute significantly, supported by rising middle-class populations and rising health consciousness. Additionally, segments such as corporate wellness, digital health platforms and wellness technologies are anticipated to gain prominence, reflecting a shift towards convenience-led and continuous health monitoring.

Indian10

The Indian health and wellness industry continues to exhibit steady expansion, supported by increasing consumer awareness and a gradual shift towards preventive healthcare. The market was valued at USD 164.35 billion in 2025 and is projected to reach USD 257.94 billion by 2034, reflecting a CAGR in the range of 5.1%. Growth is being driven by evolving consumer preferences, including a heightened focus on fitness, nutrition and overall well-being, alongside a rising prevalence of lifestyle-related conditions associated with urbanisation and sedentary habits.

Higher disposable incomes and improved access to wellness products through organised retail and digital channels have further strengthened market expansion.

Outlook

The industry is expected to maintain a stable growth trajectory over the forecast period, supported by continued consumer preference for preventive healthcare and wellness-oriented lifestyles. The industry is likely to benefit from ongoing product innovation, increasing integration of digital health solutions and expanding reach across urban and semi-urban markets. At the same time, the sector continues to address structural challenges, including improving accessibility, responding to lifestyle-related health concerns and strengthening consumer confidence in an increasingly diverse range of offerings. Overall, demand is expected to remain consistent across key segments, supported by long-term structural drivers and increasing consumer engagement with health and wellness solutions.

Mattress Industry

Global11

The global mattress industry continues to exhibit steady expansion, supported by resilient demand fundamentals across residential and institutional segments. The market was valued at USD 43.4 billion in CY 2025 and is projected to reach USD 70.8 billion by CY 2034, growing at a CAGR of approximately 5.3% during 2026–2034. Demand is anchored by replacement cycles in developed regions and first-time purchases in emerging economies.

Asia-Pacific accounts for the largest share of the global market, backed by rapid urbanisation, population growth and increasing household formation. Additionally, the continued expansion of hospitality sector, including hotels and serviced accommodations, contributes meaningfully to overall demand. The interplay of these factors has enabled sustained volume growth across regions.

Outlook

The industry is poised to sustain a steady growth trajectory, underpinned by supportive macroeconomic and demographic factors. Expanding urbanisation, along with increased residential construction, is expected to generate additional demand. At the same time, a revival in institutional demand, particularly from the hospitality and healthcare sectors, is likely to provide further impetus to growth.

Technological advancements, including the increasing adoption of smart and technology-enabled mattresses, along with ongoing premiumisation, are expected to improve value realisation. Overall, the industry is well positioned to sustain consistent growth, supported by innovation, expanding distribution channels and evolving consumer preferences.

Indian

The Indian mattress industry is at an inflection point, supported by evolving consumer preferences, increasing formalisation and a gradual shift towards value-driven consumption. Historically characterised by unorganised and price-led offerings, the industry is transitioning towards a more organised and branded ecosystem, with rising preference for quality, durability and standardised products. The market was valued at approximately USD 2.31 billion in FY 2025 and is expected to reach around USD 3.48 billion by FY 2030, reflecting steady expansion supported by improving demand fundamentals.12 This transition is further reinforced by increasing awareness of sleep health and wellness, resulting in mattresses being viewed not merely as functional products but as an integral part of lifestyle and long-term well-being.

The current phase of growth is also underpinned by structural consumption dynamics, where category adoption tends to accelerate as income levels rise and discretionary spending increases. India is witnessing a gradual improvement in mattress penetration alongside rising income levels, supported by urbanisation, expansion of organised retail, improved access to consumer financing and growing health awareness. In addition, favourable macroeconomic conditions, including rising disposable incomes, increasing urbanisation and the expansion of nuclear households, are driving demand for home comfort products. Consumers are increasingly upgrading from traditional bedding solutions to more advanced and ergonomically designed mattresses, contributing to improved product mix and value realisation. Organised players continue to gain share through brand-led offerings, wider distribution reach and enhanced customer experience, while the growing adoption of e-commerce and direct-to-consumer channels is improving accessibility and reshaping purchase behaviour.

Outlook

The Indian mattress industry is expected to sustain its growth trajectory, supported by continued premiumisation, increasing formalisation and expanding digital adoption. The structural drivers underpinning the industry indicate a favourable outlook, with improving product mix, deeper market penetration and evolving consumer preferences towards higher-quality offerings. The expansion of organised distribution networks and omni-channel presence is expected to enhance accessibility and engagement, positioning the industry for sustained and value-accretive growth over the medium term.

Polyurethane (PU) Foam Industry

Global13

As of CY 2025, the global PU Foam industry continued to register steady expansion, supported by its extensive application across end-use sectors such as bedding, furniture, insulation and automotive interiors. The market was valued at USD 55.18 billion in CY 2025, reflecting strong underlying demand and a consistent growth trajectory, with a CAGR of 8%.

The industrys strength lies in its wide-ranging utility across both comfort and efficiency. Flexible foam remains integral to bedding and seating solutions, while rigid foam plays a critical role in insulation for buildings and appliances. Asia-Pacific accounted for the largest share of the market, driven by rising housing activity, improving income levels and expanding manufacturing capabilities. In parallel, demand from construction and automotive sectors continued to support growth, with increasing emphasis on lightweight, energy-efficient and durable materials.

Outlook

The industry is anticipated to maintain its growth momentum over the medium term, with a gradually transition from volume-driven growth to value-led expansion. The market is projected to reach approximately USD 64.36 billion by CY 2027, supported by ongoing urbanisation, infrastructure development and evolving consumption patterns.

A structural transition towards sustainable and high-performance materials is underway, as manufacturers increasingly incorporate eco-friendly inputs and advanced foam technologies. Emerging demand from electric vehicles, green buildings and cold-chain logistics is likely to redefine application dynamics, while innovation in insulation and comfort solutions will remain central to growth. At the same time, the industry is expected to balance efficiency with environmental responsibility, positioning itself as a material provider and enabler of energy savings and improved living standards across global markets.

Indian15

The Indian Polyurethane (PU) foam industry continues to build on strong structural momentum, supported by its widespread application across consumption and industrial segments. The market reached approximately USD 4.2 billion in FY 2025 and is progressing at a steady CAGR of around 5.9%, reflecting both volume growth and value accretion across end-use categories.

PU foams significance lies in its versatility and performance characteristics, enabling its use in comfort products like bedding and upholstery, as well as in automotive interiors and insulation solutions that enhance energy efficiency. Increasing urbanisation, improving income levels, and evolving consumer preferences have accelerated the shift toward higher-quality and branded home comfort products. At the same time, growth in the automotive and real estate sectors continues to support demand, while the expansion of e-commerce and logistics has led to incremental usage in protective and industrial packaging applications. The combination of cost efficiency, adaptability, and wide applicability positions PU foam as a critical material within Indias evolving consumption ecosystem.

Outlook

Looking ahead, the industry is expected to enter a more value-oriented phase of growth, supported by sustained structural drivers and cyclical recovery across key sectors. The market is projected to approach USD 7.2 billion by FY 2034, indicating continued expansion and premiumisation in bedding and furniture, increasing adoption of energy-efficient insulation solutions, and the growing need for lightweight materials in mobility and industrial applications. These trends are expected to drive both volume growth and value realisation over the medium term.

In parallel, the industry is gradually transitioning toward a more innovation-led and sustainability-focused framework. The increasing emphasis on bio-based raw materials, recyclable foam solutions, and low-emission formulations, along with tighter regulatory norms around energy efficiency and environmental compliance, is expected to reshape product development and manufacturing practices. As a result, the market is likely to evolve from a largely commodity-driven structure to a more differentiated and value-accretive landscape, with greater focus on quality, technology and organised scale players.

Company Overview

Incorporated in 1971, Sheela Foam Limited has evolved into one of Indias leading integrated comfort solutions companies, with a diversified presence across mattresses, polyurethane (PU) foam and allied home comfort categories. Over the decades, the Company has built a strong foundation anchored in manufacturing excellence, brand leadership and deep distribution reach, enabling it to serve a wide spectrum of retail and institutional customers.

Today, Sheela Foam operates through a fully integrated business model spanning across foam manufacturing, product design, branding, distribution and digital engagement. This integrated platform enables the Company to respond with agility to evolving consumer preferences while driving operational efficiencies and consistent product quality across markets.

The Companys portfolio covers a comprehensive range of applications, including comfort foam, technical foam and furniture cushioning, catering to both consumer and industrial segments such as automotive, furniture, packaging and infrastructure. Its flagship brands, Sleepwell and Kurlon, are among the most recognised names in the Indian mattress industry, supported by a growing presence across premium, mid and value segments. In addition, the Company is expanding into adjacent and emerging platforms, including furniture solutions and digital-first businesses, further strengthening its engagement across the consumer lifecycle.

A defining milestone in the Companys journey has been the successful integration of the Kurlon business, which has significantly enhanced scale, expanded its multi-brand portfolio and strengthened its pan-India distribution network. This integration has enabled deeper market penetration, improved channel productivity and the ability to leverage synergies across sourcing, manufacturing and go-to-market strategies.

In line with its strategic focus on building an integrated ecosystem around comfort and lifestyle solutions, the Company has also expanded into adjacent and digital-first platforms. Through Furlenco, its furniture solutions business, the Company is strengthening its presence in the fast-growing furniture and rental ecosystem, enabling deeper consumer engagement beyond mattresses. In parallel, Staqo, the Companys digital and technology arm, is focused on enabling data-driven decision-making, enhancing digital capabilities across the value chain and supporting scalability through technology-led interventions. These platforms complement the core business by extending the Companys reach across the broader home and lifestyle ecosystem while reinforcing its omni-channel strategy.

With a widespread manufacturing footprint across India and international operations in markets such as Australia and Spain, Sheela Foam combines global capabilities with strong local execution. Its continued focus on innovation, premiumisation and disciplined capital allocation positions the Company to drive sustainable growth while improving value realisation.

Guided by its philosophy of being "Fully Integrated, Eager to Serve," Sheela Foam remains focused on strengthening customer centricity, enhancing omni-channel reach and delivering differentiated comfort solutions, while consistently creating long-term value for all stakeholders.

The Company has developed a robust multi-channel distribution network, comprising over 11,000+ touch points complemented by a growing presence in retail, online and COCO formats. It also maintains an established international presence across Australia, Spain and the GCC region, enabled by localised operations and supply chain initiatives. With a share of ~30% in the Indian branded mattress segment and ~40% in Australia, the Company continues to consolidate its positioning through premiumisation, network expansion and disciplined execution.

Financial Overview

In FY26, the Company reported standalone net revenue from operations of H 2,962 crore, compared with H2,675 crore in FY 25, while profit after tax stood at H131 crore, against H93 crore in FY 25.

In Australia, net revenue from operations was AUD 71.08 million, compared with AUD 73.09 million in FY 25, with loss after tax at AUD 1.90 million, as against AUD 2.71 million in FY 25. The Spain business recorded net revenue of EUR 38.15 million, compared with EUR 37.62 million in FY 25, while profit after tax stood at EUR 1.38 million, versus EUR 0.64 million in FY 25.

On a consolidated basis, net revenue from operations stood at H3,821 crore, compared with H3,439 crore in FY 25, with profit after tax at H161 crore, against H90 crore in FY 25.

Key Financial Ratios

Particulars	FY 2026	FY 2025	% Change
Interest Service Ratio (Earnings before interest, tax and expectational items /Finance cost)	3.21	1.82	76
Current Ratio	0.73	0.98	-25
Debt Equity Ratio	0.16	0.34	-52
Operating Profit Margin (%)	39.09	36.74	6
Net Profit Margin (%)	4.41	3.47	27
Return on Net Worth (%)	4.48	3.34	34
Debtors Turnover Ratio	11.80	11.40	4
Inventory Turnover Ratio	6.86	6.97	-2

Interest service ratio improved due to decrease in finance cost and an increase in earning before interest, tax and exceptional item in current year. Current ratio decreased due to sale of investments in current year. Debt equity ratio decreased due to decrease in debts in current year. Both Net profit margin as well as Return on net worth improved due to increase in profit after tax in current year.

B2B Business Overview

The B2B segment delivered a resilient performance during FY 2025–26, supported by sustained demand across key end-use industries and a diversified customer base. Growth was driven by steady traction across automotive, furniture and footwear segments, along with expansion into emerging sectors such as railways and aviation. The segment recorded healthy volume growth during the year, supported by improved demand conditions and deeper engagement with OEM customers, while an improved product mix with higher contribution from value-added and application-specific solutions supported overall performance.

Expansion in High-Performance and Value-Added Segments

The Company strengthened its presence in high-performance applications, including automotive comfort systems, NVH (Noise, Vibration, Harshness) solutions and certified foams for railways and aerospace. In parallel, progress in import substitution enabled successful commercialisation of indigenously developed products, supporting localisation efforts and reducing reliance on imports. The focus on specialised and specification-driven segments has enhanced positioning in higher-value applications.

Operational Efficiency and Capability Enhancement

Operational focus remained on optimising capacity utilisation, improving manufacturing efficiencies and maintaining cost discipline despite volatility in raw material prices. Continued investments in research and development and technical capabilities enabled faster product development cycles and improved alignment with evolving customer requirements, strengthening long-term business relationships.

Outlook

The B2B segment is expected to maintain a steady growth trajectory, supported by expansion in high-value applications across automotive and packaging, increasing participation in certified segments such as railways, buses and aviation, and strengthening presence in acoustic and other value-added solutions. Growth is also expected to be supported by continued focus on specialty and performance-driven foams, ongoing import substitution initiatives aligned with localisation priorities, and development of eco-friendly, low-emission and recyclable solutions in line with evolving regulatory and customer requirements. The Company will continue to prioritise deepening customer relationships, expanding into new applications and geographies, and improving operational efficiency through process optimisation and digital enablement, with a focus on enhancing profitability through product mix, cost discipline and scale efficiencies.

E-Commerce Growth Trajectory

The Companys e-commerce business continued to scale strongly during FY 2025–26, building on the momentum established in the previous year, where revenues had doubled. This sustained growth reflects a structural shift in consumer behaviour towards digital-first discovery and purchase journeys, as well as the Companys focused execution in strengthening its omni-channel capabilities.

At the beginning of the year, the Company had outlined a clear strategy to drive disproportionate growth through its direct-to-consumer

(D2C) platform, while simultaneously enhancing the visibility and performance of the Kurlon brand across marketplace channels. During the year, the brand-owned platform delivered robust growth of approximately 136% year-on-year, while the Kurlon portfolio on third-party platforms grew by nearly 70%, indicating strong traction across both owned and partner ecosystems.

This performance was underpinned by a series of targeted interventions across the value chain, including optimisation of the product portfolio, sharper performance marketing, improved fulfilment timelines and continuous enhancements in user interface, content and overall customer experience. These initiatives have contributed to higher visibility, improved conversion rates and stronger customer engagement across digital channels.

E-commerce continues to be a key strategic priority for the Company. The focus remains on improving channel efficiency through reduction in return rates, tighter assortment planning and expansion into adjacent product categories, alongside continued premiumisation. In parallel, the Company is investing in strengthening its D2C ecosystem through improvements in content, funnel efficiency and customer retention metrics.

Aligned with its philosophy of being "Fully Integrated, Eager to Serve," the Companys digital strategy is centred on creating a seamless and integrated consumer journey across online and offline touchpoints. The continued integration of e-commerce within the broader omni-channel framework is expected to drive market share gains, enhance customer lifetime value and support sustained, profitable growth in the online segment.

Marketing and Branding Strategy

The Companys marketing and branding strategy is centred on strengthening presence across channels, expanding consumer reach and enhancing brand positioning across price segments. It follows an integrated approach where physical retail, digital platforms and distribution networks collectively influence purchase decisions. With consumers increasingly initiating their journey online and completing transactions offline, the Company has established a cohesive omni-channel presence, ensuring consistency in brand communication across touchpoints.

The dual-brand strategy remains a core pillar, with Sleepwell positioned as a premium and aspirational brand driven by innovation and consumer experience, while Kurlon addresses value-driven and mass segments, particularly in high-growth regions. This balanced portfolio across premium, mid and economy categories supports both volume growth and value realisation.

The Company has also strengthened its retail footprint through significant showroom additions and a focused expansion of COCO stores to enhance in-store experience. Its e-commerce business continues to scale, supported by targeted campaigns, improved visibility and a gradual shift towards higher-value products.

Growth has been further supported by deeper market penetration through the U2O segment, enabled by an extensive dealer network across towns and states, along with targeted digital campaigns and direct consumer engagement initiatives. Product innovation remains integral, with portfolio expansion across adjacent categories including pillows.

Internationally, the Company continues to scale its presence in the GCC region through e-commerce platforms, retail expansion and local partnerships. The integration of Kurlon and expansion of Furlenco are enabling synergies across distribution and brand reach, supporting a more cohesive and scalable business model.

Company Outlook

The Company is well positioned to capitalise on opportunities arising from increasing awareness of sleep wellness, evolving consumer preferences and the continued shift towards organised and branded offerings. Growth is expected to be supported by stronger customer engagement initiatives, continued product innovation and the expansion of its integrated multi-brand platform across retail channels, including COCO stores, e-commerce and omnichannel formats. These efforts are further complemented by a deeper distribution network and broader market penetration across existing and emerging markets.

The Company will continue to focus on premiumisation, with emphasis on premium and luxury mattresses, foam-based solutions and select adjacent categories to enhance value-led growth, while strengthening its presence across key domestic and international markets. Simultaneously, investments in raw material capabilities, supply-chain resilience and operational excellence are expected to improve efficiency, strengthen competitiveness and support sustainable profitability. Supported by its established market position, diversified portfolio and disciplined execution capabilities, the Company remains well placed to deliver long-term value creation for stakeholders.

Environmental, Social, and Governance (ESG)

The Company has embedded ESG principles into its core strategy, aligning its sustainability roadmap with clearly defined targets for 2030 across energy, water, waste and social inclusion.

Risk Management

The Company operates in a dynamic business environment where macroeconomic factors such as inflation, interest rate movements and economic slowdown may impact consumer demand and input costs, while fluctuations in raw material availability and supply chain disruptions can affect production efficiency and product quality. Inventory management remains critical, as excess stock could lead to higher carrying costs and potential obsolescence. The industry also continues to witness intense competition from both organised and unorganised players, exerting pressure on pricing and margins, while evolving regulatory requirements and the presence of counterfeit products pose risks to compliance and brand integrity. In addition, changing consumer preferences towards innovative, sustainable and digitally enabled products, along with a growing shift towards online purchasing, are reshaping demand patterns.

To address these challenges, the Company follows a balanced approach through strategic sourcing, bulk procurement and supplier diversification to manage input risks, supported by continuous supply chain optimisation. Inventory levels are closely monitored through demand planning and a strong distribution network, while ongoing investments in product innovation, brand strengthening and operational efficiency help maintain competitive positioning. The Company ensures compliance through robust quality processes and product authentication measures, along with active market surveillance. It also continues to strengthen its digital capabilities and omni-channel presence to remain aligned with evolving consumer behaviour.

Human Resources

The Company recognises its workforce as a critical enabler of operational performance and long-term value creation. During FY 2025–26, the Company continued to align its human resources framework with business priorities, with a focus on strengthening organisational effectiveness, leadership depth and performance orientation. The performance management system was further refined to enable sharper goal-setting, clearer differentiation and stronger linkage between performance outcomes and rewards, supporting a more accountable and merit-driven culture. Organisational capability development remained a key focus area, with emphasis on internal talent progression, structured succession planning and deployment of talent across critical roles, supported by targeted learning and development interventions with increasing adoption of outcome-based and digitally enabled capability-building programmes.

At the same time, organisational structures were streamlined and role clarity enhanced to improve cross-functional alignment, decision-making speed and overall workforce productivity, alongside a continued focus on cost discipline and efficient resource utilisation. The Company continued to maintain its commitment to responsible employment practices, with sustained emphasis on statutory compliance, workplace safety and employee well-being, while progressing towards alignment with evolving labour codes. Employee engagement remained an area of focus through leadership connect and reinforcement of organisational values, supporting a cohesive culture and stable industrial relations through proactive and transparent communication.

Internal Controls

The Company maintains a robust and integrated internal control framework designed to ensure the integrity of financial reporting, safeguarding of assets and adherence to applicable laws and regulations. This framework is supported by clearly defined policies, standard operating procedures and a strong governance structure, enabling effective oversight across all business functions.

Risk assessment remains an integral part of the control environment, with a structured approach to identifying, evaluating and mitigating key business risks. These insights are embedded into the Companys strategic and operational decision-making processes, ensuring alignment between risk management and business objectives.

The Audit Committee plays a central role in overseeing the effectiveness of internal controls, supported by independent internal audits and periodic external assessments. Observations and recommendations arising from these reviews are systematically tracked and addressed, with a focus on continuous improvement and control strengthening.

The Company leverages advanced digital systems and enterprise-wide MIS to enable real-time monitoring, improve transparency and enhance decision-making. These systems support tighter control over financial processes, including budgeting, expense management and variance tracking, ensuring timely identification and resolution of deviations.

Sheela Foam continues to strengthen its control environment through the integration of processes, data and systems across functions. This integrated approach enhances operational discipline, improves responsiveness and supports the delivery of consistent and reliable outcomes across the organisation.

Cautionary Statement

The statements provided in the Management Discussion and Analysis Report outlining your Companys forecasts, assessments and anticipations are considered forward-looking statements as per relevant securities laws and regulations. Actual outcomes may vary from those indicated or suggested based on economic factors influencing demand and supply, pricing trends in both local and global markets where the Company operates, changes in government policies, tax regulations and other laws. The Company assumes no obligation to publicly update, modify, or revise any forward-looking statements based on subsequent developments, information, or occurrences.