Pakka Ltd Q1 FY2026 Concall Summary

Key Takeaways

• Execution reset, not a derailment: Revenue fell 11–15% QoQ/YoY on a 14-day planned shutdown to accumulate pulp for PM3, but management frames the quarter as a one-off and says the underlying project trajectory is intact, just delayed by roughly two years.
• The big bet is now fully funded and building: Financial closure completed with Axis Bank, two more banks near disbursement, and PM4 commissioning targeted by end-FY26. The company is pivoting from fundraising mode to execution mode.
• Leadership reshaped for the next phase: Ved Krishna returned to India to lead day-to-day; Jagdeep Hira stepped back on health grounds; Shubham Tibrewal took over Food Services; Rolando Yon moved from CFO to head the Americas. The bench is being rebuilt for scale.
• The flexible packaging story is being derisked in stages: Management now openly separates barrier coated paper (near-term, replacing polyethylene) from true flexible packaging (12–15 month shelf life, still being cracked). Greaseproof is a cost-pressured fallback, not the prize.
• What to watch next quarter: Whether the three new products launch on time, whether PM4 commissioning stays on track for FY26, and whether the Guatemala Stage 1 funding closes with the \$25 mn LOI converting to a binding commitment.

The Quarter: What Happened and Why

• 14-day pulp holdback drove the top-line miss: Pulp sales were stalled in April and May to accumulate feedstock for PM1 and PM3, while PM3 itself was already down. The result was a 15% QoQ and 11% YoY revenue decline, plus a ~5 percentage-point hit to EBITDA margin that would have been 21–22% without the shutdown.
• Other income fell as equity cash was deployed: Interest income dropped because fixed deposits parked from the preferential equity raise are now being drawn down for the Jagrati project. The PBT decline was a trickle-down of lower revenue, not a new cost event.
• Food Services showed a welcome QoQ uptick: Revenue inched up sequentially even as the division continued a product and supply-chain rationalization. The YoY comparison was slightly down.
• Consolidated revenue rose but PBT dipped: The consolidated picture reflected higher investment spend flowing through, with ROCE and ROE carrying the dilutive effect of the preferential equity raise.

Ved Krishna: "I have come back in to lead right now, at least in this critical period. I will be based in India and we will make sure that we will overcome all the challenges that we have today."

The Capacity Build: Jagrati, PM4 and the Two-Year Delay

• Jagrati is part-commissioned and accelerating: PM3 now has a better pressing system that will produce more and different grades; the pulping line was completely changed; part of the recovery boiler is set up. Financial closure is done and management is pushing to commission the full project within this financial year.
• PM4 is the next catalyst, targeted by end-FY26: Billed as the first machine in India to create barrier coated papers, it will start in 6–8 months and target multiple segments. The company decided to go with offline coating rather than online because even a simple viscosity change can destabilize an online system.
• The delay is owned, not explained away: Management acknowledged the plan to reach earlier revenue numbers was delayed by roughly two years, citing the time taken for funding, stabilization and ordering. FY26 is about commissioning; significant impact is expected in FY27, with the previously stated numbers hit in FY28.
• Pulp mill optimization is the near-term unlock: The pulp mill is expected to reach 200 tons of daily production within the next month. PM3 is guided to 60–70% capacity utilization in its first year (FY26–27), then 80%, then stabilizing around 90%.

Ved Krishna: "As Packa, we are definitely delayed in reaching those numbers, but we still remain confident that it is a two year kind of delay. But we do plan to achieve those numbers in the next two years."

Flexible Packaging: The Staged Reality

• The ambition has been split into three achievable tiers: Stage 1 is greaseproof paper, producible in 6–8 months as soon as the machine starts. Stage 2 is barrier coated paper replacing polyethylene on existing products like sugar sachets and snack bags, economically viable at planned scale. Stage 3 is true flexible packaging with 12–15 month shelf life, the big challenge still being tackled.
• Greaseproof is a cost-pressured fallback, not the strategy: Many competitors entered the greaseproof market in the last year, squeezing pricing. Pakka has structural cost advantages from own pulping and own energy, so it can still make money, but management was explicit: "Is it what Pakka is aiming for? The answer is no."
• Barrier coated paper is the pragmatic near-term prize: It is simpler than greaseproof, does not need 12–15 month shelf life, and customers already use Pakka's paper lined with polyethylene. The company will try to provide a better structure at similar pricing. Offtake agreements are not needed because it is a direct substitute.
• M1 found its first pilot home; M3 hit a certification snag: M1 is being tested for a deep pouch application with pilots expected between Q3 and Q4. M3 performance is fine but a required certification is still pending. Metallized substrate trials in England delivered some success and some learning, now moving to another iteration.
• The outer pouch of a tea bag is a live, undisclosed pilot: Running with one converter, initial volume indicators are "pretty decent," and the company is looking at doing conversions in the United States to minimize tariff impact. Management declined to disclose volumes, margins or costs, citing confidentiality.

Ved Krishna: "If we cannot meet the goal of flexible, we are going to land with various barrier coated applications that have a certain amount of moisture and air barrier, but they are not the 12–15 month shelf life."

Food Services: Rebuilding Share in a Fragmented Market

• The market has structurally shifted: Over 70 competitors have entered, mostly smaller localized players with cost advantages, and there is a general consumer shift from disposables to reusables. Pakka's response is to compete on product quality and innovation rather than price.
• Key wins are rebuilding momentum: The division won back lost QSR accounts because customers recognized product quality, found a successful new segment in religious institutions, and started working with Compass Foods and Sodexo in institutional catering.
• Q-commerce is a bright spot: Presence expanded from ~30 cities to ~186 cities on Blinkit and Swiggy, doubling revenue on this channel. B2B distribution also opened 25 new cities, making products available Pan India.
• The market share ambition is 10–15%: Management sees a revenue opportunity of ₹600+ crores from disposable tableware alone, targeting market leadership through first-mover product innovation.
• Clamshells and delivery containers are the "Holy Grail": Multiple product designs and qualifications are complete, final tests are underway, and the products should hit the factory within the next month. The delivery container is described as a first-time industry innovation: leak-proof and compostable.
• Chuck losses are shrinking even with the shutdown: Management noted that competition from cheap material is actually positive because it expands the category and takes the product to customers Pakka could not previously target.

Shubham Tibrewal: "We definitely see ourselves being the market leader, being the first mover in the country and also the product innovator of capturing a good 10 to 15% market share, which would give us a very, very significant revenue opportunity of 600 plus crores."

The Americas: Guatemala Restructured for a Safer Start

• The project is now three stages, not one giant leap: Stage 1 is a molded products facility in Guatemala, \$15 mn investment, targeted to go live by June 2026. Stage 2 is a barrier coated paper facility, \$265 mn, targeted for 2028. Stage 3 is flexible packaging, to be built after Stage 2. The strategy is to capitalize on the large molded market opportunity in the Americas first.
• Funding is progressing, slowly: Rothschild has replaced Nomura to lead the equity raise. A \$25 mn LOI from a Panama investment fund is under due diligence, and a \$12 mn LOI from Guatemalan private equity funds is in process. For Stage 1, management does not expect large dilution given the size and what Pakka has already invested; financing is likely mezzanine-type. Valuation is being looked at between 7X and 9X of initial investment.
• Tariffs are being managed on multiple fronts: The 7.5% tariff increase on final selling price is becoming manageable in the interim. The company is moving to a more efficient coastal supply chain and exploring near-shoring closer to North America as a longer-term solution. Tariffs in other countries, combined with Pakka's Central American presence, are opening up new opportunities.
• Model fiber is shipping a couple of containers a month: This continues to grow despite tariff headwinds. M1 should see decent sale quantities in the next two quarters.
• Pulp will initially be outsourced from Brazil: The plan is to move to own pulp later, consistent with the staged, capital-light approach.

Innovation, Leadership and the Team Rebuild

• Innovation leadership was reset by management's choice: Dr. Ramji Subramanian's application was short of what was wanted. Dr. Sam Son faced challenges being US-based while most innovation happens in India, and coming from large companies without cellulose knowledge. It was Pakka's call not to extend that contract. A new lead is expected to be onboarded within this quarter.
• The innovation team has been restructured into eight workstreams: Satish has been leading on an interim basis. New hires include Juan Gabriel Mosquera for flexibles, Pankaj Khairkar returning from Germany, and a Columbia University masters graduate heading biopolymer, all based in Bangalore.
• Jagdeep Hira stepped back on health grounds: He has been suffering since COVID and the speed of execution needed was becoming challenging. He remains a dear friend with full commitment to ensure PM4 runs well, and stays connected to the project.
• Ved Krishna relocated to India for the critical phase: He committed to remain until the project is up and running. India leadership will eventually transition to someone else, but not in the next 6–9 months.
• Deep bench cited: Narendra Agarwal (30 years with Pakka) handles the plant; Deepak Pandey handles the Jagriti project; Shubham stepped into a management role; Rolando stepped into the Americas role. A women's leadership program has identified 20 women across Pakka for future leadership.
• Three outsourced production sites are now live: The company is also working with a couple of technology suppliers to evolve molded fiber technology faster, and has started rebuilding problematic machines in-house rather than risk another failure with unproven external technology.

Ved Krishna: "Let me assure you, Packa has extreme depth when it comes to team and people. You'll be surprised if you ever visited us."

Guidance & Commitments

Key Metrics