Sheela Foam (SFL) is a leading manufacturer of mattresses in India, marketing its product under the ''Sleepwell'' brand. As of FY16, it has a market share of 20-23% in the organized mattress market. The issue is an offer for sale. SFL will not receive any proceeds from the IPO.

There is no listed peer in the domestic market. At the higher price band of Rs. 730, SFL's share is valued at a P/E multiple of 34x its FY16 earnings. Moreover, on P/BVPS and EV/EBITDA front, the company is
available at 10.5x and 19.6x.

Choice Broking has recommended 'Subscribe' to IPO of Sheela Foam. Commenting on the investment rationale, the stock broker said, ''As the company generates around 60% of the sales in cash, its business might get affected due to the ongoing demonetization process in Q3FY17. The government is planning to move towards a cashless economy and is targeting to change the consumer behavior from cash payment to digital payment. We are of the strong opinion that this transformation will be gradual and thus the business sentiment will be affected in the near term, but will be positive in the long run. The demanded P/E multiple of 34x, seems to be on higher side.''

''Considering the above observations and the current scenario, we feel that there will be bleak prospects of listing gains. For investors with a long term horizon, we recommend a ''Subscribe with Caution'' rating for the public issue ,'' it added.

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