Wakefit IPO is seeking a premium in a ₹3 trillion market. Is it justified?

For investors, the offer is a chance to track Wakefit’s shift from an online mattress seller to a broader home-solutions business spanning furniture and offline retail.

The issue, priced at ₹185-195, includes a fresh issue of ₹377 crore and an offer-for-sale of ₹912 crore. At the top end, Wakefit’s implied market capitalization is ₹6,373 crore, broadly in line with peer Sheela Foam at ₹6,482 crore. Promoter shareholding will fall to 36.8% from 43%.

Of the net proceeds, the company will use ₹30.8 crore to set up as many as 117 Company-Owned and Company-Operated (COCO) stores, ₹161.4 crore for lease and licence-fee payments for existing stores, ₹15.4 crore for capex, and ₹108.4 crore for marketing. The utilization mix underscores its focus on expansion and brand strength, an approach that may appeal to investors seeking growth-led deployment.

The key question is how Wakefit looks operationally and financially as it enters the market.

Growing portfolio

Wakefit now offers products across three categories – mattresses, furniture, and furnishing/decor, and is the only D2C home and furnishing company with a presence across all three, each generating over ₹100 crore in FY24. Revenue grew at a 24.9% CAGR during FY22-24, 2.5x the industry and 1.6x organized peers.

Mattresses remain the core. Wakefit is among the top three organized players by revenue in FY24, and ranks among the leading sellers on India’s two largest horizontal marketplaces. Mattresses made up 61.4% of revenue ( ₹1,274 crore) in FY25, followed by furniture (27.6%) and furnishings (11%).

Regulatory and other risks

This reliance exposes it to shifting consumer preferences such as interest in eco-friendly materials, while regulatory changes could affect operations. The Furniture (Quality Control) Order taking effect on 13 February 2026 mandates BIS compliance for certain products, and noncompliance could hurt the business.

That said, these risks are industry-wide, but Wakefit’s brand-heavy model adds another layer. Advertising expenses were 11.8% of revenue in FY23 before easing to 7.8% and 7.6% in the following two years as scale improved.

Still, the company must spend consistently to maintain brand visibility, as even small shifts in perception can weigh on demand.

Integrated model

Wakefit’s strength lies in its full-stack, vertically integrated model that spans design, manufacturing, distribution, and customer experience. It sells through its own website and COCO stores, and through e-commerce platforms, quick-commerce channels, and 1,504 multi-brand outlets.

In the channel mix, the contribution of own channels has remained around 57-58%, with the balance from other channels. For Wakefit, store additions play a key role in sustaining revenue growth, as the average order value at COCO stores is 78.8% higher than on its website.

And the company has moved in that direction, with COCO stores rising 5.4x to 125 (Q2 FY26) from 23 in FY23, with 117 new COCO stores planned by FY28, funded by the IPO net proceeds.

Selling through owned stores gives Wakefit greater control over product experience and service, boosting loyalty, repeat purchases, average order values, and conversion rates.

Cross-selling and premiumization

The omnichannel approach and broad portfolio allow Wakefit to cross-sell—17.9% of furniture customers in Q2FY26 (17.6% in FY25; 17.8% in FY24) came from other categories. The company plans to expand its furniture business and focus on premium segments like its Plus range to lift customer spending.

It also plans to pilot two large-format COCO jumbo stores in Bengaluru, potentially adding amenities such as restaurants to encourage longer visits.

But costs are rising. COCO store rent accounted for 3.3% of revenue in FY25, and leases often have a 5% annual escalation. Lower throughput, more online competition, consumer shifts toward private labels, and higher discounting and commissions on digital platforms remain pressure points.

Cost pressure

As a direct-to-consumer (D2C) brand, the company is heavily dependent on third-party logistics service providers and spends around 8% of revenue every year. Thus, an increase in delivery charges could impact the company's margins and profitability. Additionally, raw materials also contribute significantly to its revenue, especially given its vertically integrated operations.

The cost of materials consumed accounted for 58.1% of revenue in FY23, easing to 47% in FY24 and 45.7% in FY25. Although the company sources 73.5% of its raw materials domestically, 26.3% is still imported from the U.S., China, Singapore, Malaysia, Vietnam, and Thailand. This number has increased from 22.5% (FY23) and 21.9% in FY24.

Though Wakefit has not faced any import restrictions to date, anti-dumping duties and geopolitical risks persist amid heightened tensions, exposing the fragile supply chain.

People problem

The business is manpower intensive, and a consistent attrition rate of over 40% raises concerns. Attrition stood at 54.4% in FY23, 41.4% in FY24, and 47.3% in FY25. While it eased to 23.9% as of 30 September, the overall levels indicate significantly higher churn.

Rising inventory

Inventory has risen from 22.8% of revenue in FY24 to 34.7% as of 30 September 2025, which could indicate soft demand or a build-up ahead of expansion. Wakefit maintains that higher inventory is necessary to support its widened product range and owned distribution network.

This view is supported by capacity utilization exceeding 75% across most plants. At the same time, it acknowledges the risk of overestimating demand. But given that Wakefit has repeatedly written down inventory over the past three years and again in the first half of FY26, it more likely points to demand running below expectations or gaps in inventory planning.

This pattern suggests that inventory levels have remained structurally elevated, while demand remains weak. As a result, the inventory turnover ratio has weakened to 1.2x in Q2 FY26 from 3.8x in FY24, indicating a slower conversion of inventory into sales. Although Wakefit states that these write-downs didn't have a material impact, the consistency of such write-downs does raise concerns.

At the same time, the working-capital cycle has improved, with net working days falling from 6.7 days in FY24 to one day. However, this improvement has been driven by delayed payments to suppliers, with payables rising from ₹144 crore in FY24 to ₹270 crore in Q2FY26. This supports near-term cash flows but masks the underlying issues of rising inventory and slower turnover.

Financial performance

Revenue momentum remains strong, supported by continued store expansion and steady demand across key categories. Revenue from operations grew 56.7%, from ₹813 crore in FY24 to ₹1,274 crore in FY25, outpacing Sheela Foam (19.6%). This was driven mainly by offline channels, where revenue jumped 5x to ₹425 crore from ₹86 crore in FY23.

The balance came from online channels (own website + marketplace), which grew modestly by 16.7% to ₹849 crore. Revenue from marketplace (e-commerce and quick commerce), however, has grown faster by 44.4% to ₹483 crore, accounting for 56.9% of revenue from online channels. Despite the strong topline, Wakefit remains loss-making, with losses doubling to ₹35 crore in FY25 from ₹15 crore in FY24.

Operationally, though, the company has turned profitable. Ebitda improved from a loss of ₹86 crore in FY23 to a profit of ₹91 crore in FY25. Ebitda margins expanded from negative 10.6% to 7.1% over the same period, trailing Sheela Foam (8%). Leverage remains comfortable with a debt-to-equity ratio of 0.5 times and a debt-service coverage ratio of 1.3 times.

Valuation test

At ₹6,373 crore, Wakefit is seeking a valuation of about 5 times sales, more than double Sheela Foam's (2 times). Wakefit is growing faster with a more diversified revenue base, but Sheela Foam remains the established market leader with stronger profitability.

This makes the premium a tough ask for investors, particularly when Wakefit is still loss-making, operating with lower margins, and carrying more inventory than it ideally should. Its valuation ultimately sits between legacy consumer brands and new-age listings on Dalal Street.

For more such analysis, read Profit Pulse.

The auditor has also pointed out gaps, including the lack of an audit trail in the company's accounting system and discrepancies between the numbers shared with banks and those in its own books. These issues aren't uncommon among new-age companies, but still signal the need for tighter controls as it enters the public market.

Madhvendra has over seven years of experience in equity markets and writes detailed research articles on listed Indian companies, sectoral trends, and macroeconomic developments.

The writer does not hold the stocks discussed in this article.

The purpose of this article is only to share interesting charts, data points, and thought-provoking opinions. It is NOT a recommendation. If you wish to consider an investment, you are strongly advised to consult your advisor. This article is strictly for educational purposes only.