PAKKA LIMITED

Pakka's Q1 FY26 EBITDA margin was approximately 16%. Management clarified that this figure was impacted by a 15-day shutdown for machine upgrades, which, if not for the shutdown, would have resulted in an EBITDA margin of 21-22%. The declaration of consolidated financial statements for FY25 and Q1 FY26 was delayed due to the first-time external audit of the US subsidiary, Baka Inc., and the complex reconciliation required for the acquisition of PACA Guatemala, involving three different accounting standards (Guatemala, US GAAP, and India's Ind AS).

The company reiterates its ambitious 'big, hairy, audacious goal' for 2030: to produce 500,000 tons per year of material. This production volume is projected to generate $1 billion in revenue, representing a 20X growth from the current $50 million. This target includes 100,000 tons from India (post-PM4 expansion) and 250,000 tons from the Guatemala expansion, with the remaining 250,000 tons to be covered by further growth initiatives.

Recent leadership changes include Ved Krishna stepping in to lead India operations during a critical period, Shubham Tibrewal taking charge of the food services business, and Rolando John leading the Americas business. Management emphasized the depth of the team and the focus on developing new leaders. They acknowledged analyst concerns regarding past leadership turnover but assured that the current structure is robust and aligned with the company's singular mission for a cleaner planet.

The Jagrati project, encompassing Paper Machine 3 (PM3) and the pulp mill, has been commissioned and is stabilizing. The pulp mill is expected to reach 200 tons per day production soon. PM3 now features a better pressing system, enabling higher production and better grades. The total project cost is 675 crores, with a projected peak debt level of approximately 600 crores by 2027 (comprising 440 crores in term loans and 160 crores in working capital). The first year of operation (FY27) is targeted for 60-70% capacity utilization.

The Guatemala expansion is proceeding in phases, starting with a $15 million molded products facility, expected to be live by June 2026. This strategy aims to capitalize on the demand for molded products in the US, leveraging Guatemala's strategic location, low tariffs (10%), and short logistics lead times. The company is securing $50 million in funding for this first stage, with commitments from Latam Capital and other investment funds. Future stages include a barrier-coated paper facility (2028) and a flexible packaging facility (total $265 million investment).

The Chuck brand in the food services segment has gained significant momentum, with products being adopted in revered institutions like Mata Vaishno Devi Shrine Board and ISKCON temples. The company has expanded its B2C presence on Q-commerce platforms (Blinkit, Swiggy) from 30 to 186 cities, doubling revenue in this segment. New products like delivery containers and clamshells are nearing launch, with delivery containers expected to hit the factory in the next month and be profitable due to their leak-proof and compostable design.

Pakka is actively pursuing flexible packaging solutions, focusing on barrier-coated papers to replace multi-layered plastic. While greaseproof paper is technically feasible, the company aims for higher-value barrier-coated products with upwards of 30% EBITDA margins. The development involves an asset-light approach, working with outsourced sites and investing in R&D and pilot coating systems. Significant technical challenges remain in achieving the moisture and air barrier properties required for 12-15 month shelf life products, necessitating continuous innovation and trials.