Pakka Ltd Q4 FY2026 Concall Summary

Key Takeaways

• A reset quarter, not a recovery: Revenue grew 8% YoY and 4% QoQ, but PBT was negative, hit by an extended PM3 shutdown (₹11 cr impact) and a pricing war in wrap-and-carry (₹16 cr impact).
• The balance sheet was saved, at a cost: A ₹500 cr NCD facility at a ~17% effective rate replaces existing bankers, with promoter equity of ₹85 cr infused at a 20% premium to book value. Management calls the debt a short-term measure, exit-able in 15 months.
• Project Jagriti is now the singular focus: The new paper machine is expected by end of September, with power and recovery boilers in July. Management has narrowed focus entirely to India, pausing Guatemala and consolidating innovation in Ayodhya.
• Food services is growing but still loss-making: Revenue jumped to ₹17 cr from ₹11.5 cr YoY, but PBT was negative due to one-off plant losses and write-offs. Management expects a significant transformation this year.
• What to watch next quarter: Whether the PM3 modification in June actually delivers the promised 10-ton/day increase and ₹8 cr PBT boost, and whether Project Jagriti commissioning stays on its September timeline.

The Funding Reset

A planned equity raise faltered when one investor did not honor warrants due to the falling share price, forcing a scramble. The resulting structure with Neo Group is expensive but, management argues, necessary to get the project running rather than starve it for capital.

• Why promoter used convertible instruments, not warrants: The 5% annual creep limit for promoters prevented a warrant subscription, so an optionally convertible instrument was used. The promoter put money in at ₹110, a 20% premium to the SEBI formula price of ₹92.
• Working capital concern partly addressed: An analyst flagged that incremental working capital of ₹100–150 cr would be needed once PM4 starts, with all assets already pledged. Management countered that the actual need is only ₹45–50 cr, and that working capital lenders will get a first charge on current assets, which were not pledged to Neo.

Himanshu Kapoor: "The essence of the project lies in the project getting started rather than just starving for money in the entire project. And all our wealth and everything lies only in the fact faster the project is implemented and it starts generating revenue."

Project Jagriti: Timelines, Products & Economics

The new machine is the company's entire growth thesis compressed into one asset. Commissioning timelines have slipped on funding delays, but management insists the end-of-September target for first paper holds.

• Power and recovery boilers are commissioning in July; testing is ongoing.
• The paper machine is expected by end of September, with a couple of months for stabilization before commercial output. Pilot runs on other machines will start earlier to seed the market.
• Product mix: The machine will produce release paper (including glassine) and base paper. Release paper targets siliconization applications where low silicon absorption is critical, with pricing starting in the ₹110–150/kg range and a target to reach ₹130–140 within this financial year or early next.
• Ramp-up: 60%+ capacity utilization expected by end of FY27, 75%+ in FY28.
• Revenue scenarios from the new facility:
• Base case (molded stagnant): ₹700–750 cr turnover, ~25% EBITDA
• Molded grows: ₹900 cr turnover
• Flexibles take off: ₹1,400–1,500 cr turnover, 22–23% EBITDA
• Full-capacity EBITDA from the new plant is pegged at 25%.
• Bare minimum EBITDA in the next two years: ₹125–130 cr, potentially ₹140–150 cr by end of FY28.

Ved Krishna: "The machine that we are expecting, though there was some delay in the funds availability, but we are still expecting by end of September, this machine will also be producing."

Wrap & Carry: The Near-Term Fix

The legacy business absorbed a double hit: a PM3 modification shutdown that stretched from a planned 20 days to 40 days, and a pricing war from new waste-paper-based entrants that compressed net sales realization.

• PM3 modification: The work done so far did not achieve the expected capacity increase. A second attempt is planned for the fourth week of June, targeting a 10-ton/day increase and a ₹8 cr PBT boost.
• Pricing defense: The company is shifting toward specialized segments where it can govern significant price, growing from 50 tons to 400–500 tons/month. New grades with better contribution are being launched on PM1 and PM2.
• Outsourced OGR will be scaled from ~300 tons to 500 tons/month to fill demand without capex.
• The waste-paper risk: Management flagged that low-cost producers using waste paper are a structural concern because waste paper should not be applied to food contact, but laws are being bypassed by classifying it as secondary packaging.

Food Services: Growth Without Profit

Revenue grew significantly YoY (₹17 cr vs ₹11.5 cr), but QoQ growth was muted because Q3 is the festive peak and Q4 included re-rationalization and stock-taking impacts. PBT was negative, driven by one-off items rather than core operational weakness.

• Volume growth of 20% (2,600 to 3,100 tons) came from expanding to 25 new cities, growing the high-margin B2C channel 2.5x to ₹6.5 cr, and unlocking new territories.
• Loss drivers were one-off: ~₹3 cr from plant equipment issues and a mid-year machine shutdown that raised production costs, plus write-offs of slow-moving inventory, old packaging, and old project development costs to create a clean start for FY27.
• The Bangalore innovation site is moving to Ayodhya within two months, a decision driven by cost and proximity to operations for faster commercialization. Most of the team is expected to be retained.
• Ayodhya plant refurbishment will remove or sell all existing equipment; food services production there will pause until funds are available for new technologies.
• The 15% market share goal by 2028 (~₹680 cr) remains intact, and the board is clear it does not want to exit the segment.

Flexible Packaging: Still in the Lab

The chemistry for non-metallized flexible packaging is not yet production-ready. Viscosity and drying challenges with new-age chemicals persist, and management cannot be totally sure it will achieve the desired production.

• Strategy shift: Instead of doing the barrier coating themselves and risking cannibalization of converter relationships, Pakka is now making base non-porous paper and feeding it to converters who quote and print.
• Metallized flexible packaging continues to be pushed in the market, but the goal remains to shift to non-metallized because metallized oxidizes in the climate and is questionable for marine and terrestrial safety.
• Pilot trials are running on smaller lab pilots; cost has come down significantly and efficacy is up. Management is close to significant trials at the global stage and hopes for more significant news in coming quarters.
• Flexible packaging will be entered through outsourced capacity at least until the company's own plant is running.
• Target: Five major brands converting part of their portfolio to Pakka's flexible solution, and five major converters buying regularly from Ayodhya.

Ved Krishna: "It is a delicate, interesting, difficult, and possible chemistry that we've been working with. But we are close to at least doing some significant trials at the global stage, and we are hoping for more significant news in the coming quarters."

Cost, Debt & The Path Back to Margin

The company is attacking costs on multiple fronts while carrying expensive debt that will take at least 15–16 months to clear. Management is explicit that margin recovery is an effort, not guidance.

• Cost optimization: The finance team is reviewing every cost with a "magnifying lens"; significant cuts are expected.
• SG&A leverage: Current SG&A and team cost is 29–32% of revenue (~₹115–120 cr). When the new plant runs, these costs rise to ₹160–180 cr but the percentage drops to 26–27% with the additional top line.
• Debt repayment: Minimum 15–16 months to wipe out the high-cost debt; trajectory changes should be visible from Q2 onward.
• EBITDA margin target: Management will "look to come towards" the historical 22–25% range, but declined to give a specific revenue number for the next two years.
• The billion-dollar ambition by 2030 remains unchanged, but when asked when investors would be rewarded for patience after the stock's fall from ~₹1,000 to ~₹300, management acknowledged responsibility for wealth erosion but gave no timeline or target for recovery.

Ved Krishna: "We are totally responsible for eroding your wealth. And we want to make sure that we do right by you."

Guidance & Commitments

Key Metrics