Credit Rating

Date: 09.10.2026 The BSE Limited National Stock Exchange of India Limited Pheroze Jeejeebhoy Towers, Exchange Plaza, Bandra Kurla Complex Bandra Dalal Street, Mumbai-400001 (East) Mumbai -400051 Scrip code: 540203 NSE Symbol: SFL Subject: Disclosure under Regulation 30 of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 – Credit Rating Dear Sir/Madam, Pursuant to Regulation 30 read with the applicable provisions of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, we wish to inform you that India Ratings and Research Private Limited (“India Ratings”) has affirmed the bank loan facilities of Sheela Foam Limited (SFL) and withdrawn the rating assigned to the Company’s non-convertible debentures, which have been fully redeemed. Bank Loan Facilities: Assigned a rating of ‘IND AA/Stable/IND A1+’ to additional bank loan facilities of Rs. 180 crore and reaffirmed the existing rating of ‘IND AA/Stable/IND A1+’ on bank loan facilities of Rs. 700 crore. Non-Convertible Debentures: Withdrawn the rating of ‘IND AA/Stable’ assigned to the Company’s non- convertible debentures aggregating to Rs. 181.25 crore (ISIN: INE916U08012), which have been fully redeemed. The detailed rating rationale issued by India Ratings and Research is enclosed herewith for your reference. This is for your information and records. Thanking you, Yours faithfully, For Sheela Foam Limited Md. Iquebal Ahmad Company Secretary SHEELA FOAM LTD. #14, Sleepwell Tower , Sector 135, Noida- 201301 Ph: Int-91-120-4868400 •Email: investorrelation@sheelafoam.com • contactus@sheelafoam.com Regd. Office: 1002 to 1006 The Avenue, International Airport Road, Opp Hotel Leela Sahar, Andheri East, Mumbai, Maharashtra, India, 400059 • Ph: Int-91-22-28265686/88/89 Toll Free: 1800 103 6664 • www.sleepwellproducts.com • www.sheelafoam.com CIN- L74899MH1971PLC427835 Title India Ratings Affirms Sheela Foam’s Bank Loan Facilities at ‘IND AA’/Stable; Rates additional amount. Withdraws ratings on NCDs. Brief India Ratings and Research (Ind-Ra) has affirmed Sheela Foam Limited's (SFL) bank loan facilities and non-convertible debentures at ‘IND AA’/Stable, while withdrawing the Long-Term Issuer Rating as follows Details of Instruments Instrument Regulator of Date of Coupon Maturity Size of Issue Rating Assigned along Rating Description Instrument Issuance Rate (%) Date (INR million) with Watch/Outlook Action Bank loan RBI 1,800 IND AA/Stable/IND A1+ Assigned facilities Bank loan RBI 7,000 IND AA/Stable/IND A1+ Affirmed facilities Non-convertible Refer ISIN 1,812.50 WD Withdrawn debentures annexure* *Details in annexure Analytical Approach Ind-Ra continues to fully consolidate SFL and its subsidiaries while arriving at the ratings because of the strong operational and strategic linkages among them. Ind-Ra notes that House of Kieraya Limited [HOK] is being classified as subsidiary of SFL with effect from October 01, 2026 due to SFL’s board control, majority voting and substantive governance rights collectively establish control under the accounting standards. Detailed Rationale of the Rating Action The ratings reflect SFL’s strong market position in the Indian organised mattress segment, led by a much larger scale of operations in terms of revenue and profitability, and improved distribution reach after the acquisition of the mattresses manufacturing company, Kurlon Enterprises Limited (KEL). The ratings also factor in the improved credit metrics in FY26, supported by improved EBITDA margins and reduced gross debt levels, which are likely to improve further with the sustenance of the EBITDA margins. However, the ratings continue to remain constrained on account of susceptibility to volatility in raw material prices and exposure to cyclicity and economic downturns. Ind-Ra is no longer required to maintain the ratings on non-convertible debentures, as the agency has received a request for withdrawal of ratings and no-dues certificate. This is consistent with Ind-Ra’s Policy on Withdrawal of Ratings. List of Key Rating Drivers Strengths • Improved scale of operations, likely to improve further • Strengthened market position; increase in online branded mattress sales during FY26 • Improved credit metrics in FY26, likely to improve further • Strong base of distribution network • Strong record of acquisitions historically Weaknesses • Exposure to cyclicality and economic downturns • Susceptibility to volatility in raw material costs; forex risk Detailed Description of Key Rating Drivers Improved Scale of Operations, likely to Improve Further: SFL’s consolidated revenue increased to INR10,319 million in 1QFY27 (FY26: INR 38,208 million, FY25: INR34,392 million; FY24: INR29,823 million), largely supported by 65% yoy growth in U20 mattress’s volumes, coupled with 49% yoy growth in e-commerce sales volume. The performance remained largely in line with Ind-Ra’s expectations. The management expects the revenue run-rate to grow 10%-12% yoy in the Indian operations for FY27, led by improving brand presence and same stores sales. Ind-Ra expects the consolidated revenue to increase to INR42,000 million-43,000 million in FY27 and rise 8%-9% yoy in FY28. In 1QFY27, SFL’s consolidated EBITDA margins remained at 10.6% (FY26: 10.3%; FY25: 8.3%; FY24: 10.1%), supported by better absorption of fixed costs overheads and improved profitability at foreign subsidiaries. This was achieved, despite a moderation in consolidated gross margins, primarily due to an increase in raw material prices following adverse geopolitical conditions. The company’s gross consolidated margins declined to 40.6% in 1QFY27 (FY26: 43.7%; FY25: 41.7%; FY24: 41.3%). The management expects the EBITDA margins to improve further during the seasonal months, backed by higher absorption of fixed costs and its cost control measures. Ind-Ra expects the EBITDA margins to be 10%-11% in FY27. SFL’s consolidated net working capital cycle remained stable at 60 days in FY26 (FY25: 60 days; FY24: 63 days), despite increase in inventory days to 67 days in FY26 (64 days; 71 days), on account of stretch in payable days to 49 days (40 days; 53 days), following working capital efficiencies. Ind-Ra expects the cycle to remain stable over the near-to-medium term. Strengthened Market Position; Increase in Online Branded Mattress Sales in FY26: SFL is the largest manufacturer of polyurethane foam (PU) foam and mattresses in India with its well-established brand, Sleepwell and Kurlon. The company has a dominant position in other industries such as automotive, footwear, lingerie, and furniture, among others, apart from mattresses. According to the management, SFL has a market share of around 30% in the overall branded modern mattress segment in India along with the acquisition of KEL. Ind-Ra opines SFL’s market share will continue to benefit from a gradual shift to the organised sector from the unorganised one, supported by increasing consumer awareness about the health benefits of quality mattresses. Also, with the launch of the affordable mattress brands, Tarang and Aaram, SFL’s market share will improve in the unorganised segment. Furthermore, SFL holds around 40% market share in Australia, being a flexible PU foam player through its subsidiary, Joyce Foam PTE (Australia). Improved Credit Metrics in FY26; likely to Improve Further: SFL’s gross debt decreased to INR7,137 million in FY26 (FY25: INR12,165 million; FY24: INR12,813 million), largely on account of the repayment of NCD, which was taken for acquiring KEL. The NCDs are paid off in full paid in October 2026. The consolidated gross adjusted debt (including leases) reduced to INR9,079 million at FYE26 (FY25: INR14,624 million; FYE24: INR14,931 million). The company’s consolidated net leverage (net debt/EBITDA) reduced to 1.9x in FY26 (FY25: 3.3x; FY24: 3.1x), owing to the improved EBITDA and reduced gross debt levels, despite a decline in its cash and cash equivalents to INR1,703 milli [Showing first 8,000 characters — download PDF for full document]