Sheela Foam eyes further investment in Furlenco as furniture rental market grows

“The company plans to rope in external investors and existing investors,” one person said, adding that the deal structures are still being worked out.

Sheela Foam, which listed in 2016, has invested about ₹400 crore to date to acquire a 45% stake in HoK, making it the largest shareholder. With 50.10% of the equity voting rights, HoK is strategically important for Sheela Foam as it can be a potential growth vertical for the mattress maker, Crisil said in April.

“The company is looking to raise over ₹100 crore ($12.5 million) to fund its expansion plans and get to the ₹500-600 crore revenue mark over the next three years,” the second person said.

Sheela Foam and HoK did not immediately respond to Mint’s requests for comment.

Sheela Foam acquired a 35% stake in HoK in 2023 for a cash consideration of about ₹300 crore to enter the fast-growing branded furniture market. The transaction valued the company at about ₹857 crore. Sheela Foam acquired another 10.5% in the following year with a ₹107 crore investment. The mattress maker also owns brands such as Kurlon, Sleepwell, Joyce and Interplasp.

“SFL has been actively involved in the operations of HoK and three out of the five board members in HoK are from SFL. HoK is likely to receive any need-based financial support at short notice in case of exigencies,” Crisil, the credit rating company, said in April.

Shares of Sheela Foam have declined about 27% in the past year.

Funding rounds

HoK raised $7 million in a debt funding round from Northern Arc and CredAvenue earlier this year. The subscription-based furniture rental startup had raised $140 million in a round led by Zinnia Global in a mix of debt and equity in 2021.

In May 2022, it raised another round of debt funding from revenue-based financing platform Klub against future recurring revenue. HoK also counts Lightbox, CE-Ventures and angel investor Saket Burman among its backers.

Founded in 2012 by Ajith Mohan Karimpana, Furlenco operates in the over $5 billion rental furniture and appliances market and has a presence in Bengaluru, the National Capital Region, Hyderabad, Chennai, Mumbai and Pune, among other cities. Its offerings range from furniture to appliances on a monthly, half-yearly and full-yearly rental basis.

HoK, which competes with Cityfurnish and Rentomojo, has a subscriber base of over 100,000 subscribers, with a net addition of 4,000-5,000 customers every month. The company differentiates itself from competitors through its in-house designing and large in-house manufacturing capacity, which accounts for 40-50% of its production.

HoK reported revenue of ₹140 crore in FY24, a drop from ₹156 crore a year earlier. Its loss widened to ₹130 crore from ₹128 crore in FY23.

The company’s revenue is expected to increase to ₹215-225 crore in FY25, driven by an increase in subscribers, according to a Crisil report in April. The credit rating company said the company is expected to turn profitable through better absorption of fixed costs driven by growing scale of operations.

It highlighted that the company would benefit from a strong position in the furniture rental market as the entry barriers are high due to extensive capital needs. However, Crisil added that the company continues to face challenges due to capital-intensive operations because the business requires continuous addition of furniture to rent out to customers.