Pakka

Pakka experienced a turnaround in profitability during Q3 FY26, following a challenging first two quarters primarily due to an extended shutdown for PM3 capacity expansion and initial phases of the Jagriti project. The company reported a quarterly revenue of approximately ₹100 crores and an EBITDA of about ₹20 crores available for investment. Despite a 4% drop in prices, operational efficiencies helped reduce the year-on-year PBT gap. The food services business saw improved revenue compared to the previous quarter, though losses slightly widened due to inventory liquidation schemes and equipment upgrades.

Project Jagriti has made significant progress, with a total committed Capex of ₹515 crores. This is funded by ₹198 crores from equity, ₹308 crores from banks and loans, and ₹8 crores from creditors. Key sections of Jagriti, including the new power plant and recovery unit, are expected to start production by the end of March or early April 2026. The new paper machine (PM4) is also progressing well, with significant movement towards commissioning expected in the first quarter of next year. A remaining equity funding gap of approximately ₹60 crores is targeted to be covered by internal accruals and promoter equity by March 2026, with the project's major spend initiation targeted by August 1st.

The company has made a strategic decision to pause the Ka Wok project in Guatemala for the next 6 to 12 months. This pause is to allow the company to fully focus its bandwidth and resources on stabilizing Project Jagriti and current India operations. Approximately $5 million USD has been spent on the Guatemala project to date. Existing Bagas and land contracts have been put in abeyance by mutual agreement, with no penalties, and the team in Guatemala has been let go, with the intention to renegotiate and restart once the India operations are stable.

The food services business has implemented several initiatives and strategies, leading to improved revenue in Q3 FY26. The B2C segment showed an 80% year-over-year revenue growth, driven by increasing the number of B2C channels and marketplaces; five were added in Q3, with five more planned for Q4. A new leak-proof delivery range, designed for gravy products and addressing leakage issues, is ready for launch this quarter. This product will be offered at a 25-30% premium, justified by its innovation and benefits to restaurants, with an initial scale of 8 machines producing 400 KG/day.

Upon stabilization, PM4 is expected to produce approximately 3,500 to 4,000 tons. Combined with existing paper machines producing around 4,000 tons, the company aims for a total production trajectory of 8,000 to 9,000 tons by the calendar year-end 2026. The initial focus for PM4 will be on base papers like grease-proof and release paper, which have umpteen applications and are largely imported. The company aims to eventually move towards barrier-coated functionalized papers, acknowledging market resistance to cost increases but emphasizing the need for better performance and value.

Pakka has focused on strengthening its internal leadership team, with management working from Ayodhya to stabilize operations and develop talent from within the organization, rather than hiring an external CEO. The company is committed to transparent communication and has released an annual calendar for investor meets, including virtual Q4 and Q3 meets, and physical Q1 and Q2 meets in Ayodhya and Mumbai, respectively. Management acknowledged past unmet commitments and expressed a commitment to delivering better results and rebuilding investor confidence.