Implementation of GST will aid the organized mattress players in gaining market share from the unorganized players: Bonafide Research
Several PE firms are investing in large mattress companies and others too have started due diligence on mattress manufacturers. Such strong investments and back up from PE firms, along with implementation of GST from April 2017, will support organized players to win the competition over regional/domestic unorganized players.
Indian mattress industry consists of organized and unorganized sector. Unorganized sector dominates the market with majority of revenues whereas organized players are trying hard to make their presence felt among masses. Mattresses from unorganized players usually use cotton filler as it is the cheapest of the many options that are now available and thus are the choice of masses. There are several types of mattresses available in the country but coir, PU foam and spring are the most popular ones. Spring mattresses are increasingly being preferred over coir and PU foam mattresses from the last few years. Indian consumers are yet to taste the best technologically advanced sleep systems but factors like favourable demographics, changing life styles and increase in disposable income makes this market an attractive one.
According to recently published report of Bonafide Research “India Mattress Market Overview, 2016-2022”, organized mattress brands will snatch the market from unorganized players in the coming five years on the basis of affordable quality, growing awareness regarding brands, diverse portfolio of branded mattresses and entry of new players in the organized segment. Apart from all this, GST (Goods and Services Tax) is expected to spur the growth for organized players from 2017. With the implementation of the GST from April 2017, the entire indirect tax system in India which includes excise, state-level VAT, service tax etc. is expected to evolve. Currently, the effective tax rate for the furnishing and home decor sector ranges above 20%. According to Anita Patil, Sr. Research Analyst at Bonafide Research, "After the implementation of GST, mattress companies will benefit from lower tax rate which will decrease the price gap between local mattresses and branded ones. This will spur the competition between organized and unorganized sector; eventually generating opportunities for the organized players." Hence, implementation of GST is expected to bring the unorganized sector under a uniform tax base and improve growth opportunities for the organized sector. The logistics costs will also be curtailed.
However, the proposed GST tax regime could adversely impact the coir industry, particularly manufacturers of coir mattresses, if coir and rubberized coir mattresses and sheets are not classified under the merit or essential list. The Ministry of Finance at present provides various fiscal incentives to the manufacturers and exporters of coir products. For coir mattresses, a concessional levy of excise duty at 2% (without CENVAT credit) or 6% (with CENVAT credit) is being extended. The government is considering to tax environment unfriendly products distinctly from others in the GST regime. As a result, classifying coir-based products under concessional category when compared to alternative products to promote their usage would result in penalizing the polluting products and incentivizing green products. All India Coir Mattress Manufacturers’ Association has been appealing to the Centre to classify such coir products under essential list or low tax bracket.
Major companies operating in the mattress market of India are Kurlon Enterprise Limited, Sheela Foam Limited, Peps Industries Pvt. Ltd., Springwel Mattresses Pvt. Ltd. and Coirfoam (India) Private Limited.