PAKKA Q1 FY27 earnings call

Pakka Limited reported its highest-ever quarterly revenue in Q1 FY27. Revenue increased by 42% year-on-year and 14% quarter-on-quarter. EBITDA saw a 31% YoY and 36% QoQ increase, while PBT grew by 34% YoY and 59% QoQ. The Q1 EBITDA margin stood at 14.5%, with management targeting 19% for FY27 and over 25% long-term.

Funding for Project Jagriti has been completed, and the project is back on track. The Power Boiler and Recovery Boiler are in advanced stages, with steam trials completed and start-up targeted for end of August or first week of September. For PM4, over 85% of major equipment work is complete, with commissioning expected by end of October/November and stabilization within 1-2 months, leading to commercial production around January. The project, costing approximately ₹753 crore, will add over 30,000 tonnes of annual capacity, focusing on high-quality substrates.

The Food Services division reported revenue of ₹18.45 crore, growing 34% YoY and 9% QoQ, despite a PBT loss of ₹1.62 crore. The business has established a strong outsourcing model with 5-6 partners, aiming to scale production and improve profitability. B2B revenue grew 46% to ₹16.5 crore, and B2C revenue grew threefold YoY. CHUK expanded into 22 new cities and added 34 key customers, with plans to add approximately 400 tonnes per month of outsourced capacity over the next two quarters. Long-term, the manufacturing mix is expected to be 20% in-house and 80% outsourced.

Pilot trials for flexC base paper, a translucent paper with enhanced strength, are underway in Europe and expected to complete within two months. A soft launch is planned for October, with commercial production following PM4 start-up in November and stabilization by January. Initial applications include confectionery wraps, snack pouches, and medical packaging. The company aims to reduce the cost of flexC base paper from ₹24 to ₹18 per square metre.

Multiple customer trials for delivery containers have been completed, with chefs reporting better food quality compared to plastic containers. The product is currently priced 40-50% above plastic alternatives, but customers are willing to absorb the premium due to performance benefits. The initial facility, requiring less than ₹2 crore investment for automated coating and gluing equipment, is expected to be in place by the next investor call. The company is also developing a heat-sealed version for price-sensitive customers.

The company's borrowing structure shifted from bank financing to Neo Asset Management to ensure Project Jagriti's continuation, with promoters' shares pledged as security. This short-term arrangement carries a higher cost of debt, approximately 17% compared to the previous 11-13%. The company plans to refinance through banks within 1-1.5 years after PM4 stabilization. Prepayment penalties and processing fees of ₹1.53 crore and ₹1.8 crore from the previous bank facilities were written off in Q1 FY27.

Pakka's long-term objective includes global expansion, though international manufacturing projects were paused to focus on Project Jagriti. The company is relocating its Material Science Centre from Bengaluru to Ayodhya to deepen investment in innovation, focusing on base materials, biotechnology, and biodegradation. This center will support the development of increasingly effective barriers for food packaging applications.