Sheela Foam Ltd Management Discussions.


Global Economy

The global economy witnessed an unprecedented crisis in 2020 as the outbreak of the novel coronavirus (COVID-19) in China towards the end of 2019 spread rapidly across the globe. While ensuing lockdowns announced by all major economies played a critical role in saving lives, they resulted in severe damage to economic activities, thereby plunging the world economy into a recession. As per the International Monetary Fund (IMF), the global economy contracted by 3.3% vis--vis 2.8% growth registered in 2019. Substantial fiscal and monetary stimulus packages enforced by the governments and central banks across the globe have been playing a pivotal role in the economic recovery. Successful vaccination programmes will boost investor sentiment and will lead to kickstart private capital inflows and fixed capital formation.

(Source: IMF World Economic Outlook, April 2021)

COVID-19 Impact

The speed and strength with which COVID-19 has struck the global economies is unprecedented, posing a threat of a deep recession to most of the economies. Although vaccination drives have raised hopes of a turnaround in the pandemic, renewed waves and new variants of the virus pose concerns for the outlook._With Chinas quick recovery and better than expected GDP outturns in advanced economies, the global contraction for 2020 is estimated at 3.3%.

The strength of the recovery is projected to vary significantly across countries, depending on access to medical interventions, effectiveness of policy support, exposure to cross-country spill overs and structural characteristics entering the crisis. Strong multilateral cooperation is required to bring the pandemic under control everywhere. Massive vaccination drives and additional policy support in few large economies have raised hopes of a turnaround in 2021 with growth expectations of 6.0% followed 4.4% in 2022.

(Source: Issues/2021/01/26/2021-world-economic-outlook-update#:~:text=The%20global%20growth%20contraction%20 for,the%20second%20half%20of%202020).

Region-wise growth

As per the International Monetary Fund (IMF), Advanced Economies (AEs) declined by 4.7%, with the USA and Europe contracting by 3.5% and 6.6%, respectively, Emerging Markets and Developing Economies (EMDEs) clocked a relatively less contraction of 2.2%, the improvement largely reflects the rebound in the Chinese economy in the second half of CY 2020 post successful containment of virus spread in the country.

The sizeable fiscal support announced for 2021 in some countries, including most recently in the United States and Japan, together with the unlocking of Next Generation EU funds, will help lift economic activity among advanced economies with favourable drivers to trading partners. With growing vaccine availability, improved therapies, testing, and tracing, local transmission of the virus is expected to be brought to low levels everywhere by the end of 2022.

(Source: IMF World Economic Outlook, April 2021)

Indian Economy

In line with the global economy, India witnessed major economic disruptions in Financial Year (FY) 2020-21, as the outbreak of COVID-19 perversely impacted human health and safety of the countrys inhabitants. This prompted the government to undertake one of the worlds tightest lockdowns, bringing manufacturing and trade activities to a screeching halt. Prolonged lowdown exacerbated existing vulnerabilities of the country including the weakened financial sector, private investments, liquidity constraints and consumption demand. Mobility restrictions and social distancing led to unparalleled supply-chain disruptions and consumer demand fallout. This forced the Indian GDP to contract by 8.0% in FY 2020-21 as against a growth of 4.0% in FY 2019-20, marking a recession since 1980.

(Source: IMF World Economic Outlook, April 2021)

The government re-opened the economy in a phased manner since June 2020 with strict standard operating procedures. Despite the challenges posed by the pandemic in FY 2020-21, the outlook for FY 2021-22 seems promising. This is largely attributed to mass vaccination drives, normalising business activities, the governments thrust on reviving infrastructure sector, revival in housing demand backed by historically low-interest rates, improving banking balance sheet and Indias increasing prominence in the global supply chain.


Policy Reforms

The government announced a special comprehensive package of Rs. 20 lakh crore, equivalent to 10% of Indias GDP under ‘Self-reliant India movement to revive the countrys languishing economic activity. The Union Budget 2021-22 has focussed on several investments focussed spending programmes like the National Infrastructure Pipeline, demand-driven capex, and the Centres Production-Linked Incentive (PLI) scheme.

On the monetary side, the Reserve Bank of India (RBI) continued with the accommodative monetary stance by bringing key repo rate and reverse repo rate to 4% and 3.35% respectively to provide monetary stimulus and trigger economic growth back to the earlier trajectory. Backed by strong fiscal and quasi-fiscal measures, Indias GDP growth is likely to rebound sharply to 12.5% in FY 2021-22.

(Source: World Bank, IMF World Economic Outlook, April 2021)


Health & Wellness Industry

The health and wellness industry in India has become mainstream in recent years._ The societal and lifestyle changes due to increased globalisation have created greater awareness on the need of wellness. Growing prevalence of chronic lifestyle diseases is one of the key factors driving the growth of the market. Factors like rapid urbanisation and rising disposable incomes, along with the increase in the number of health-conscious consumers, changing millennial preferences over ‘material things,_are projected to drive the industry growth. Furthermore, the emerging trend of using wearable devices, such as fitness bands and trackers, is also providing a boost to the growth of the industry.

Health and wellness refer to the state of complete wellbeing of the body, mind and spirit. The sedentary lifestyles and hectic schedules,_ have encouraged the masses to adopt various healthcare activities, including yoga, meditation and athletics. The health and wellness industry is expected to see a positive growth in the near future owning to increased consumer demand for quality offerings to match their changing lifestyles.


Indian mattress industry

The Domestic mattress industry, which is heavily dependent on retail business, has been facing a subdued demand due to the screeching halt in the business because of the COVID-19 pandemic. While the actual sales of the retail establishments might be impacted, the online channel is seen bringing optimism. Since people have been confined to their homes because of the lockdown, they are looking at ways and means to make their stay comfortable. Of the many things that could come up for an upgrade is a mattress. And this could be an opportunity for the industry. The gradual recovery in the economic factors such as increased income levels and infrastructural developments, in terms of the increased number of residential units and hotels in the country have led to substantial growth of the mattress industry.

The India mattress market is segmented into PU Foam, Rubberised Coir, Spring Mattresses and others.

The unorganised sector, primarily dominates the Indian mattress market; however, with growing awareness and an increase in the earning capability of consumers, the organised sector has gained prominence in recent years. A visible shift has been observed over a period of time in the consumers perspective, where the main focus is on the comfort and functionality of the product. The demand for customised and luxury mattresses has been increasing, making the companies to leverage new techniques to utilise their resources and technologies. Mattresses are no longer considered as mere consumer durables; they are an indicator of the quality of life.

(Source: why-indias-mattress-industry-is-having-sleepless-nights/ article31572798.ece)

Growth Facilitator of Indias Mattress Industry:

1. shift in product preferences: Increasing awareness among people about the benefits of purchasing a better-quality product is augmenting the demand for comfortable products that align to health benefits.

2. Increased awareness of quality mattresses:

Increased awareness of the benefits acquired from using the right quality mattresses for enhancing sleep experience is fuelling the demand for quality mattresses.

3. Demand for innovative products: Increasing disposable incomes, rapid urbanisation, growing numbers of millennials have been augmenting the demand for quality and customised products.

4. Growing awareness of branded products: Branded mattresses have been witnessing growing demand owing to the boost in the housing and institutional sector.

5. Shift to the organised market: A major shift from unorganised to the organised players has been largely seen with the implementation of GST norms and formalisation of the economy.

These factors are expected to boost the growth of the organised mattress industry, with a market share of 42% by the fiscal year 2022.

A shift in consumer choices:

Quality: Traditionally, in India cotton mattresses are used which are highly susceptible to germs, dust mite attacks. Their low quality and sagging issues require increased maintenance.

Comfort: Consumers preferences are changing towards good quality mattresses that provides comfort and quality sleep as sleeping disorder cases are increasing.

Changing preferences: Consumer preferences have shifted towards premium quality customised products from traditionally used cotton mattresses.

Research: Development in technology has helped in thorough research and development of a wide range of personalised products as per evolving customer demands.

Technology: The advancement of technology has helped in keeping the mattresses, fresh, durable, lightweight and breathable by using anti-bacterial treatments and new foaming technology. This technology is helping manufacturers to produce a wide range of tech-driven products to cater to consumer demands.

Organised Mattress Market

The organised mattress market is classified into three categories, PU Foam with approximately market share of 50%, Rubberised Coir constituting 30% and Spring Mattresses constituting 20%. Indian consumers largely prefer the PU foam mattresses as they are durable, comfortable and relatively reasonable. The growing end-user industries such as bedding & furniture, electronics, automotive, and building & construction are further augmenting the growth of PU Foam. Rubberised coir mattress market witnessed a contraction in demand due to the rising price of rubber combined with sagging and quality issues. Spring mattresses, on the other hand, are seeing a surge in demand due to urbanisation and increasing spending power. Being on the premium price side, it also provides quality and comfort.

Residential and institutional users are prime consumers of branded mattresses in India. The residential sector is the major contributor in the mattress market in comparison to the institutional sector.

Distribution Platforms

The organised mattress market considers sales from both online and offline distribution channels. The offline market has a significant share of sales largely dominated by retail sales through distributors/dealers or own franchised stores. One of the advantages of offline distribution channels is that an end-user can get advice from professional sales personnel. This factor plays a significant role in the offline segment to maintain its market position._

The online mattress market is gaining momentum in India largely due to ease, comfort, competitive pricing options, faster delivery and an array of choices for customised products. The demographic Indian profile is swiftly changing buying mode online which has been fuelling online sales. Doorstep delivery, the trial benefits and attractive packaging is further strengthening customers demand.

Indian Flexible Pu Foam Industry

The Indian foam industrys future seems promising with increasing opportunities in various applications, such as building and construction, bedding and furniture, transportation, electrical and electronics, footwear and others. The major growth factors for this market are growth in bedding and furniture industry, high demand of PU foam in building insulation for energy conservation and increasing automotive production._

Emerging trends which have a direct impact on the dynamics of the PU foam_ industry, includes the emergence of carbon dioxide-based flexible foam and usage of natural based raw materials to manufacture PU foam._ The developing countries like India, Brazil, and China have been expanding home furnishing sector which fosters the demand for PU foam in the region.

The flexible PU foam is manufactured as Slab Stock Foam and Moulded Foam. Slab stock foam holds a major share in the market, comprising 65-70% share. It is largely used in industries like mattresses, furniture, and footwear, among others. On the other hand, moulded foam, constituting 30-35% of the organised market, is majorly applied in the automotive industry. Flexible foam is expected to remain the largest market by value and volume due to its lightweight, durable, resilient and energy absorption properties.


Market Drivers and Opportunities

Growing consumerism: India is gradually shifting from a production-oriented mixed economy to a consumer society. The consumption growth will be supported by a 1.4 billion strong population that is younger than that of any other major economy._ The demographic young profile, having a higher spending power, is more brand conscious and has complete information about the product. Rising consumerism is augmenting the demand for comfort sleeping products which has been a major growth driver to the modern mattress market.


Greater spending propensity: Higher disposable incomes can be seen as an indicator of peoples standard of living and welfare. Increasing income level and higher disposable income create a thrust to spend more on luxury and premium quality products. Demand of mattress market has been growing because of rising incomes and expansion of the middle class and high-income strata.

Increasing incidence of lifestyle diseases: Back pain, spine-related problems, orthopaedic ailments occurring due to sedentary lifestyles are fuelling the demand for quality home and well-being products. The demand for quality sleeping products has been augmented by increasing incidences of lifestyle diseases which has led to greater awareness on health and comfort.

Evolving preferences: Consumer preferences have been making a radical shift owing to a better standard of living, busy schedules, sedentary lifestyles, changes in consumer taste and preferences and advancement in technology. These factors, in turn, will boost the demand for bedding products and mattresses.

Rising share of the organised sector: With the growth of international players and branded companies, consumers are shifting from traditional, low-quality products to branded mattresses. The shift in demand for better quality and customised products has been resulting in a significant rise of organised players. The organised sector in the mattress industry is further augmented by the formalisation of the economy.

Growth in end-user industries: The government initiatives like Smart City, Housing for All combined with favourable measures and policies would increase the number of residential units and favour real estate segment, which will lead to higher mattress consumption, thereby fuelling the growth of the mattress industry.

Challenges transportation and Warehousing: The PU foam and mattresses being voluminous in nature, creates a challenge for warehousing and transportation. It demands huge cost, making long-distance transportation infeasible.

Lack of consumer awareness: Traditional mattresses and other sleeping surfaces earlier dominated the market due to lack of consumer awareness. Consumers were not adequately informed of the benefits of a good quality mattress.

Raw materials: The price of key raw materials for foam viz. Polyol and TDI have doubled during the year 2020-21,due to supply chain issues, temporary shutting down of some global plants etc. Not only that the prices have gone up, there has been global shortage of these materials. This has seriously impacted the PU Foam business in India.


The flagship company of the Sheela Group, Sheela Foam Limited was incorporated in 1971. The Company enjoys a dominant presence overseas, with its products being exported to over 20 countries worldwide. Professionally managed by a highly qualified team, the Company is the first mattress and home comfort products company in India to be listed on the stock exchanges.

The Companys market-leading research and development, encapsulated in the promise of long-lasting benefit to the end user, reinforces brand awareness among consumers looking for real value. The Company is backed by an extensive sales and distribution network, making it close to the consumer for envisioning a healthy future together.

Product Portfolio:

Mattresses: My Mattress, Spring range, Technology range, Comfort Cell range, Back support range, Flexi PUF range economy range

Home Comfort Products: Furniture Cushions, Pillows, Comforters/Duvets, Sofa-cum-Beds

technical Foam Products: Automotive foams, Reticulated foams, Ultraviolet Stable foams, Sound Absorption foams

Manufacturing Excellence

The Company has 16 manufacturing locations across India, Australia, and Spain, engaged in the manufacture of evolving products that provides the perfect mix of comfort and support. As a revolutionary enterprise, the Company has strong abilities of quality engineering and technological developments.

Brands built over consistent quality and innovation

The Company strives to deliver premium and personalised products to keep up with the brand name. The brand has grown over the time with developed products and created a reputation for own. Other brands of the Company include Feather Foam and Starlite, which are low-priced mattresses for consumers. These brands have qualified the Company to boost its share in the organised mattress market.

technological innovations in sleepwell:

Due to continuous R&D, Company has developed "Neem Fresche" technology providing several health benefits to the consumers. All the products of the Company are treated with Neem Fresche.

Developed high performance flame retardant foam for mass transportation and institutional usage.

Various cutting and packaging equipments, which were hitherto imported, are now developed in-house, resulting not only in substantial cost savings but also in conservation of Foreign Exchange.

Other Initiatives: As on 31st March, 2021, the Company has increased its Exclusive Branded Outlets to more than 5,400.

Deeper Penetration: Company has expanded its dealer network to various Tier III and IV towns. The number of total dealers has crossed 11,500.

Online sales: Company has become aggressive in Online Marketing. Company has registered growth of 74% of its Online Brand SleepX in FY 2021 compared to FY 2020.


During FY 2020-21, net revenue from operations on standalone basis were Rs. 1,690 crore as compared to Rs. 1,755 crore in 2019-20, due to the COVID-19 disruptions. Profit after tax for the current year increased to Rs. 181 crore from Rs. 166 crore. The net revenue from operations from Australia increased to AUD 81.08 million from AUD 66.1 million. The net profit after tax increased to AUD 4.84 million in FY 2020-21 from AUD 4.08 million in FY 2019-20. The net revenue from operations from Spain increased from Euro 6.48 million to Euro 39.75 million. The Net profit increased from Euro 0.69 million to Euro 4.09 million. On consolidated basis, net revenue from operations increased to Rs. 2,435 crore from Rs. 2,174 crore. On consolidated basis net profit after tax increased to Rs. 240 crore from Rs. 194 crore last year.

Key Financial Ratios Standalone Operation as per SEBI Listing Obligations and Disclosure Requirements (Amendment) Regulations, 2018

2020-21 2019-20
Debtors Turnover 11.67 times 15.32 times
Inventory Turnover 8.59 times 11.03 times
Interest Coverage Ratio 29.41 times 28.13 times
Current Ratio 1.83 2.36
Debt Equity Ratio 0.00 0.00
Operating Profit Margin (%) 11.86 10.91
Net Profit Margin (%) 10.72 9.43
Return on Net Worth 18.32 19.94
(RONW) (%)


Evolving with the changing demand

The Company is committed to developing personalised products to cater to the increasing demand. The Companys wide range of products, know-how and manufacturing capabilities helps it to produce higher-margin products, including more cultured grades of technical PU foam.

Widening distribution channels

The Company is aiming to expand its domestic retail presence and continue to sell its low-priced products in the rural market. Infrastructure development and expanding distribution channels in newer geographies catalyse its reach in remote areas which has a demand for low-priced products.

strengthening Brand presence

The Companys low-priced mattresses – Starlite and Feather Foam – provide adequate growth drivers to pierce in the rural retail market. The Company continues to invest in strengthening its brand presence and strives to accomplish this with brand promotion and marketing initiatives, strengthening the distribution and retail network, among others. It seeks to launch competitively priced products to gain higher volumes.

Leveraging E-commerce

To keep pace with changing times, the Company is using an e-commerce platform for the sale of mattresses and allied products. The Company alongside using its own website to showcase product line-up and attract sales also uses marketplaces like Amazon and Flipkart to retail its goods. The Company aims to augment its top line and bottom-line growth in the future with higher e-commerce penetration.


Macro-economic Risk

Macro-economic risks like the ongoing second wave of the COVID-19 pandemic, the slowdown in the end-user industry, moderate growth of housing, hospitality and automotive sectors, may impact the growth of the sectors. Since the Company is largely dependent on end-user industries, its performance gets directly impacted due to external factors affecting those sectors.


Greater demand conditions, positive government reform measures, increasing infrastructure development are providing boosters to the economy. To combat the economic disruptions caused by COVID-19, the government and major financial institutions have been enforcing a number of reform packages to balance the economic consequence. Amidst, all challenges, India continues to be amongst the fastest growing economy.

(Source: economy/indicators/india-to-be-among-fastest-growing-emerging-economies-in-fy22-rating-hinges-on-deficit-debt-sp/articleshow/81054307.cms?from=mdr)

Rapid urbanisation, a growing number of millennials, rising disposable income, growing middle-class are fuelling the growth for quality products and services.

Formalisation of economy, increasing awareness for high-quality mattresses are augmenting the organised sector share in the mattress market.

The Companys subsidiaries in Australia and Spain helps to penetrate into the overseas market and also reduce overdependence on the Indian economy.

Competition Risk

The growth opportunities for the organised players have been increasing due to increasing demand and reduction in GST rates. The number of players operating in the industry has been growing with the increasing number of the organised mattress market players resulting in tough competition. Failure to produce high-quality products to meet the demand may lead to loss of market share.


The Company has established itself as a trustworthy brand by producing a wide range of mattresses and home comfort products as per the consumer choices. Its flagship brand Sleepwell enjoys higher customer reliability.

The Company strives to augment its R&D activities and continues to develop new technologies for bringing premium and customised products. The Company is backed by advanced manufacturing equipment and improvised shop floor operations, which provides higher operational advantages.

The Company aims to offer the right quality mattresses through technology initiatives like Comfort Cell, Neem Fresche. Technology helps the Company to create quality and innovative products and services. Further, the extensive network helps to boost the sale of the premium products.

The Company also focusses on fulfilling the demand of certain sections with its low-priced mattresses. This helps the Company to stay in the competition with the unorganised sector.

Inventory Risk

In case of being unsuccessful in marketing and selling products, huge inventory pile-up may pose challenges to the Company.


The Company through its wide distribution channel of more than 110 exclusive distributors, more than 11,500 retail dealers, over 6,100 multi-brand and 5,400 exclusive brand outlets ensures balanced and orderly sales.

The Company leverages on brand visibility mechanism and invests in brand building and advertising costs to strengthen its presence across various mediums.

It ensures efficient product distribution with the help of robust IT infrastructure and inventory management. The system ensures real-time inventory management and makes product available on time.

Raw Material Risk

Production is completely dependent on an uninterrupted supply of raw materials, any disruption in it may cause hamper in the production. A large portion of raw materials being imported, currency and exchange rate fluctuations, may affect the profitability.


The Company makes bulk purchases of key raw materials (Polyol and TDI) at competitive rates. It strikes a balance between imports and local procurement of raw materials.

The Companys long-standing relations help it to procure raw material at optimal rates.

It minimises the risk of raw material shortage in unavoidable circumstances by having sufficient storage of raw materials to meet the demand.

Counterfeiting Risk

Failure to address product counterfeiting and quality issues, may result in the lack of customer trust, loss in sales and severe impairment to the brand name.


The Company periodically checks the market to track and avoid sales of fraudulent and counterfeit products.

Investments have been made towards the introduction of RFID micro-chips in mattresses to enable the Company to check genuine products.

Internal Controls

The Companys internal control framework centres on strong governance, vigilant finance function and independent internal reviews. Risk evaluation exercise prioritise risks facing the business, on the basis of which strategies are formulated. The Audit Committee periodically reviews and takes suitable actions for any deviation, observation or recommendation suggested by the internal auditors. The Company strives to follow the best practices in corporate governance. Well documented policies and procedures enable it to strictly adhere to all applicable procedures, laws, rules and statutes. The Companys robust IT systems safeguard its sensitive data and ease out audit process. Accounting Standards are strictly followed while recording transactions. A host of strategies are devised in addition to robust MIS systems, for real-time reporting, so as to control expenses. Any variance from budgetary allocation is promptly reported and corrected to ensure strict compliance.

Human Resources

The Company has experienced and talented pool of employees who play a key role in enhancing business efficiency, devising strategies, setting-up systems and responding to an evolving business environment. The Company has embarked on several human resource initiatives to enhance the productivity of the organisation. The Company endeavours to provide a safe, conducive and productive work environment. Such initiatives help to attract and retain the best talent across the industry. The Company ensures equal access to opportunities in the areas of recruitment, training, career development and advancement regardless of their gender, age, racial/ethnic background, religion or social status. The Company follows hybrid culture in practicing work from home procedure. The Company also extended insurance coverage for all its employees. Stringent adherence to the Code of Ethics and fair business practices is ensured. As on 31 March, 2021, the employee strength of the Company stood at 2,822.


The statements in the Management Discussion and Analysis Report that describes your Companys projections, estimates and expectations are "forward-looking statements". They are within the meaning of applicable securities laws and regulations. Actual results could differ from those expressed or implied depending upon the economic conditions affecting demand/supply, price scenario in the domestic and international markets in which it operates, changes in government regulations, tax laws and other statutes. Your Company undertakes no responsibility to publicly amend, modify or revise any forward-looking statements on the basis of any subsequent development, information or events.