Thank you, Shailendra. Thank you all for joining on to Sheela Foam Q4 FY26 and FY26 Earnings Conference Call.

We have with us Rahul, Chairman and Managing Director; we have with us Rakesh, Deputy MD; and Amit, Group CFO. I would request Rahul to start the call with initial remarks, post which we'll have a Q&A session.

Over to you, sir. Thank you so much.

Shailendra-ji?

Hi. Yep.

You can open the lines for the management. Rahul will have to start with the comments, please.

Yeah.

Hello, Rahul?

Ji.

Hi. Hi, sir.

I think you got disconnected. I would request you to start the call with initial comments, post which we'll have a Q&A session, sir.

Over to you, sir. Thank you.

Yes.

Good afternoon, ladies and gentlemen. At the outset, let me thank you all for attending this conference call to discuss our operational and financial results for quarter four and the financial year ended March 2026.

I do hope you've gone through the results and the earnings which have been uploaded on the website. FY26 has been a year of implementation of the benefits of the Kurlon acquisition and its integration with Sheela Foam.

Both Sleepwell and Kurlon brands delivered strong growth, and our foam segments also recorded commendable momentum. The broad-based performance has translated into a healthy growth across both revenue and profitability.

I'm pleased to share that the company achieved several milestones in FY26, including highest ever annual foam production, highest ever top line, and the highest ever EBITDA. This reflects the strength of our integrated platform focused on execution and a continued commitment to a profitable growth.

We're also cautious and remain watchful of the evolving situation in the Middle East and its potential implications for raw material availability and the supply chains. The company, till now, was able to navigate this environment without any material disruption, and I hope that we continue to do that.

Our long-standing supplier relationships, both in domestic and international markets, ensured continued availability of key raw materials such as polyol and TDI. This ensured that the customer servicing without disruption and also increased the top line in quarter four.

This reflects the resilience of our sourcing network and the strength of our supply chains relationship. For Q4 of last year, our Indian operations, which are now our standalone business, demonstrated a revenue growth of 24%.

For a full year FY26, the growth was 11%. The volume growth for full year was around 15%.

This should also further show positive movement as selling prices are bound to be higher in FY27 as compared to FY26, and we are all aware that the higher raw material prices will be contributing to that. The core EBITDA margins for Q4 climbed to 11.5%.

For full year of last fiscal, the core EBITDA margins stood at 10.7%. This indicates that we are already in a 11% to 12% bracket and should move further onwards with growth.

The Kurlon acquisition has moved beyond integration and is now visibly contributing to the group's operating performance. Our business segments have also shown healthy growth during the year.

Mattress volumes grew by 13% year-on-year in quarter four FY26 and by 12% for the full year. Value growth in the mattress segment was 13% in Q4 and 10% for FY26.

Growth during the year was well distributed across both Sleepwell and Kurlon, supported by deeper distribution, sustained brand investments, sharper channel execution, and the benefits of a more integrated operating platform. On the retail side, we added approximately 600 net new showrooms during FY26.

This further strengthens our market reach. Kurlon showroom expansion, particularly in Northern India, continued to gain encouraging traction.

Alongside this, we also continue to develop adjacent home comfort categories, including pillows, as part of our broader effort to deepen consumer engagement across the comfort portfolio. Our e-commerce business also continued to scale strongly during FY26.

Sales on our own websites, which we call as Brand.com, grew by 136% year-on-year, and sales on platforms grew by 39% year-on-year. This performance has been driven by a focused digital strategy, targeted consumer marketing, a sharper online portfolio, and better alignment between product, pricing, and fulfillment capabilities.

The My Mattress proposition and our online-led consumer initiatives have helped strengthen our direct engagement with consumers. Our unorganized to organized business, which we earlier used to refer as STI, or Small Town India initiative business, now operates through 8,400 dealers and reaches over 5,000 towns across 24 states.

In FY26, this U2O business delivered volume growth of 65% and value growth of 111% on a year-on-year basis. This growth has been supported by continued product innovation and by strengthening deeper distribution reach in the markets.

In foam business, for Q4 FY26, volumes grew by 34%, while value growth was 36%, aided by better price realizations. For the full year of last fiscal, volume growth was at 18%, while value growth stood at 14%.

This growth was supported by a broader customer pipeline, disciplined market development, and a continued focus on higher value applications. Overall, our India business delivered a strong FY26 performance, driven by the strength of our brands, expanded distribution reach, sharper channel execution, and sustained operating discipline.

The year also demonstrates that growth and profitability can move together when the business is integrated well and execution remains consistent. I'm also pleased to share that the board has recommended a dividend of 20% for FY26, subject to approval of shareholders.

This is significant milestone for the company, as the profitability of the business has enhanced after successful integration of Kurlon, and with significant reduction of debt levels, the group has strengthened its cash generation profile, enabling it to share profits with shareholders. This marks the first dividend recommended by the company since listing, for that matter, forever.

This is the first time the dividend is being recommended. Both Australia and Spain have delivered stellar operating performance during the year.

In Australia Joyce, revenue stood at ₹422 crore in FY26, and EBITDA margins improved to 10% for the full year, which is a significant improvement of almost 400 bps over FY25. The improvement in profitability profile was due to implementation of strategic yield improvement programs, renegotiating prices with key customers, and supply chain restructuring institutionalized in last year.

In Spain, revenue stood at ₹391 crore in FY26 and EBITDA margin of 10.4% for the full year as compared to 8.4% in FY25. As we clearly see, in both Australia and Spain, the EBITDA margins have increased.

On Furlenco, I'm happy to share that business is expanding and is well-poised on its growth journey for FY26. Furlenco reported a revenue of ₹370 crore, a growth of over 60% year-on-year.

The company clocked a PAT of close to ₹60 crore compared to ₹3 crore in FY25, thereby marking significant improvement in its performance. Furlenco has been able to achieve this growth while maintaining a stringent cost discipline and fiscal prudence.

As I had spoken in our last call about integrating Furlenco and Sheela Foam's omnichannel network and establish Furlenco's presence across Sleepwell and Kurlon stores, I'm happy to share that we have seen encouraging response from customers visiting our 40-plus integrated stores wherein they are able to get offerings from both Furlenco and Sheela Foam. We are constantly increasing such integrated stores and hope to cross 100 stores during current year.

Next, our IT business, Staqo, has also continued to evolve as a differentiated digital capability within the group, with its solutions now supporting enterprise workflows, analytics, and technology-led decision making across sectors. During FY26, Staqo delivered a revenue of ₹70 crore.

We see Staqo not merely as a technology subsidiary, but as a strategic digital asset that strengthens the group's broader capabilities in automation, data intelligence, enterprise efficiency, and artificial intelligence. Coming to ESG, our focus remains on embedding sustainability into the way we operate, rather than treating it as a separate initiative.

During FY26, we made steady progress across our identified priorities, with continued emphasis on energy efficiency, responsible resource management, waste reduction, workplace inclusion, and of course, fire safety. We have already operationalized a 500 kW solar power plant at our Jabalpur facility and are progressing with over 1,000 kW of additional solar capacity across other manufacturing locations.

We're also able to augment gender diversity in our workforce to around 8% during the year. These actions reflect our commitment to building a more responsible, inclusive, and efficient operating platform.

Our responsibility extends beyond business performance to the communities we serve and the lives we are able to touch. Our CSR agenda continues to be anchored around two key areas where we believe we can create meaningful and a lasting impact: emotional wellness and skill development.

Through our emotional wellness initiatives, we are able to touch hundreds and thousands of lives across the country, thereby helping build wider awareness and a sustained national conversation around preventive emotional well-being. In skill development, our programs across armed forces preparation, fashion designing, paramedical training, and soft development are focused on equipping young men and women with livelihood-linked capabilities.

These initiatives reflect our belief that true value creation is measured by the positive and enduring impact that can be created on the society around us. With this, I will now request our Group CFO, Mr.

Amit Kumar Gupta, to take you through our financial highlights. Over to you, Amit.

Thank you, sir. Thank you for your inputs on our business and strategy going forward.

Just to update on the financials, just some numbers here. Our volumes and profitability for Q4 and financial year '26 continued strong trajectory, supported by healthy growth and sustainable margins.

On consolidated basis, revenue grew by 24% year-on-year in Q4 to ₹1,050 crore. For financial year '26, the consolidated revenue grew by 11% YoY to ₹3,821 crore.

On a standalone basis, revenue again grew by 24% YoY in Q4 to ₹819 crore, whereas in the financial year, it grew by 11% YoY to ₹2,962 crore. Our consolidated core EBITDA stood at ₹121 crore for the fourth quarter, growing by 90% on a year-on-year basis.

Core EBITDA margins improved by around 400 basis points to 11.5% from 7.5% last year. Financial year '26 consolidated core EBITDA stood at ₹414 crore.

For the first time, we as a company have crossed ₹400 crore by growing by around 46% YoY with a margin expansion of 261 basis points to 10.8% for the year. This improvement was driven by incremental sales, better gross margins, and disciplined controlled over operating or fixed cost.

I am pleased to share that the consolidated PAT for Q4 stood at ₹92 crore, representing a 7x increase on a year-on-year basis. For financial year '26, the consolidated PAT stood at ₹161 crore, growing by around 78% YoY.

If we look at the yearly figure of ₹171 crore, out of this, ₹144 crore came in the last two quarters only. In the first two quarters, we had certain impacts of mark-to-market on the investments that we have put in government securities.

During the last two quarters, we have done ₹144 crore, which means a run rate of more than ₹70 crore per quarter. With the expected growth, we expect to continue the momentum going forward.

During financial year '26, the company also reduced net debt by ₹156 crore, reflecting the underlying cash generation of the business and continued focus on balance sheet discipline. At the time of Kurlon's acquisition, the consideration was higher than the tangible value of the asset.

This is generally the case when you acquire a strong brand which provides returns over a longer period of time. However, to look at the returns from a shorter period of time, when we exclude the intangible portion of the investments and calculate return on capital employed, we see that it currently stands at around 18%, which, even before Kurlon acquisition, was around 17%.

This demonstrates that our return matrices have also improved in comparison to what it was before Kurlon acquisition, and we are only in the midst of our journey. With this, I request the moderator to open the floor for questions and answers.

Thank you.

Hi, sir. Good evening, and thank you for the opportunity.

Congratulations for a decent performance. Rahul, just firstly to start with going forward, fiscal '26 was a year of hard work to get this growth and profitability back.

I think keeping the momentum going from here on, what are the top two, three things you're spending time on or the team is spending time on in terms of both staying ahead of competition and at the same time improving the return on capital for the business? If you could share your top-down thoughts for the entire business, overall how you're looking at next two, three years, that would be really helpful.

That's the first question.

Amit, you want to answer that?

Yeah. Rahul, as I outlined in our earlier conversations also during these calls, we had taken a target that we would be trying to reach a growth rate of around 15% plus.

Now since raw materials have increased last year, this should be better than 15%. First and foremost thing is how we can strengthen our different product lines and our different business lines to deliver the growth that we have committed to the market and consequently improve the profit line.

Also going forward, we would be looking into very complementary business lines which are related to us, and some of them we have already initiated. For example, the pillow segment, that's a market of around ₹100 crore, but we till now were giving out only pillows as free along with the mattresses.

Now we will be treating it as a separate category and building it upon. Thirdly, the two segments, which are the e-commerce segments and the U2O segments, will continue to be our strong focus areas because these are the areas which we need to penetrate deeply, not only to maintain our leadership status, but also to grow further in this country, which has around 85% of its market currently occupied by unorganized and traditional mattress segment.

I think not on a one- or two-year, but on a three- to five-year horizon rate, our objective would be to get into related product category so that we are a full product player and increase our penetration across the country. Maybe Rakesh has something to say, that's fine?

No, that's fine.

Yeah. Fine.

That would be sufficient, Rahul. In case you have anything addition to ask, please let us know.

Sure. Thank you so much.

It gives some clarity. Second was I just wanted to touch upon the input cost inflation bit of it.

If you could just talk about where are TDI and polyol pricing right now, and how do you plan to pass it through both for mattresses and foam segments? If you could just talk about what kind of price increases you're looking forward to across segments, and is that sufficient enough to let the margin actually sustain or maybe expand going forward?

That's my last question.

That's a extremely difficult question and probably multiple questions put all together. Rahul, the pricing of TDI and polyol is like crystal ball gazing at the moment.

It's not moving only in one direction, but it's also moving in both directions and moving in large quantities. What used to be some ₹2, ₹3, ₹4, ₹5, ₹10 a kilo in a year that you would see something moving up or down, or up and down, now you suddenly have ₹40 and ₹50 at a time happening multiple times in a month.

Therefore, to handle that, we are learning how to do it. Thankfully, some of our segments help us, like the B2C segment.

There are some others which are stable, but also move slowly, don't move along with the raw material market, which is a B2B segment. Then there is also the industrial segment, which moves even quicker than the raw materials.

It's a mixed bag. It's something that we can't say that we have full handle on, but should be able to sail through and believe that as soon as the war kind of finishes off, this oscillations or volatility will reduce.

Now, you are asking what the future of these prices of the raw materials would be. They are definitely at a high level at the moment.

I can only give you a last 5 years average where polyol should be and where TDI should be. Polyol should be around 120 bucks, and TDI should be around 200 40 or something like that.

At the moment, they are both above that. Very difficult to predict.

I cannot add anything more. Yeah.

Rakesh, you want to add? Yeah.

I can just say that we have been also able to pass on the cost increase due to raw material across all the channels: B2C side, the industrial foam side, and partly also on the B2B side. We see a opportunity also for a margin expansion, which we've experienced in March and also going forward, that opportunity exists.

As far as raw material, like Rahul rightly put it, the raw materials definitely are looking southwards now. It's a very volatile situation.

It's a function of both availability and the pricing. While it is going down because of the demand, but the moment somebody picks up a good quantity, it starts looking northwards.

It's a play of supply chain currently.

Got it, Rakesh. Could you quantify the price hike?

Currently, TDI's the main supplier is GNFC. Their price is about 275, and polyol is around 180.

Rakesh, I was actually asking about the price hike taken for our mattresses and foam. What is the pass-through you've taken so far?

That's what I wanted to. Ritesh,

very difficult to give in percentage terms. They are different for different categories, as Rakesh just mentioned, that in mattresses, we have been able to take decent one, B2B a little lesser, that industrial segment, yes, we can pass on immediately.

Yes, polyol and TDI on an average increased between 25% to 35%, and depending on how much foam is consumed in different categories, we have been able to increase prices to offset those price increases and to some extent maintain our margins also.

Got it, Amit. Thank you so much.

I'll get back in the queue. All the best for the next year.

Thank you.

Thank you for taking the question, and congratulations, better set of numbers this time around. The first query is just on the marketing expenses, because we've been bringing that out historically.

I didn't quite catch it in this presentation. How much would we have spent in the fourth quarter, and how much would we, as a percentage of sales, would be for FY26?

Rahul

Arjun,

sorry, Arjun, for the entire year, it should be around 4.5%, almost similar to what we did last year. Quarter-on-quarter is a fraction that moves on.

I think it would be a little lesser because Q3 is the highest percentage we spend upon. Maybe around 4-odd percent.

Fair. Helpful.

Sir, the second question is on the depreciation side. Just wanted to understand, post these changes, what outlook do we anticipate for FY26?

What should be the number we should work with?

'27 or '26?

'27, sorry. '27.

Rahul, I think at a consolidated level, we would be looking for a depreciation based on current assets, and I'm not commenting

what

incremental depreciation we might have for capital investment that you do next year, should be around ₹140 to ₹145 crore at a consolidated level.

Sure. This quarterly run rate of 35 is essentially one can annualize this number.

Yes, yes. You can.

Sure. The final bit on CapEx for next year, what's our outlook?

Including maintenance and some debottlenecking capacities, because we have grown by around 15% in volume this year, and we anticipate even a higher growth in the next year. We will need certain debottlenecking CapEx at certain of our facilities to meet this volume.

We should be somewhere between ₹125 to ₹150 crore.

This is including maintenance CapEx?

Everything. This is including marketing CapEx, which is for opening of new stores.

This is maintenance CapEx for all our plants both in India, Australia, and Spain. This is also any new CapEx we need for debottlenecking.

Everything included.

Perfect. Thank you so much for answering these questions.

Thank you.

Thank you so much, sir, for giving this opportunity. Sir, my first question is the unorganized to organized segment showed a massive growth.

How scalable is this market strategy across remaining states where you do not yet have a major presence?

Sorry, Deepali, you were not very clear. We could understand that U2O has shown a high growth, but after that, what you said, please, can you repeat?

Sir,

my question is the unorganized to organized segment showed a massive growth. How scalable is this market strategy across remaining states where you do not yet have a major presence?

Thank you. My first question is on the margins.

Is it fair to say that, in the backdrop of escalation in raw material prices, our EBITDA margins will be under pressure in Q1 or Q2?

Sorry, I could not get your question. Can you please repeat?

In backdrop of raw material prices, our EBITDA margin should be under pressure in Q1 or Q2, right? Because Q4 we must be having stocks at old prices.

The inventory may be there, the raw material inventory. Q1 and Q2, we may have to use the inventory which is bought at higher prices, and I'm assuming that there'll be some pressure on EBITDA margins in Q1 or Q2.

No. If you see our gross margins, see what happens is whenever there is a raw material price increase, it is not that we instantly can increase the price of our products to the consumers also.

It's a process which takes around 10 to 15 days, and same is the quantum of inventory that we have. The higher price inventory almost maps up with the increase in the prices, and that's why you see there is not a very material increase in gross margins in the quarter as compared to the fourth quarter last year.

It would be almost same, 50, 100 basis point improvement. Technically, there was no impact of lower raw material prices when these prices went up.

Similarly, in the first and the second quarter, we don't expect any impact of higher raw material prices. I don't say there might not be 50, 100 basis points, there can be, because the prices are very volatile currently.

Not more than that. What leads to EBITDA margin, and which has been done in the fourth quarter, is an increase in volume.

We are a 30% plus contribution margin business, and whenever there is an increase in volume, that directly flows to the bottom line, strengthening the EBITDA margin. That's the reason why we will be focusing on growth which we have done last year and we will be doing in the current year.

Right. I was just trying to figure out, if the poly prices have gone up from, say, 120 to 180, I'm sure we'll not be able to pass on such a large increase, even of a 20%, 25% increase is difficult to pass on.

How are we confident with, I'm just

I'll take that. I think what Rahul mentioned as 120 was the ideal price for polyols.

And 120 was the price in January. The price started rising from February, and then there was a sharp spike towards end of February when the war started.

The polyol price had gone up to 220. What Amit is saying is when it was rising, we were able to take price increasing.

Now the highest price that it has gone up to is 220, and currently, it is at 180. It is oscillating between 200 and 180.

The part price increase has already been taken. Therefore, it will not impact the margins going forward.

Great. My last question, yeah.

No, go ahead, Amit.

Understood. Thanks.

My last question is on Furlenco. What is our plan for say next 3, 4 years?

How do we see that business growing? Any long-term plans there, 3-, 4-year plans?

Furlenco already is at about ₹370 crore. Next year's plan is about ₹500 crore, and it's tracking well.

I think two things that we look forward to: one is that when would be a right time for doing an IPO. We will take our decision somewhere in the next 3 to 4 months' time.

Right, sir. My last question is on the debt levels.

What could be our debt levels for next 2 years, '27 and '28?

To answer that question, I'll divide the debt between two parts: one, the debt which is outstanding on the Indian books, and the second, the debt which is outstanding in Spain and Australia. Spain and Australia is around ₹350-odd crore.

700.

That is ₹350 crore, which is self-liquidating, is being paid off from the cash flows of Australia and Spain itself. The other ₹300-odd crore is in India, which I think if you see or utilize the entire cash flows what we are anticipating, should be paid in the next 1, 1.5 years.

Great. Thank you very much.

Okay. Thank you.

Sir, I couldn't get the answer on Furlenco. First, Furlenco is now a materially ₹60 crore profit company, and we have round about 50%-plus holding.

What is the course of business plan there, and what kind of ROE that business operates at?

We don't hold 60%. I'll just correct that number.

On a fully diluted basis, we hold around 43% in Furlenco. We are the largest shareholder, and we hold majority on the board and the shareholder meeting, these two.

Yes, we have done ₹60 crore PAT in the current year. ROE for the company will be different, but I can say that we have done a total investment of around ₹430 crore for our investment.

Even if you take ₹1,000 crore basis that, which is divided into debt and equity, I think it's a metric that can vary. What is important here is return on capital employed.

The assets that Furlenco has deployed and the type of EBITDA that it is getting, the return on capital employed is around 30% to 35% for Furlenco. Our returns, of course, will come mainly to the valuation of the company since we are a shareholder, and that will depend upon what price the company gets listed.

This company is going for IPO?

Not currently, but there are plans to go for IPO once it reaches a threshold size, which, as Rahul just mentioned, maybe the 1 year from now or maybe a little bit later than that.

Okay. On the debt and the interest cost part, you said that the debt of India will be repaid in 1.5 years?

Yeah. The cash flows generated will have capacity to repay the India debt in 1.5 years, since it is around ₹300-odd crore.

Whether we will pay or we will utilize that cash for further growth in the business, that's something different. Because these are immaterial debts.

If you see debt to EBITDA, it is less than 1.

Can you give out the interest cost for the next 2 years? That would be helpful, the way you gave out depreciation cost.

Maybe you could give out the interest cost.

At a consolidated level, as I said, if you add up, you will have a debt of around ₹600 to ₹700 crore. The interest cost for the debt would be ₹35 crore, and another ₹15-odd crore for bank charges and other things.

At a consolidated level, finance cost should show a figure of around ₹50-odd crore, until and unless we do major changes in the capital structure. Okay.

Okay. Done, sir.

Thank you.

Thank you.

Hi, sir. Thanks for the opportunity.

Sir, first question is on U2O. If we look at that for full year, volume growth is around 65% and 111.

A sizable difference between value and volume over here. Sir, if you could provide some color on why this gap, what is it that we have changed over the last 1 year?

That's the first question. The volume growth is 61%

65%, and value growth is 111%.

Correct. Ritesh, what has happened is that we have introduced a higher model.

Earlier, when we had launched this product, we had launched with only one model. Now we have introduced another model at a higher price point.

That is one. Second is there also has been a price increase in both the models.

It is a result of that.

Sure. Sir, what would be the volume contribution by percentage for U2O on the total volumes that the company does?

Ritesh, I'll have to get back with these numbers. We generally don't disclose the distribution of mattress between different categories.

I'll have to get back with those figures. I'll talk to you separately on that.

Sure. Sir, just over here, would it be margins accretive or higher than what we report at standalone basis over here, specifically for U2O?

Margins would be more or less a notch lower than the offline mattress and much higher than the e-com. It would lie somewhere in between.

Fair enough. Sir, would you like to comment something on e-com, basically?

Again, it has done quite well. 52% value growth.

If you could highlight what is our thought process over here, because historically we did very well, then we scaled it back. Again, we are back on the paddle over here.

How should we look at this part of the business?

Ritesh, we are on two sides. We are put additional focus on the Brand.com side.

That is one as a platform. Second is we have also put focus on Kurlon.

Both these put together has led to a substantial growth on the Brand.com side. Also on the platform, Kurlon was lagging behind, we had to made some changes, and in terms of our play on the platforms.

That has also yielded good results. It's a combination of these two things which has led to this growth.

Sure. Just last question, what is the motivation of changing the depreciation policy right now?

Ritesh, I think depreciation policy was very skewed. Whenever we used our foaming machines last, if you see an example of our foaming machine in Greater Noida, it has been installed for last 22 years now and is functioning well, producing around 25,000 tons of foam or rather more than that per annum.

Generally, these machines last for very long, around 40 to 50 years. If we follow the written-down method, then potentially it depreciates the machine to the extent of 70%, 75% in the first 3, 4 years, which does not reflect the actual amortization of the asset on the revenue that it generates, and it is it skews the things.

Secondly, the second biggest part of our assets is generally plant building and building and related assets. Lands don't get get depreciate.

Even buildings have a life of 40 to 50 years. Just to align the cost of depreciation which is allocated to business on a year-on-year basis year basis in line with whatever with the useful life of that particular asset and what value it delivers over 40, 50 years, we have realigned the policy to reflect realistic figures.

Sir, I'll call you for this separately. Sir, just last question, I think we had ₹40 crore of some synergy savings which were still pending.

I think we had given a number of 160 plus 40, 40 was pending. It was contingent on certain new machines.

If you could just provide some color on the timelines of the incremental synergy pending benefit and by when the machines would come. Thank you.

You're right, Ritesh. We had said that we will realize a total synergy of ₹250 crore, out of which around ₹190, ₹200 crore we had done till two quarters back.

₹40 crore was to come from some new machines which were imported with a new material of malleable fiber to be used as a comfort layer. That is currently under installation.

It is delayed by a quarter and a half. I think by the mid or end of this quarter, that will be installed, and we might see that scaling up in the subsequent quarters.

Thank you, sir. I'll join back the queue.

Thank you so much.

Thank you.

Yeah. Hi, sir.

Am I audible?

My first question, we've seen impressive volume growth in technical foam and comfort foam in this quarter. Just wanted to check for any one-off B2B orders in technical foam or any inventory stocking up by the channel in lieu of price hikes due to crude volatility?

Yeah. If I look at the annual picture of both B2B and the comfort foam, we started putting more focus on these two segments, and there were some structural changes in the distribution and also the way we were approaching the market.

One is a function of that. Overall, we've grown in both these segments upwards of 15%.

Quarter four, there has been a spike, which is primarily two reasons: one is whatever steps we had taken to build this business further, that is one, and second, when the war broke, we were in a much better position to continue serviceability in the market. There was smaller players were finding it difficult to maintain their supply chains.

Those orders also got shifted to us. If you see on a annual basis, these businesses are now at a level of 15% growth on a annual basis, and our plan for the next year is also on the similar lines.

Okay. This customer gain that we have done, right, say people who weren't able to supply to these guys, now we've gotten them as our clients, or incremental volumes from existing clients who were buying from somewhere else, is that also continuing, maybe because we are giving better service or better pricing, or they've reverted back to their existing suppliers?

Sure. As I said, we had taken these two as also focus businesses where some changes had to be made, which took some time.

That was irrespective of the war and the scarcity of raw material. Those actions were already started getting implemented and showing results.

Now as far as this was concerned, the March and the month of April is concerned, this is where some customers who had moved out also started buying. Then obviously we will retain them, and that's what the plan is going forward.

Got it. My second question was on the international piece, right?

I'll split it. Australia, our gross margins have expanded quarter-on-quarter while also other expenses have increased quarter-on-quarter, ₹50 crore in Q4 versus ₹42 crore expense in Q3.

Just is this some reclassification or could you help me understand that? Then also on the Spain piece, the gross margins, are they firmed up around the 32% gross margin mark?

The fixed expense as a percentage has come to about 20% of our revenue. How much of that is fixed versus variable, I'm just trying to assess the sensitivity here.

Sure. Let's start with Australia.

Australia has shown a steep increase in gross margin in the current year current quarter, I would say, not the year. Two reasons: one, yes, efficiency measures have been there on for last 1 year or so.

The margins we achieved EBITDA margins we achieved there last year was 6%, we were on an improvement spree throughout the year. The methods that were applied was, one, creating efficiency with the wastage that they created, and secondly, taking price hikes with the customers, which had not been taken for a very, very long period.

Now this a little bit of disruption in the raw material prices created a little bit of plus and minus in Australia, but I think to some extent, maybe around 54%, 55-odd percent, Australian margins have improved. There may be aberration of 3%, 4%.

You should be able to see 4%, 5% higher than the normal margins it used to had in the past. Now as far as the fixed costs are concerned, I would request you look at it as a percentage of total revenue because the exchange rates have gone differently.

When you convert Australian dollar into rupee, which was 55 a year before to 65 now, it's a different scenario, right? Fixed costs reflect only that portion.

When we move to Spain, Spain has been a real surprise because Europe was going through challenges, the pricing realization that could be done in Spain was much better. I would not say 32%, 33% would be a stable sort of margin, but I would I can comment that around between 30% to 32% would be a stable margin.

It will not revert to 28%, 29%, which we had seen in the past. That way the profitability will remain there.

Is there still scope for cost optimization there, or that 20% other expenses is going to largely remain around that 20% mark?

Some minor improvements may happen, but broadly it would remain the same. Yes, turnover improves because there is a very strict cost control there.

If you see the fixed cost structure between Australia and Spain, Spain is very small. Scope is always there, but I would not say any material sort of a scope there.

Our intent with both Australia and Spain is also not to go to a profitability of 16%, 18%, because we know those types of profitabilities don't survive in those countries. Intent is to retain it between 10% to 12%, which to some extent is feasible in these countries and possible.

Just a quick question. It's a continuation on the international piece only.

You all were planning to sell or you all were exploring whether to sell off the international business. Is that still in the plans, or we're now going to continue with this business as is?

I think one of the investor conferences I had mentioned this, that we are open to that. I think our position remains the same, that we are open to that, but that doesn't mean that we are switched off from it.

We will pursue that and wait for right person to come at or a right party to come at a right time. At the moment, we still do whatever is necessary to maintain that business.

Got it. Thank you.

That's it from my end.

Thank you.

Hello, can you hear me?

Yeah. I just wanted to understand, just going back to the previous inventory question and the channel stocking on that comfort foam, technical foam.

Because the raw material prices have increased so much, are we saying there was no channel stocking in this quarter?

No. Pallavi, as Rakesh sir already mentioned, that higher volume was because of two reasons: one, the work that has been done throughout the year with the new customers, and second, because some of the players, smaller players, have gone out of business, and that business also came to us.

There we don't anticipate any major channel stocking, and foam is a very bulky material. You can't go beyond a volume to stock foam.

It's very difficult. We don't anticipate any choking or blocking of the channels and the resulting in any challenges in the subsequent months.

It was a genuine demand in the market which the existing suppliers of those customers could not fulfill, which we went ahead and fulfilled. That was some part of the growth.

The rest part of the growth was our own efforts and what we have been doing in the past.

Sir, just one question, a slightly broader observation. What specifically since the last 2 years have we brought in for the volume growth in the India business improving, and if you could articulate that and the sustenance of the same?

We have got a double-digit number this year as well. Some key points there, sir?

Yeah. See, there were multiple things.

One, very sharp focus on all these. Once we took over Kurlon, it was a new animal for us, a very different sort of a company.

Though we used to sell the same products, but the companies were very, very different: the way it sold, the way it produced, the way it managed the business. We struggled with it for a year or two, and I think you all are witness to that how we struggled.

That also led us to more detailing and more focused on our existing business, and we identified certain priorities for ourselves, which we had reflected in our commitments to the market also. Of course, we could partly make them.

Going ahead, we hope to meet the full commitments. Which was growth on one side and profitability on the other side, a very profitable growth sort of a model.

The entire focus and energy of the organization was shifted to these two. The discussions that now we have, the opportunities that now we explore, the push that we give to the market, each and every category what we study and try to see what best can be done, I think the level of working and the level of dedication in those have gone up, and the focus of the organization to long-term planning has solidified, which also gives us the confidence to tell you that this growth is going to continue in future.

Nothing else. I don't think raw material has changed.

I don't think market has changed, customer has changed, or anyone has changed, but yes, our way of looking at the business and putting targets in front of ourselves has changed.

Any channel-related changes and since both the brands were operating in different geographies, but trying to also have aspirations in their co-geographies, any changes there?

The brand-wise focus continues, because they both have evolved in their own way. That is one which we have put more focus on.

Second is also on the white spaces for channel expansion. Last year also saw a massive expansion covering many areas where we were not represented.

There is also a system to look at our channel partners where we are also getting more and more accountability on that side. Because we have now integrated both the brands under the channel partner, so that piece has also being looked at very closely, being monitored, and accountability fixed there.

I think sum total of all these things is we are getting better as far as the channel is concerned.

Market share?

Market share, there is no recent study that there is association used to do it, but our belief is that we can sense that at least for the both the brands, and with a U2O kind of initiative and e-com, the organized sector play is improving. Which from last couple of years was on the other direction where the unorganized was kind of growing at a faster rate than organized, we are seeing this change now moving more towards organized side.

Sir.

Thank you for the opportunity, sir. Wanted to understand on the TDI part.

If I heard you right earlier in the call, you said that GNFC is a player who is the biggest supplier of TDI, but they have their own factories closed during the war, and also what we heard that one of the biggest, probably the biggest player in China and world, and they had also stopped supplying TDI from China. How have we managed to procure the required amount of TDI quantity?

You're right. GNFC was shut down first on a technical reason, and then later also in the month of March because of the natural gas energy.

The shutdowns were temporary in nature, and during that part, the traders who cater to the balance 40% of the market, they had increased the rates. The material was available, but it was available at a much higher price.

That is one part. Second, we had about few months back, we had also taken an in-principle decision to also hedge our risks.

We had introduced a new supply partner, and who was very supportive during this time, and we were able to meet the requirement. We did not have any stock-out situation, though we had to pay a little more for TDI at a few times during the month.

Okay. Was this new supplier Chinese?

It's a mix of both the Korea, there was some material from Japan, which is coming in, and also from China. China also has more than one manufacturer.

There are a couple of manufacturers who are there. Some of them, they bring in the material on their own, and they supply it locally as per the pricing of the market.

Some you can import directly. It's a mix of both.

Right. Got it, sir.

That's all from my side, sir, and all the best. Thank you.

Yeah. Thank you.

Thanks, Shailendra. Thank you all for joining on to the call.

Rahul, if would like to please have some closing remarks. Thank you so much for your time here.

Ritesh, thank you very much for conducting the call. As usual, it has been lot of incisive questions, and let me just say that we continue to learn as you question us and we keep answering that.

With that, I would just wish you all the best. Have a great weekend, and we will soon meet again in another quarter.

Thank you very much.

Thank you.

Thank you.