“We will fund the acquisitions through the mixture of equity, debt and internal accruals,” Sheela Foam chairman and managing director Rahul Gautam said in an interview on Monday.

Around ₹800 crore to ₹850 crore will be funded through internal cash accruals, while the company will need to raise around ₹1,500 crore via equity or debt, group chief financial officer Amit Gupta added.

Earlier in the day, Sheela Foam announced that its board has approved the purchase of a 94.6% stake in Kurlon and a 35% stake in House of Kieraya.

Sheela Foam will pay ₹2,050 crore for the Kurlon transaction, subject to customary adjustments for working capital, debt and surplus cash. The deal valued Kurlon at ₹2,150 crore,

The Furlenco deal is expected to close by the end of August, and the Kurlon transaction by the end of November. Sheela Foam expects to tie up financing for the Kurlon deal by September-end.

Sheela Foam will take a 35% stake in Furlenco for around ₹300 crore in cash. The deal valued the startup at around ₹857.14 crore ($104.5 million). This is almost similar to its June 2022 valuation of around $106 million, according to Tracxn.

Mint reported on 8 February on Sheela Foam’s plan to acquire Furlenco.

The fund infusion into Furlenco is a primary investment and will help in retiring debt. Sheela Foam has the option of raising its stake in Furlenco to about 44%, Gautam said.

While Furlenco promoters currently own around 11%, private equity firm Lightbox holds 25-26%, with the rest held by small investors, Gautam said.

Sheela Foam doesn’t have the right of first refusal on the balance stake beyond 44%, but it expects it would be able to increase its shareholding beyond that also if it wants to, Gautam said. The unit economics of Furlenco is strong, he said. “Furlenco is expected to turn earnings before interest, tax, depreciation and amortisation (Ebitda) positive by October-end,” he said. “Let me be upfront. Burning money is not our forte. We would not do it. We see that Furlenco is at an inflection point.”

On Kurlon, Sheela Foam said the deal will help consolidate the fragmented domestic market for mattress and foam-based products. It will also help broaden Sheela Foam’s customer base into the southern and eastern parts of India. The company also expects to gain from Kurlon’s robust distribution network and production efficiencies, resulting in cost savings.

With this acquisition, Sheela Foam expects to achieve a combined market share of around 21% in the Indian mattress market. Gautam said he doesn’t expect any concerns from the Competition Commission of India as the domestic mattress market is still very fragmented.

Set up in 1962, Kurlon posted revenue of ₹808.80 crore in FY22, up ₹767.25 crore in FY21 but lower than FY20’s ₹995.56 crore. Kurlon has not yet declared its FY23 results.

On Furlenco, Sheela Foam said the investment will help the company enter the “fast-growing branded furniture market”.

Furlenco has a strong online presence and operates in Bangalore, Mumbai and Delhi NCR.

Sheela Foam previously acquired Joyce Foam in Australia with five manufacturing plants in 2003 and Comfort Technologies in Spain in 2019.