Pakka Q1 FY26 earnings call

Where management's figures differ from the filing

• EBITDA margin (Q1 FY26): said ~16% this quarter (would have been 21-22% without the 15-day shutdown); filed EBITDA ex other income margin 7.2%. Management's stated 16% does not reconcile to the filed 7.2% even allowing for the 5pp shutdown impact they cited; analyst on the call also disputed that margins had been below 10% ex other income.

What moved the numbers, as management explained it

• 14-day shutdown of pulp sales and PM1/PM2 to accumulate pulp for the Jagrati expansion compressed Q1 revenue; both PM3 and pulp mill are now back online. (one-off)
• Lower NSR across the industry; management said they are better placed than peers and saved more, but the revenue still felt the weakness.
• Other income fell because FDs funded from the equity raise are now being drawn down for the Jagrati project, reducing interest income. (one-off)
• PBT decline is a trickle-down from lower revenue; management explicitly said there is no specific incremental expense to flag this quarter.
• FDA required retrospective external audit of Pakka Inc from FY22 onwards (first-time external audit) and reconciliation across Guatemala, US GAAP and Ind AS for Pakka Guatemala acquisition, delaying the FY25 consolidated results and the Q1 FY26 call. (accounting)

The numbers management led with

• Promoter pledge release: 91.06% of promoter group equity shares released from pledge; balance pending bank-level release
• Production capacity target: 500,000 tons/year by 2030; current ~50,000 tons (10x growth target)
• Guatemala stage 1 capex: $15mn investment for molded products facility in Guatemala; live by June 2026
• Guatemala stage 2 capex: $265mn investment for barrier-coated paper facility; live by 2028
• Equity raise target: $50mn for Guatemala stage 1; $25mn LOI from Latam/Panama fund secured, $12mn LOI in process from Guatemala PE; Rothschild engaged (replaced Nomura)
• Jagrati peak debt: ~Rs 600 crores peak debt in FY27 (Rs 440 crores term loan + Rs 160 crores seasonal working capital)

Guidance on this call

By business

Balance sheet, capex and funding

• Peak term loan for Jagrati project ~₹440 cr in FY27; working capital peak ~₹160 cr; total peak debt ~₹600 cr in FY27.; the peak debt level for This is around 440... working capital which is ongoing is about 160. So I would say if you take both, it'll be about 600 crores
• Jagrati project total cost ₹675 cr; coater (offline) ~₹36 cr, of the 675 cr is the rest of the project. 425 cr hard cost excluding coater.; 36 crores is what I remember... we are still kind of assessing... to continue with the current project cost... 675 crores
• Three banks completed financial closure for Jagrati; Axis Bank has disbursed, two others completing internal compliance.; we have three banks wherein the financial closure has been completed. We have already received disbursement from Axis Bank
• Guatemala stage 1 capex $15M; stage 2 capex $265M planned for 2028.; That's an investment of around $15 million... That plan is to go live in 2028. It's a $265 million investment
• 91.06% of promoter group equity shares released from pledge; balance 8.94% in process (technical glitches at bank end).; 91.06% of equity equity shares of promoter groups have been released from the pledge and the balance is also in process
• Guatemala equity raise: $25M LOI secured (Panama fund), $12M in process (Guatemala PE); Rothschild engaged (replaced Nomura); senior debt and stage 1 close targeted.; we have already $25 million under LOI... another $12 million in process of LOI

The industry, as management sees it

Management views the sustainable packaging industry as supply-constrained and demand-led, citing Trumponomics-driven US nearshoring tailwinds, anti-dumping duties on Chinese/Vietnamese/Indian/Thai pulp, and 50% tariff on Brazilian pulp as creating a strategic opening for Pakka's Central American footprint. Food packaging in India is a $6.3bn market growing into plastic substitution and Q-commerce tailwinds.

Risks management named

• Promoter pledge on remaining ~9% of equity shares still pending release
• M3 metallization not planned in-house due to scale economics; outsourced for now
• Sub-coating capacity at Jagrati still being scoped; cost reduction from ~30% premium to incumbents needed
• Flexible-packaging technical validation of 12-15 month shelf-life barrier still in iteration
• Two-year delay in achieving prior financial targets disclosed by management
• Past innovation leadership exits (Dr Sam Son); permanent innovation head yet to be appointed

Not answered directly

• Specific names of large FMCG customers
• Detailed Q2 FY26 revenue and EBITDA guidance
• Exact capex committed to date on flexible packaging
• Specific cost per square metre of flexible packaging grade
• Jagrati coater cost escalations (deferred to next quarter)

Asked for a number, answered without one

• Cost of flexible packaging per sq meter: Ved disputed the 35 figure saying they are way lower at 'about 20 to 30% higher than the current substrates' and would reduce by bringing it in-house; no rupee/sq m number was given.
• Volumes for M3 outer pouch of tea bag: Satish said volumes are 'pretty decent' and margins are baked in but declined to give specifics due to confidentiality, saying 'we should be able to give you much better figure in the next in in in the next meetings'.
• Guatemala stage 1 dilution and valuation: Rolando said 'we don't expect a large dilution' due to structuring (mezzanine), and valuation targeted at 7-9x of initial investment vs peers; no specific stake % given.
• Jagrati project cost escalation: Ved said work is to keep it within 675 cr; if there are escalations they will know within a quarter. Peak debt ~600 cr in FY27 was given but no specific escalation % disclosed.
• Food services Q1 segment revenue/EBITDA: Management said food services saw a slight QoQ increase and slight YoY drop; Chuk losses reduced in Q1 even with the shutdown but no specific segment revenue or EBITDA figure was given.

Every question, with its answer

1. 1. Innovation roadmap and global leadership

   Sukrut D. Patil, Unaffiliated

   Question. As Pakka expands globally and builds its regenerative packaging platform, how is management planning the next big step in using tech and partnerships to create new materials or circular systems? Is there a roadmap to make Pakka a global leader in compostable packaging through standards and supply chains in US and Latin America?

   Answer, Ved Krishna, Business Head, Pakka Limited. Ved outlined 8 innovation streams (4 product, 4 process) looking beyond bagasse into microbial fermentation, rigid packaging, food carry and waste valorization. Short-term focus is flexibles and food service product launches; long-term (5-10 years) covers new substrates. He confirmed Pakka will pursue global leadership through standards and supply chain partnerships in US and Latin America, with 100,000+ tons/year scale as a core criterion.

   Follow-up. How does management balance capital allocation between new plants, R&D and global partnerships - is there a system to balance short-term profits with long-term impact?

   Answer. Neetika explained that capital allocation is governed by liquidity available for operations and 1-1.5 year forward needs, internal ROI thresholds, and working capital cycle considerations. She said enhancements to working capital limits and approvals are split between operational efficiency and long-term investments.

2. 2. Leadership transitions and execution risk

   Paras Chheda, Unaffiliated

   Question. With multiple leadership exits including the head of innovation, Dr Sam, and MD Jagdeep Hira, there appear to be several arrows in flight without adequate backup. What is the plan to man the Jagruti Ayodhya and Guatemala projects given execution is the challenge?

   Answer, Ved Krishna, Business Head, Pakka Limited. Ved detailed deep bench: Narendra Agarwal (30 years) leading plant operations, Deepak Pandey leading the Jagruti project, Pankaj Khairkar moved from Germany, Juan Gabriel Mosquera from Colombia, and a young woman from Columbia University to lead biopolymer. He confirmed Jagdeep is not gone but will no longer be actively involved, and a permanent India head will be identified over the next 6-9 months. He committed to personally seeing the project through commissioning.

   Follow-up. Is there a single equivalent for Jagdeep's execution role, or will Juan Gabriel and Pankaj Khairkar collectively fill that gap? And is management confident on commercializing the metallic packaging material, or open to the greaseproof paper path?

   Answer. Ved clarified the project is split: Narendra Agarwal for plant, Deepak Pandey for Jagruti project execution. On packaging, base paper automatically yields a greaseproof sheet; the machine and people (Juan Gabriel, Sudhir) are equipped for greaseproof. However, greaseproof sells at $1,400-1,500/ton and does not add enough value; the plan is to ladder up from greaseproof ($1,500) to barrier-coated ($3,000) to fully flexible ($5,000) products.

   Partly answered.

3. 3. Jagrati project cost and peak debt

   Kashvi Dedhia, Unaffiliated

   Question. Given coating machines are not yet in place for flexible packaging, what is the total hard cost of the Jagrati project and what will be the peak debt level in FY27? Has there been any cost escalation?

   Answer, Ved Krishna, Business Head, Pakka Limited. Ved said coater cost is part of the project (~Rs 36 crores per Neetika) and they are still working to stay within the Rs 675 crores total budget. He committed to confirming any escalations in the next quarter. Peak debt level will be around Rs 600 crores in FY27 (Rs 440 crores term loan + Rs 160 crores seasonal working capital).

   Follow-up. Have we started any sales of M3 or tableware in the US from India, and what is the response given the tariff situation? What is the plan of action for Indian exports to the US?

   Answer. Satish ChamyVelumani said M1 is being piloted with a large converter for a pouch application, expecting decent sale volumes in next two quarters. Molded fiber exports are ~2 containers/month and growing despite Trumponomics; tariff impact of 7.5-8% on final sales is being managed via supply chain moves closer to the coast. Long-term solution is the Guatemala nearshoring facility.

   Partly answered.

4. 4. Flexible packaging definition and capex

   Kaustav Bubna, Unaffiliated

   Question. What does the company classify as flexible packaging, what is the total capex made to date on these products, what is the incremental capex over the next 2-3 years, and what is the fixed asset turnover plus sustainable margins?

   Answer, Ved Krishna, Business Head, Pakka Limited. Ved explained flexible packaging as multi-layered (4-5 layers) with 9-18 month shelf life - potato chip bags, chocolate wrappers, etc. - typically with metallised layer for moisture and air barrier. Pakka is targeting 2-layer barrier-coated paper (paper + coating) as a sustainable alternative. On margins, he indicated 'upwards of 30% EBITDA' is the target across products, with the difference being in the top line ($1,500 to $5,000/ton range). He did not give specific capex numbers, instead noting that flexibles have been kept asset-light and outsourced so far.

   Follow-up. Is the flexible packaging project still in R&D phase or is it in CWIP? When will it be commercially committed?

   Answer. Ved said the company has been asset-light - no significant capex committed; instead working with three to four customers via outsourced sites and using imported paper from Europe for MVP market trials (e.g., Mars fold test learning). Pilot coating system is being invested in now; the product is beyond bench but not yet at a scale to commit to large customers.

   Partly answered.

5. 5. EBITDA margin walk

   Kaustav Bubna, Unaffiliated

   Question. Last two quarters, EBITDA margins excluding other income have been below 10% - can management walk through this?

   Answer, Ved Krishna, Business Head, Pakka Limited. Ved disputed the claim, stating margins have not been below 10% and asking for clarification. Neetika confirmed this quarter's EBITDA was ~16% and last quarter ~20-21%. Ved clarified that the 16% reflects a 5% drag from the 15-day shutdown; absent the shutdown, margin would have been 21-22%.

6. 6. Tea bank outer pouch opportunity

   Shreny Tanawade, Unaffiliated

   Question. What is the outer pouch of a tea bank offering, what are the expected volumes and margins, and what is the costing and customer profile?

   Answer, Satish ChamyVelumani, Interim Innovation Lead, Pakka Limited. Satish said it is too early to confirm volumes; pilots are running with one converter that has presented to two US customers (names confidential). Volumes are 'pretty decent' and Pakka is also looking at doing these conversions in the US to minimise tariff impact. He confirmed margins are baked in via the value proposition but declined to share numbers.

   Follow-up. What is happening in R&D and can we expect materially new product offerings in 9-12 months? Is M3 a sellable product for the US from India and what premium does it command?

   Answer. Ved said at least three innovative products are in the pipeline, with launches expected within this quarter or this year. Satish added that current exports are Chuck-branded tableware to prestigious religious institutions (ISKCON Washington DC, etc.) and Indian applications; clamshells and delivery containers are being launched; 2x market premium exists for compostable vs non-compostable, and Pakka is selling 10-20% above other exporters. On M1M3, M1 is at 5-10% premium over conventional options and accepted by converters; M3 hit a small snag and is being optimised.

   Partly answered.

7. 7. Jagrati capacity ramp and flexible timeline

   Hiren Patel, Unaffiliated

   Question. Will Jagrati capacity be fully utilised by March 2026 or is it phased? Will flexible packaging be done in the next one year from Jagrati (NM or metallised)?

   Answer, Ved Krishna, Business Head, Pakka Limited. Ved explained the typical curve: pulp mill will be optimised at 200 ton/month in next month or so; machine typically does 60-70% utilisation in Year 1, ramping to 80% then 90%. Jagrati will start with barrier-coated papers and build toward flexibles. He detailed viscosity challenges (500 lab unit vs 1,500 at pilot scale in England) and ongoing co-development with Balrampur Chini on PLA, PHA and nanocellulose substrates. Decision to keep coating offline rather than inline to handle formulation changes.

   Follow-up. Is the resizing of the Guatemala project due to financing constraints or delay in flexible packaging development?

   Answer. Rolando Yon clarified it is a 'safe start' approach - capitalising on the moulded products opportunity first while flexibles development continues. Not primarily a funding constraint, but staging allows commercial channels to be set up while the larger flexible facility is being finalised. He acknowledged fast-moving alternative technologies are a competitive risk to manage.

8. 8. Greaseproof paper viability

   Jeet Gala, Unaffiliated

   Question. On the Jagrati project and greaseproof paper: (1) have trials been done on a paper machine for greaseproof viability and optimal quality, (2) does the AFRI study suggest cost advantage for PM4, (3) are there offtake challenges, and (4) is there volatility or downward pressure on greaseproof NSR?

   Answer, Ved Krishna, Business Head, Pakka Limited. Ved confirmed greaseproof capability since another company uses Pakka's pulp to produce greaseproof and release paper. He said cost competitiveness is strong due to in-house pulping and energy. On NSR, Indian greaseproof is at Rs 120-130/kg; however, the market is crowded and Pakka prefers to focus on barrier-coated grades. Greaseproof remains a viable backup but not the target. He reiterated Jagdeep is 'very much with us' and committed to PM4 success.

   Follow-up. What is the difference between barrier-coated paper and greaseproof? On the Guatemala project - what is the timeline, dilution, valuation, and when does stage 2 funding start?

   Answer. Ved clarified barrier-coated paper is paper + coating for 3-6 month shelf life (sugar sachets, spices, oregano); greaseproof is similar concept but slightly different. On Guatemala, Rolando said they discuss all three stages with investors from day one; some come in at stage 1, others at stages 2 or 3. For stage 1, low dilution is expected due to Pakka's $8-9mn already invested; financing will use more mezzanine than pure equity. Stages 2-3 will involve more pure equity and dilution to be negotiated. Valuation targeted at 7-9x of initial investment against US peers.

   Partly answered.

9. 9. Missed projections and revised guidance

   Vishal Sharma, Unaffiliated

   Question. The company had made aggressive sales and profit predictions for each year but actual outcomes are well below. What are the realistic predictions for FY26, FY27 and FY28?

   Answer, Ved Krishna, Business Head, Pakka Limited. Ved acknowledged there was a plan to grow to a certain number and the company is way below. He attributed the gap to delays in funding, stabilisation and ordering of the Jagrati project, and challenges in the inorganic food-service growth strategy (outsourcing, rationalisation, market bans). He took full responsibility and stated the targets will be hit with a two-year delay, with significant impact visible in FY26-27 and the original numbers achievable in FY27-28.

   Follow-up. With current revenue at <Rs 500 crores vs a projected Rs 2,500 crores, and 2030 still being a target - how will the billion-dollar sales target be achieved?

   Answer. Ved remained committed to the 2030 number. He explained the path: India to ~100,000 tons by 2027, Guatemala to 150,000 tons by 2028 (250,000 with second line as mirror site), and continued hunt for more sites. The first 250,000 tons is 'concrete steel on the ground'; the second 250,000 tons is 'pie in the sky' requiring scale evolution and new product introductions.

   Partly answered.

10. 10. FMCG customer pipeline

    Vishal Sharma, Unaffiliated

    Question. To reach the billion-dollar target, the company will need a major FMCG partner like Nestle or ITC. Are we in talks with any such large players?

    Answer, Ved Krishna, Business Head, Pakka Limited. Ved replied: 'All the ones that you mentioned and more,' declining to name customers for confidentiality reasons.

    Not answered directly.

11. 11. Chuck investment thesis and delivery container

    Manali Gala, Unaffiliated (question submitted via chat)

    Question. What is the outcome for further investment in Chuck given that automatic machines have troubled in the past? What is the status of the delivery container and is it profitable? And did Chuck losses reduce in Q1 even with the shutdown?

    Answer, Shubham Tibrewal, Food Service Business Head, Pakka Limited. Shubham welcomed competition as expanding the market and highlighted Chuck's quality and innovation edge. On delivery containers, the technology is being finalised with first-of-its-kind innovation; product to launch in coming quarters, designed to be leak-proof and compostable. Ved added the team is going 'asset light' via three outsourced sites while rebuilding problem-prone production machines in-house. He expects much more clarity on own production by the next call.

    Partly answered.

12. 12. Revenue decline Q1 FY26

    Khyati Devani, Unaffiliated

    Question. Why is there a 11-15% QoQ revenue decline, and why did FY25 vs FY24 show only marginal revenue growth of ~1%?

    Answer, Neetika Suryavanshi, Finance Head, Pakka Limited. Neetika attributed the QoQ decline primarily to the 14-day shutdown for pulp accumulation. She also flagged industry-wide efficiency headwinds and explained pulp sales were stalled in addition to PM3 being down, which compounded the impact. She said the quarter is an exception and team is focused on improvement.

    Follow-up. Is there scope for reduction in overall expenses given the EBITDA and margin decline?

    Answer. Neetika acknowledged expense reduction is a continuous ongoing effort. Ved added 'there's always scope' for cost optimisation.

    Partly answered.

13. 13. Flexible packaging cost economics

    Shiv Patel, Unaffiliated

    Question. How does the company plan to reduce the cost of flexible packaging from Rs 35 per sq meter to Rs 26 per sq meter, and how long will it take?

    Answer, Ved Krishna, Business Head, Pakka Limited. Ved disagreed with the Rs 35 number, stating current cost is way lower and about 20-30% above incumbent substrates. The plan is to bring it down further via in-house production. He stressed value creation over price, detailing how Pakka designs for the whole chain - substrate, conversion, packaging, branding, unboxing - to reduce customer inventory and create holistic value.

    Follow-up. Is the Guatemala plant planning to use third-party pulp? And why is the company moving into value-added grades when margins may mirror the existing paper business?

    Answer. Ved confirmed initial pulp will be sourced from Brazil (outsourced) given Trumponomics-driven anti-dumping duties on China, Vietnam, India, Thailand and 50% tariff on Brazil - though Brazil remains closer to Guatemala than alternatives. On margins, he reiterated the driving force is a cleaner planet, with scale and performance as the path to margins; the company will not enter value-added categories where margins do not justify the effort.

    Partly answered.

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