sheela foam - stock market tips and ipo analysis ... november 29, 2016 3 sheela foam debt-free bs...

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Please refer to important disclosures and disclaimers at the end of the report

Sheela Foam

Priced to perfection, Await better entry points

November 29, 2016

IPO

No

te

Nishna Biyani [email protected] +91-22-66322239

Keyur Pandya [email protected] +91-22-66322247

Rating Subscribe

Price Band Rs680-Rs730

IPO Fact Sheet

Opening Date November 29, 2016

Closing Date December 1, 2016

BRLMs Edelweiss Financial Services,ICICI

Securities

Issue Size Rs5.1bn

Fresh Issue NIL

Offer for Sale (Promoter group Co) Rs 5.1bn

Issue Details Pre-issue equity (m shares) 48.8

Post-issue equity (m shares) 48.8

Post-issue Market Cap (Rs bn)* 35.1

Share Holding (%) Pre-IssuePost-Issue*

Promoters 100 85.5

Public & Others 0.0 14.5

*Equity issuance calculated on higher band price

Sheela Foams (SFL) is a leading manufacturer of mattresses in India marketed under the popular brand “Sleepwell”. The company commands a market share of 20-23% in the organised mattress industry (~size Rs28-30bn growing @10-12%) with a pan-India distribution consisting of 100 exclusive distributors, over 2,000 exclusive retailers and around 2,500 MBO’s. SFL has significantly benefitted out of lower RM prices primarily TDI and Polyol over the past 18 months, thus improving margins by almost 500bps and earnings up 2.5x over FY15. The IPO is at a price band of Rs680-730. At the upper end of the band, the stock trades at a market cap of Rs35bn and at 34x FY16 PER. We feel the pricing is VERY AGGRESSIVE and do not expect any immediate listing gains.

However, the company has been returning high capital return ratios, zero net debt balance sheet, efficient working capital coupled with limited equity offering and high co-relation with Indian consumption segment, we would expect the company to return strong earnings in future leading to higher stock returns. We recommend investors to ‘SUBSCRIBE’ with long term outlook for the next 12-24 months.

Key Highlights

Strong business execution and experienced management: SFL’s financial performance has been robust, with revenue and earnings CAGR of 10.4% and 49.8%, respectively, over FY13-16 period. Also, it has an extensive and well developed pan-India sales and distribution network. Further, the management team is very experienced, forward looking and is actively involved in day-to-day functions.

Debt free company and efficient working capital management: SFL is a net cash company (Rs471m) and the business requires Net working capital of 33days most of which is inventories. Management had highlighted that IPO proceeds (Rs5.1bn) are going to be utilized for philanthropy purposes.

Drop in RM prices have aided margins, sustainability the key: SFL has benefitted significantly on account of lower prices of TDI and Polyols by 7% & 29% respectively over the past 18 months. However, the absence of long term contracts in sourcing its key RM exposes the business to RM risk. Also, in the past 2 months, volatility in TDI/Polyols prices has increased and prices of TDI have risen more than 2x off-late.

Key financials (Y/e March) 2013 2014 2015 2016

Revenues (Rs m) 11,490 12,711 14,177 15,500

Growth (%) 10.0 10.6 11.5 9.3

EBITDA (Rs m) 817 847 910 1,761

PAT (Rs m) 308 278 426 1,048

EPS (Rs) 6.3 5.7 8.7 21.5

Growth (%) 296.7 (9.8) 53.3 145.6

Profitability & Valuation 2013 2014 2015 2016

EBITDA margin (%) 7.1 6.7 6.4 11.4

RoE (%) 20.1 15.2 19.3 35.9

RoCE (%) 9.8 10.5 11.6 22.2

EV / sales (x) 3.3 2.9 2.5 2.2

EV / EBITDA (x) 46.1 43.3 39.3 19.7

PE (x) 115.4 127.9 83.5 34.0

P / BV (x) 21.0 18.1 14.5 10.5

Source: Company Data; PL Research

November 29, 2016 2

Sheela Foam

Investment Rationale

Organized mattress market still in a nascent stage

Out of the total mattress Industry size of Rs85-90bn, organized players are estimated

to constitute 33-35% of the total market, the rest being unorganized. The transition

from unorganized to organized is expected to continue as domestic and global

manufacturers offer superior quality of products across wide range of price points.

Also, Factors like rising urbanization, increase in disposable income, increase in

health related issues and increasing awareness about sleep products bode well for

the faster growth of mattresses industry. Going ahead also, trend is expected to

continue with organized sector growth of 11-13% over FY16-FY21E period vs.

unorganised segment’s growth of 6-8%, bringing overall industry growth to 8-10%

Exhibit 1: Organized industry is expected to grow@11-13% and reach a size of Rs 140bn by 2021

FY12 FY16E FY21E Unorganised Organised

Source: RHP; PL Research

Strong brand recall and a pan-India distribution network

SFL has developed its “Sleepwell” brand for the past 2 decades through emphasis on

innovation and has produced personalized and niche home comfort products over

the years. The brand recall is maintained through continuous engagement with

distributors and dealers and extensive advertisements in print and electronic media.

Further, it has a strong pan-India distribution consisting of 100 exclusive distributors,

over 2,000 exclusive retailers and around 2,500 MBO’s.

Urbanization, rising disposable incomes

and rise of modern retail offers favourable

business dynamics over the long term

Rs21bn

Rs44bn

Rs32bn

Rs59bn

Rs85bn

Rs55bn

Rs60-65bn

Rs85-90bn

Rs130-140bn

10-12% 11-13%

7-9%

6-8%

8-10%

8-10%

November 29, 2016 3

Sheela Foam

Debt-free BS and strong operating cash flows

SFL is a net cash company and generates strong operating cash flows. Further, capex

requirements per annum are in the range of Rs450-500m to set up new facilities

near potential markets and maintenance capex.

Exhibit 2: SFL has steadily improved its BS over the years

-

50

100

150

200

250

300

-

500

1,000

1,500

2,000

2,500

3,000

(Rs

m)

(Rs

m)

Debt Cash & Bank Finance cost

Source:Company data, PL Research

Exhibit 3: Operating cash flows strong for past 5 years

-

500

1,000

1,500

2,000

FY12 FY13 FY14 FY15 FY16(R

s m

)

CF from Operations

Source: Company data, PL Research

Efficient Working capital management

SFL gives credit period of 30-60days to its distributors and dealers in respect of its home comfort products and institutional customers for its Technical PU Foam lines. Similarly, it sources its RM from domestic companies like Manali Petro & GNFC as well as international companies like Dow Chemicals & BASF with a 30 day payable

limits. So, the working capital cycle is largely dependent only on inventory management which has improved over the years significantly.

Exhibit 4: Working Capital Cycle has improved in the past 4 yrs

44 44 42

31 26

-

10

20

30

40

50

60

FY12 FY13 FY14 FY15 FY16

Inventory days Debtor days Creditor days WC days

Source: Company Data, PL Research

November 29, 2016 4

Sheela Foam

Industry Dynamics

The India mattress market has witnessed sustained growth over the recent years on

account of rising penetration of organized sector in mattresses segment fueled by

rising demand of good quality mattress, rising health consciousness and entry of

new players in organized segment of mattress industry. The industry consists of

rubberized coir, PU Foam and spring mattresses with estimated market size of Rs 85-

90bn growing @8-10% CAGR for past 5 years. Industry is dominated by unorganized

local players, specialising in hand-made cotton/coir -mattresses with a market share

of 65%. Organised sector comprising of 20-25 mid-sized and large players is growing

faster at a CAGR of 10-12% over FY12-FY16 to reach ~28-30bn for FY16.

Product Varieties in Mattresses

The most popular varieties of mattresses in India are that of cotton, rubberized coir

and foam which differ in density, freshness, comfort, strength and prices.

Exhibit 5: Mattresses Industry by categories

Mattress Type Advantages Disadvantages

PU Foam Soft, Very Light Hot, Expensive, Sag

Latex Rubber Not as soft as Foam, Comfortable Expensive

Spring Mattress No Sagging, Long Life Very Expensive

Rubberized Coir Firm, Reasonable Priced Tendency to sag

Cotton Mattress Cheap, Foldable, of any size available Forms Lumps

Source: PL Research

The mattress market is comprised of large companies, like Kurlon Enterprise, Sheela

Foam, Peps Industries, Springwel Mattresses, Coirfoam (India), Duroflex India,

Godrej Interio (GI) and Springfit Marketing Inc. Major foreign companies operating in

the mattress market of India includes Simmons and Beddings, Serta and King Koil.

PU foam accounts for 50% of the organised Industry

Indian organised mattress industry is dominated by PU foam with ~49-51% share

owing to durability and competitive prices where as rubberized coir has a lower

share of 29-31% due to (i) tendency to sag easily, reducing replacement cycle to 4-5

years (ii) better value proposition from PU foam products & (iii) Shift of rubber usage

for other high margin products with increase in prices of rubber over last few years.

While demand for spring mattress has jumped significantly over the last few years,

its usage is restricted to urban areas only, due to price premium over PU foam and

coir.

The growth in mattress market has been

largely led by the domestic factors such as

increased income levels and also due to

infrastructural development in terms of

increased number of residential units and

inflating number of hotels in the country.

The organized mattress market has been

dominated by Kurlon and Sleepwell which

possess a wide spectrum of mattress within

the affordable price range for the Indian

consumers.

PU foam mattresses are preferred in

Northern India due to its tendency to

absorb heat and remain warmer in winters

where as rubberized coir mattresses have

higher penetration in Southern India

caused by abundant availability of both

coir & rubber

November 29, 2016 5

Sheela Foam

PU Foam – ~50% Rubberised Coir ~30% Spring ~20%

Exhibit 6: PU foam mattresses dominates organised industry

PU foam50%

Rubberised

coir30%

Spring20%

Source: RHP, PL Research

Exhibit 7: Region wise industry break up


Traditional distribution channel dominates the trade

Indian organised mattress industry still largely operates through traditional channel

of distributors and dealers (~87-89%) while online sales accounts for <3% of sales.

Customized product requirement, having a touch and feel aspect and logistical

barrier has limited the use of online channel partners.

Exhibit 8: Distributors/dealers dominate the trade

Distributors & dealers

87%

Own/Franchise

10%

Online

3%


Region wise

Breakup

North 25-29%

East 17-21%

South 28-32%

West 22-26%

November 29, 2016 6

Sheela Foam

Industry challenges

Higher transportation and warehousing cost

Flammable nature of PU foam requires them to be warehoused in temperature

controlled places while mattresses’ inherent nature of being voluminous keeps the

transport and warehousing cost higher at ~6-10% which is higher when compared

with other manufacturing sectors.

Non-standardized bed sizes

Indian mattress industry faces a unique challenge of customizing mattresses to

match with the dimensions of end-use. This further requires frequent changes in the

manufacturing process thus affecting the benefits accruing out of batch processes.

According to an estimate, India has around 18 bed sizes vs. 4 sizes in the developed

market. However with technological advancement and the learning curve of almost

2 decades, customization has become cost effective.

RM volatility poses a threat on profitability

Raw material cost constitutes 50-60% of revenue and performance of the industry is

significantly affected by availability & price volatility of major RM components.

Polyol & TDI (Toluene Di-Isocryanate) are the key crude based raw materials

constituting ~50% and 25% of total raw material cost respectively. Both of them are

either imported or traded at import parity prices and are having high price volatility

which distorts the profitability. TDI prices have gone as high as USD8,000/tonne in

October 2016 from ~USD1,800/tonne in March 2016 and are currently at

~USD4,000/tonne. Such volatility in key RM prices and intense competitive

environment hurts the industry.

Exhibit 9: TDI Price volatility has increased in past 2 months

129

172 164 150

111

275

-

50

100

150

200

250

300

FY12 FY13 FY14 FY15 FY16 Nov'16

(Rs/

Kg)


Exhibit 10: Polyol prices are still favourable

126 117

138 149

126

105

-

20

40

60

80

100

120

140

160

FY12 FY13 FY14 FY15 FY16 Nov'16

(Rs/

Kg)


Higher transportation and warehousing

cost requires the industry players to have

multiple plants at diverse locations,

restricting the benefit of economies of

scale and leading to existence of small

regional players.

November 29, 2016 7

Sheela Foam

Business Description

SFL’s business primarily comprise of two segments, i.e. Home comfort & Technical

grade foam.

Home comfort (B2C segment)

Under this segment, SFL offers plenty of products ranging from mattresses (PU foam,

rubberized coir & spring), pillows, furniture cushioning, sofa-cum bed as well as PU

foam cores to further use in finished furniture products. Being largely a B2C

business, SFL offers array of products with varied specifications so as to reach/appeal

wide range of consumers having different preferences. The segment accounts for

2/3rd of the consolidated revenues & operates through network of 100+ distributors

and ~5000 dealers (2000+ exclusive and 2500+ multi brand)

Technical grade (B2B segment)

SFL supplies variety of technical grades of PU foams to diverse end user industries

having applications in automotive parts, filtration systems, sound absorption

systems, garments, footwear, packaging etc. It caters to Australian and New Zealand

markets under Australia based wholly owned subsidiary- Joyce Foam. They have five

manufacturing facilities in Australia and out of its five facilities, one manufactures PU

foam while rest four are engaged in manufacturing of home comfort products and

technical foam products.

Exhibit 11: 65% of revenues are from Home Comfort Products

-

5

10

15

20

FY15 FY16

(Rs

bn

)

Home comfort Technical grade

14.115.5

~35%

~65%

~34%

~66%


Exhibit 12: Volume growth at 7.4% for FY16

4.9%

7.4%

6.3%

1.8%

0.0%

2.0%

4.0%

6.0%

8.0%

FY15 FY16

Volume Gr. Price hike


November 29, 2016 8

Sheela Foam

Exhibit 13: Category wise Product Applications


Exhibit 14: Business dominated by Home comfort products which is largely B2C segment

Source: PL Research

•Mattress overlay foam

•Medical Mattress foam Visco Foam

•High Quality bedding foam

•Furniture Foam

High Resilience foam

•Mid and Bottom Shoe Sole Foam

•Foam for automobile parts

•Shoe Upper Foams Hard foam

•Foam For Clothing

•Foam For Sport Shoes

•Foam for Inner Wears

•Foam for Ladies Under Garments

UV Stable White Foam

•Foam for Air Filters

•Foam for Oil Filters Reticulated Foams

Home Comfort

Technical Grade

Mattress Pillows Furniture Cushioning

Automotive Filtration Footwear Sound Absorption Seat System Cushioning

Constitutes 60-70% of Revenues & largely is a B2C business

Constitutes 30-40% of Revenues & largely is a B2B business

November 29, 2016 9

Sheela Foam

Financial Highlights

SFL revenues are growing @ 10.4% CAGR for past three years

SFL’s financial performance has been robust with revenue and earnings CAGR of

10.4% and 49.6%, respectively over FY13-16 period. Prices of key RM consumed

decreased in FY16 aiding margins by 500bps YoY. The drop in RM costs has

continued this year as well with EBIDTA margins at 13.3% for H1FY17, highest in the

history of the company. But with the RM prices moving up sharply in the last two-

three months due to plant outages, we expect a margin contraction in 2HFY17.

Exhibit 15: Steady sales growth on rising margin profile

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

-

5,000

10,000

15,000

20,000

FY12 FY13 FY14 FY15 FY16 H1FY17

Revenue (Rs m) EBITDA Margin


Exhibit 16: Earnings growth of 2.5x in FY16 YoY aided by low RM cost

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

-

200

400

600

800

1,000

1,200


PAT (Rs m) PAT Margin


RM & Advertising and Promotion are the key costs

SFL has been significantly benefitted due to lower prices of TDI and Polyol improving

the gross margin of business by 800bps in FY16. The savings in RM was used to

increase the allocation towards advertising and incentives to dealers. The employee

cost is largely stable between 9-10% of sales.

Exhibit 17: RM costs have inched lower over the past 18 months

FY12 FY13 FY14 FY15 FY16

Revenues 100% 100% 100% 100% 100%

Total RM Cost 62.1% 60.4% 61.0% 61.4% 53.4%

Gross Margin 37.9% 39.6% 39.0% 38.6% 46.6%

Employee cost 8.9% 9.0% 9.4% 9.1% 9.0%

Other Exp 23.7% 23.5% 22.9% 23.1% 26.2%

EBITDA 5.3% 7.1% 6.7% 6.4% 11.4%

Interest 2.3% 2.0% 1.5% 1.1% 0.8%

Other Income 0.6% 1.1% 0.0% 0.7% 1.1%

PBT 1.1% 3.4% 2.8% 4.1% 9.8%

PAT 0.7% 2.7% 2.2% 3.0% 6.8%


Exhibit 18: Advertising,incentives and promotional expenses on a rise

0.0%

5.0%

10.0%

15.0%

20.0%

-

500

1,000

1,500

2,000

2,500


Total Advt & Promotion exp (Rs m) % of revenues


Revenue growth of 9.2% for FY16 is split

between volume growth of 7.4% and price

rise of 1.8%

November 29, 2016 10

Sheela Foam

Valuations and View

SFL has significantly benefitted out of lower RM prices primarily TDI and Polyol over

the past 18 months, thus improving margins by almost 500bps and earnings up 2.5x

over FY15. We would also like to highlight that SFL has the following turn-on points

like a) Experienced Management, b) Strong balance sheet with net cash on books, c)

Improved Working capital cycle from 44days in FY13 to 26 days in FY16 , and

d)Strong return ratios. However, considering the recent spurt in TDI prices and the

impact of demonetization on the entire B2C businesses, we feel the second half of

FY17 may see a struggle for growth. The IPO valuation of Rs35bn at upper price band

offers the stock at 34x FY16 PER which has been the best earnings since inception.

Though there are no listed comparable for SFL, we would like to draw a comparison

with some of the mid-cap stocks in home-improvement space.

Exhibit 19: Valuation Snapshot of Building Materials Sector

Company

M.Cap (Rs bn)

Sales (Rs bn) PE Ratio (x) RoE (%) EV/EBITDA (x) FY16-FY18E CAGR (%)

FY16 FY17E FY18E FY16 FY17E FY18E FY16 FY17E FY18E FY16 FY17E FY18E Sales EBITDA PAT

Kajaria Ceramics 79 24.2 26.8 30.9 34.5 28.6 23.6 27.5 26.5 26.6 17.3 15.2 13.1 13.1 15.1 21.0

Somany Ceramics 23 17.1 18.8 21.5 33.2 25.0 19.7 18.9 19.1 20.2 16.5 13.6 10.6 11.9 24.6 34.7

Greenply Ind 31 16.5 18.2 20.8 24.2 20.8 17.0 23.4 21.5 20.9 13.2 12.0 10.2 12.2 13.9 20.4

CenturyPly (I) Ltd 40 16.3 18.5 23.6 24.1 22.3 17.1 36.3 29.9 30.6 15.6 14.3 10.8 19.0 20.4 18.5

Source: Bloomberg, PL Research


Sheela Foam

Annexure

Exhibit 20: Issue details

Issue Period Opening date: 29th November 2016; Closing date: 1st December 2016

Exchange Listing on both NSE and BSE

Issuer Sheela Foam Ltd

Offer Type Initial Public Offering

Face Value Rs.5/-

Price Band Rs680-730/ share

Bid Lot 20 equity shares and in multiples thereof

Issue Split (No. of shares)

QIB Portion: 50% of the issue

Non-Institutional portion: Not less than 15% of the issue

Retail Portion: Not less than 35% of the issue

Current Shareholding

Pre-Offer Post-Offer*

Promoters 100.0% 85.5%

Others 0.0 % 14.5%

Book Running Lead manager

Edelweiss Financial Services, ICICI Securities

Source: RHP *Equity issuance calculated on higher price band

Exhibit 21: Issue is priced between Rs33.1bn to Rs35.1bn M.Cap

Existing Outstanding Equity Shares (m) 48.8 48.8

Price Band (Rs) 680 720

Post Issue M.Cap band (Rs M) 33,172 35,124

Source: RHP

Exhibit 22: Selling Shareholder – Promoter Group Company

Shareholder Name Amount (Rs)

Polyflex Marketing Pvt Ltd 5100

Source: RHP

Exhibit 23: Average cost of acquisition for promoters

Shareholder Name Average cost of acquisition per share (Rs)

Ms Sheela Gautam 0.03

Mr Rahul Gautam 0.12

Polyflex Marketing Pvt Ltd 0.33

Source: RHP

IPO Proceeds are OFS from promoters and would be used for philanthropy.


Sheela Foam

Company Background

Incorporated in the year 1971, Sheela Foams Ltd is a leading mattresses

manufacturer in India with market share of ~23% in Rs30bn organised mattresses

industry. Its product range includes (i) mattresses, furniture-cushioning, pillows,

cushions, sofa-cum-beds as well as PU form cores used to manufacture finished

home comfort products in Home Comfort category and (ii) PU foams for use in auto

components, filtration systems, garments, shoes, inner-wears under Technical Grade

category.

SFL operates 11 manufacturing facilities in India with a total installed production

capacity of 123,000 TPA of foam. These are located strategically across all four zones

in the country, in the states of UP, Punjab, HP, Telangana, Tamil Nadu, Gujarat, WB,

Sikkim and the union territory of Dadra and Nagar Haveli. Facilities at Greater Noida,

Hyderabad, Erode, Talwada and Rangpo (Sikkim) units are equipped to both produce

finished home comfort products and PU Foam, while Surajpur, Kala Amb, Rajpura,

Jalpaigudi and Silvassa facilities are processing units, where PU Foam slabs are

converted into finished comfort products, PU Foam cores and technical foam.

Exhibit 25: Manufacturing facilities & installed capacities

State City Installed Capacity as on

March 31, 2016

Production CAGR FY14-FY16

FY14 FY15 FY16

UP Greater Noida 60,000 18,786 22,610 23,709 12.3%

Telangana Hyderabad 13,000 3,608 3,523 4,072 6.2%

Tamil Nadu Erode 16,000 3,118 3,424 3,657 8.3%

Gujarat Talwada 28,000 8,278 9,011 9,454 6.9%

Sikkim Rangpo 6,000 1,424 1,553 1,685 8.8%

123,000 35,214 40,121 42,577 10.0%


Promoter and Management Bandwidth

Mr Rahul Gautam, MD – Mr Rahul Gautam has more than 4 decades of experience

in the home comfort products and PU foam Industry. He is also serving as the

chairman of the Indian Polyurethane Association.

Mr. Rakesh Chahar, Director - Mr. Chahar has been with SFL since 1990 and has 25

years of experience in the business of selling and marketing of bedding products and

PU foam. He is currently also the chairman of Indian Sleep Products federation.

Dr. Mahesh Gopalasamudram, COO – Dr Mahesh has joined SFL in Nov 2015 and

has been associated with Dow Chemicals and Manali Petrochemicals in the past. He

is responsible for R&D, manufacturing and allied operations. He has more than 17

years of experience in the chemical industry.

Exhibit 24: About the company

Largest PU foam producer in India

Distribution

100+ Distributors

2000 Exclusive dealers

2500 multibrand dealers

No of plants 11 plants in India

5 plants in Australia

Capacity 1,23,000 TPA (India)

10,500 TPA (Australia)

No of Employees

2000+



Sheela Foam

Australian acquisition offers unique advantages to Sheela Foam

Sheela Foam, through subsidiary Joyce Foam pty Ltd, acquired the business of

manufacturing polyurethane and polystyrene foam of Joyce Corporation Limited,

Joyce Indpac Limited and Marfoam Pty Limited ,for a consideration of AUD16m,

having facilities in Australian and business presence in Australia & New Zealand.

Joyce Foam Pty is one of the largest flexible PU manufacturers in Australia with ~35%

market share.

Australia being a developed market offers moderate growth however acquisition

bring on the table, benefits of scale while bargaining with RM suppliers, R&D

support and insights about changing consumer behaviour as the country grows.

Exhibit 26: Joyce Foam Factsheet

Year of Acquisition November 2005

Purchase consideration AUD 16m

Facilites 5 , in Australia

Business presence Australia and New Zealand

Specialised in PU foams used primarily in the manufacture of mattresses and home furniture.

Capacity 10,500 TPA

Financials (FY16) Revenues AUD 60m

EBIT Margin ~11%

No of Employees 150



Sheela Foam

Financials

Exhibit 27: Income Statement (Rs m)

Y/e March 2012 2013 2014 2015 2016 H1FY17

Net Revenue 10,449 11,490 12,711 14,177 15,500 7,955

Raw Material Expenses 6,485 6,938 7,753 8,711 8,276 4,021

Gross Profit 3,964 4,552 4,958 5,465 7,224 3,934

Employee Cost 925 1,032 1,194 1,285 1,394 786

Other Expenses 2,482 2,702 2,916 3,269 4,068 2,090

EBITDA 557 819 848 912 1,762 1,058

Depr. & Amortization 252 314 300 280 293 144

Net Interest 243 231 192 162 117 55

Other Income 59 124 6 106 168 82

Profit before Tax 120 396 361 574 1,520 941

Total Tax 42 88 83 148 472 282

Profit after Tax 77 308 278 426 1,048 658

Ex-Od items / Min. Int. (0) - - - - -

Adj. PAT 77 308 278 426 1,048 658

Avg. Shares O/S (m)* 48.8 48.8 48.8 48.8 48.8 48.8

Adj EPS (Rs.) 1.6 6.3 5.7 8.7 21.5 13.5

Source: Company Data, PL Research *Post split and Bonus in May 2016 & June 2016 respectively


Sheela Foam

Exhibit 28: Balance Sheet (Rs m)

Y/e March FY12 FY13 FY14 FY15 FY16 H1FY17

EQUITY AND LIABILITIES

Share Capital 162 163 163 163 163 244

Reserves and Surplus 1,215 1,532 1,802 2,287 3,221 3,802

Shareholder's Funds 1,377 1,695 1,965 2,450 3,384 4,046

Minority Interest 13 - - - - -

Non Current Liabilities

Long-Term Borrowings 1,235 1,122 866 726 346 288

Deferred Tax Assets / Liabilities (24) (4) 6 24 19 (10)

Other Long Term Liabilities 114 174 218 275 342 362

Long Term Provisions 74 81 98 102 106 128

Total Non-Current Liabilities 1,399 1,374 1,188 1,127 814 767

Current Liabilities

Short Term Borrowings 1,207 944 829 539 788 573

Trade Payables 802 810 989 1,140 1,126 1,208

Other Current Liabilities 524 753 1,190 1,394 1,464 1,251

Short Term Provisions 80 89 91 145 306 244

Total Current Liabilities 2,612 2,596 3,098 3,217 3,684 3,275

Total Liabilities 5,401 5,664 6,252 6,795 7,883 8,088

ASSETS

Non-Current Assets

Net Block 2,279 2,673 2,519 2,791 2,807 2,705

Goodwill 3 3 3 72 71 71

Capital Work in Progress 410 15 168 83 97 474

Non Current Investments 54 76 0 0 100 100

Long Term Loans & Advances 70 72 74 114 146 199

Other Non Current Assets 4 6 4 9 15 16

Total Non-Current Assets 2,820 2,845 2,768 3,069 3,236 3,565

Current Assets Loans & Advances

Inventories 917 1,162 1,241 1,182 1,046 1,318

Sundry Debtors 1,154 1,044 1,201 1,145 1,171 1,338

Cash and Bank 206 322 768 1,170 2,172 1,331

Short Term Loans and Advances 233 227 213 171 190 294

Other Current Assets 72 64 60 58 69 241

Total Current Assets 2,582 2,820 3,484 3,726 4,647 4,523

Total Assets 5,401 5,664 6,252 6,795 7,883 8,088



Sheela Foam

Exhibit 29: Cash Flow (Rs m)

Y/e March 2012 2013 2014 2015 2016 H1FY17

C/F from Operations 598 973 1,244 1,473 1,764 30

C/F from Investing (38) (298) (269) (486) (337) (529)

C/F from Financing (637) (558) (529) (585) (425) (341)

Inc. / Dec. in Cash (77) 116 446 401 1,002 (840)

Opening Cash 283 206 322 768 1,170 2,172

Closing Cash 206 322 768 1,170 2,172 1,332



Sheela Foam

Prabhudas Lilladher Pvt. Ltd.

3rd Floor, Sadhana House, 570, P. B. Marg, Worli, Mumbai-400 018, India

Tel: (91 22) 6632 2222 Fax: (91 22) 6632 2209

Rating Distribution of Research Coverage PL’s Recommendation Nomenclature

25.6%

60.7%

13.7%

0.0%0%

10%

20%

30%

40%

50%

60%

70%

BUY Accumulate Reduce Sell

% o

f To

tal C

ove

rage

BUY : Over 15% Outperformance to Sensex over 12-months

Accumulate : Outperformance to Sensex over 12-months

Reduce : Underperformance to Sensex over 12-months

Sell : Over 15% underperformance to Sensex over 12-months

Trading Buy : Over 10% absolute upside in 1-month

Trading Sell : Over 10% absolute decline in 1-month

Not Rated (NR) : No specific call on the stock

Under Review (UR) : Rating likely to change shortly

DISCLAIMER/DISCLOSURES

ANALYST CERTIFICATION

We/I, Mr. Nishna Biyani (BE, MBA-Finance), Mr. Keyur Pandya (Mcom, MBA-Finance), Research Analysts, authors and the names subscribed to this report, hereby certify that all of the views expressed in this research report accurately reflect our views about the subject issuer(s) or securities. We also certify that no part of our compensation was, is, or will be directly or indirectly related to the specific recommendation(s) or view(s) in this report.

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Our sales people, traders, and other professionals or affiliates may provide oral or written market commentary or trading strategies to our clients that reflect opinions that are contrary to the opinions expressed herein, and our proprietary trading and investing businesses may make investment decisions that are inconsistent with the recommendations expressed herein. In reviewing these materials, you should be aware that any or all o the foregoing, among other things, may give rise to real or potential conflicts of interest.

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ANALYST CERTIFICATION

The research analysts, with respect to each issuer and its securities covered by them in this research report, certify that: All of the views expressed in this research report accurately reflect his or her or their personal views about all of the issuers and their securities; and No part of his or her or their compensation was, is or will be directly related to the specific recommendation or views expressed in this research report

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