Sheela Foam Ltd said on Friday its board has approved a plan to acquire a majority stake in Spanish company Interplasp SL for €42 million ($46.7 million) to expand in Europe.
Sheela Foam, through a unit, will acquire a 93.67% stake while three key managers will continue to hold the balance, the Indian company said in a stock-exchange filing. The company, which sells mattresses under the Sleepwell brand, will have the right of first refusal of these shares.
The acquisition would give Sheela Foam a presence in Europe, the world’s largest polyurethane foam market, the company said.
Interplasp, which was established in 1987, makes polyurethane foam for bedding, furniture and other applications in Spain and Portugal. The company has a manufacturing facility in Yecla, in Spain, with a capacity to produce 22,000 tons of polyurethane foam. It also markets some of its foam to Morocco.
The Spanish company's turnover rose to €31.6 million last year from €24.1 million and €15.9 million in 2017 and 2016, respectively.
Sheela Foam, which made a blockbuster stock market debut two-and-a-half years ago, has been struggling to accelerate growth for the past few quarters due to tough competition and slow demand.
The company’s consolidated net sales for 2018-19 increased 9% compared with more than 12% the previous two years. This dragged the compound annual growth rate in sales for the five years through March 2019 to around 11%, according to a VCCircle analysis.
Earnings before interest, taxes, depreciation and amortisation (EBITDA) and net profit were flat during 2018-19 as margins shrank to four-year lows.
The company's stocks have been trading off the 52 week highs of Rs 1817.95 per share. Its share prices on Friday fell 0.7% to Rs 1272.7 apiece on the BSE Ltd in a flat Mumbai market.
In India, unorganised players control nearly two-thirds of the country’s mattress market. The organised players besides Sheela Foam, include Duroflex Pvt. Ltd, Kurlon Enterprise Ltd, and Peps Industries.
Earlier in April, Kurlon bought Pune-based Spring Air Bedding Company India Ltd, which markets its products under the brand Spring Air and Englander.