Mumbai: Sheela Foam Pvt. Ltd, which sells mattresses under the Sleepwell brand, plans to raise as much as Rs.500 crore through an initial public offering (IPO) by March, according to two people aware of the development.

Edelweiss Financial Services Ltd and ICICI Securities Ltd will manage the process and work has been initiated on the IPO, said one of the two people cited above, requesting anonymity as the person is not authorized to speak to reporters.

“The initial share sale will be majorly a primary fund-raising effort, however, the promoters might also sell some part of their shareholding through an offer for sale,” this person said.

Sheela Foam is looking to file share-sale documents with markets regulator, the Securities and Exchange Board of India, by the next quarter, and the company might look to launch the IPO before March 2017, said the second person cited above, also requesting anonymity.

“They will use the funds to invest in additional manufacturing capacity and new product development,” the second person said, adding that some funds will also be allocated for further brand building ahead of its IPO.

Led by Rahul Gautam, Sheela Foam makes and sells polyurethane foam-based mattresses. Sleepwell is the company’s flagship brand. The firm also makes foam for industrial applications.

“We have nothing to share at this time. While an IPO is one of many avenues that we could choose to pursue, we are right now focused on building our business,” said Gautam in an e-mailed response to queries about his company’s IPO plans.

E-mails sent to spokespersons for Edelweiss and ICICI Securities seeking comments remained unanswered.

Sheela Foam has 12 manufacturing facilities and a nationwide network of more than 100 distributors and around 5,000 dealers. The company also exports its products to almost 25 countries, according to its website.

In 2005, it acquired the polyurethane and polystyrene foam business of Australia-based Joyce Foam which has five manufacturing facilities and claims to have 35% market share in the polyurethane foam business in that country.

Sleepwell in India competes with other home-grown brands such as Kurlon Enterprise Ltd, Springfit, and Springwel Mattresses Pvt. Ltd.

Private equity (PE) firms have cozied up to mattress makers. In October, Kurlon raised Rs.90 crore from Motilal Oswal PE-managed PE fund, India Business Excellence Fund.

A strong home-grown consumer story, such as Sleepwell, may generate interest from investors as seen in the recent public market offerings, experts say.

“Public market investors are keen on consumer stories,” said Munish Aggarwal, director at investment bank Equirus Capital Pvt. Ltd. “Several of these companies have over the years invested in building strong consumer brands and positioned themselves as consumer stories, resulting in strong awareness of their brands among consumers,” said Aggarwal, adding that the positioning of the IPOs will be more as a consumer story even though the business might not be purely consumer-facing and have a large business-to-business element to it.

He also warned that valuations will play a huge role.

In 2016, PE backed consumer facing companies such as Parag Milk Foods Ltd and Quick Heal Technologies Ltd raised Rs.751 and Rs.451 crore, respectively, in their market debuts.

So far in 2016, 10 companies have raised Rs.6,743 crore though the IPO route, compared to 21 firms raising about Rs.13,600 crore through IPOs in 2015, data from primary market tracker Prime Database shows.

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