PAKKA - Pakka

📊 NSE: PAKKA 🏢 Paper 📅 Last Updated: 12/14/2025 10:50

💰 Financial Performance

Revenue Growth by Segment

Total Operating Income (TOI) was INR 408.24 Cr in FY24, representing a slight moderation of 2% from INR 415.85 Cr in FY23. The American business segment reported revenue of INR 15.74 Cr in Q2 FY26, a 14% increase compared to INR 13.81 Cr in Q2 FY25.

Geographic Revenue Split

The primary operations are based in India (Uttar Pradesh), with expanding international presence through Pakka Inc. (USA), Pakka Pte Ltd. (Singapore), and Pakka Guatemala. The American business contributed INR 15.74 Cr in Q2 FY26 revenue.

Profitability Margins

PBILDT margins remained healthy at 22.82% in FY24 and improved to 23.71% in 9MFY25. PAT margin was 12.38% in FY23. Net Profit before tax for the consolidated group was INR 47.97 Cr in FY25, down 25.9% from INR 64.77 Cr in FY24.

EBITDA Margin

PBILDT margin stood at 22.82% in FY24, a slight increase from 22.37% in FY23 (up 45 bps). This was driven by cost-effective production and integrated operations despite a dip in sales realizations.

Capital Expenditure

The company is executing a large-scale capex titled 'Project Jagriti' totaling INR 676.26 Cr. This is funded via INR 450.00 Cr in debt and INR 226.26 Cr in equity/internal accruals. Additionally, a USD 55M investment is planned for molded products in the American business by 2028.

Credit Rating & Borrowing

The company holds a 'CARE BBB; Stable' rating for long-term bank facilities and 'CARE A3+' for short-term facilities. Interest coverage was robust at 10.39x in FY24 and 9.75x in 9MFY25.

⚙️ Operational Drivers

Raw Materials

Primary raw materials include agro-based bagasse (fiber) and rice husk (fuel for power generation). Rice husk costs accounted for 16.27% of TOI in FY23, up from 11.35% in FY22.

Import Sources

Bagasse is sourced locally within a 100-km radius of the plant in Uttar Pradesh, India, which is a major sugarcane hub.

Key Suppliers

The company maintains long-term relationships (over 15 years) with its top 10 suppliers to ensure a consistent supply of bagasse.

Capacity Expansion

Project Jagriti involves commissioning a new manufacturing line for greaseproof paper. The American business (Kawok stage) is targeting a 40 TPD (Tons Per Day) molded product capacity by 2028.

Raw Material Costs

Raw material costs are vulnerable to price fluctuations in bagasse and rice husk. In FY23, a spike in rice husk prices led to a 219 bps dip in PBILDT margins as power and fuel expenses rose to 16.27% of TOI.

Manufacturing Efficiency

Efficiency is driven by a cost-effective production setup and integrated operations. Average working capital limit utilization was ~49.7% for the nine months ending February 2025.

Logistics & Distribution

Distribution costs are optimized through the plant's proximity to raw material sources (sugarcane hub) and established customer relationships over four decades.

📈 Strategic Growth

Expected Growth Rate

15-20%

Growth Strategy

Growth is targeted through 'Project Jagriti' (greaseproof paper for flexible packaging), a USD 55M investment in American molded products to reach USD 36M turnover by 2028, and the launch of new delivery containers and leak-proof products in Q3/Q4 FY26.

Products & Services

Kraft paper, bagasse-based tableware, clamshells, delivery containers, meal trays, and greaseproof paper for flexible packaging.

Brand Portfolio

PAKKA (formerly Yash Pakka and Yash Papers).

New Products/Services

Successful launch of clamshells (INR 20L+ sales in month 1). Upcoming launches include a range of delivery containers, meal trays, and leak-proof delivery containers in Q4 FY26.

Market Expansion

Expansion into the USA and Guatemala for molded products. The company is also merging Pakka Impact Limited into the parent entity to streamline Indian operations.

Strategic Alliances

A Memorandum of Understanding (MOU) is in place for the 40 TPD molded product project in the American business.

🌍 External Factors

Industry Trends

The industry is shifting toward sustainable, compostable packaging. Pakka is positioning itself as a leader in bagasse-based alternatives to plastic and styrofoam, targeting a scale of >INR 600 Cr.

Competitive Landscape

Operates in a highly competitive and cyclical paper industry, competing with both traditional paper mills and emerging sustainable packaging firms.

Competitive Moat

Moat is built on integrated operations (pulp + power + paper), a 40-year track record, and a strategic location in the sugarcane hub of India, providing a sustainable cost advantage in raw material procurement.

Macro Economic Sensitivity

Sensitive to agro-commodity prices (bagasse) and fuel prices (rice husk/coal), which directly impact the cost of production and margins.

Consumer Behavior

Increasing consumer demand for eco-friendly and compostable delivery packaging is driving the launch of new product lines like leak-proof containers.

Geopolitical Risks

Expansion into Guatemala and the USA introduces exposure to regional regulatory environments and trade policies.

⚖️ Regulatory & Governance

Industry Regulations

Operations are governed by the Companies Act 2013 and SEBI Listing Regulations. The company is currently undergoing a merger process for its subsidiary Pakka Impact Limited.

Environmental Compliance

The company is subject to strict pollution control norms inherent to the paper industry; compliance is managed through its integrated, agro-based production model.

Taxation Policy Impact

Income tax paid (net) was INR 17.30 Cr in FY25 compared to INR 19.16 Cr in FY24.

Legal Contingencies

The auditors noted a need for strengthening the process of financial closure at period ends, but reported no qualifications or adverse remarks in the CARO report for the Indian subsidiary.

⚠️ Risk Analysis

Key Uncertainties

The primary uncertainty is the timely completion and stabilization of the INR 676.26 Cr 'Project Jagriti' capex. Failure to achieve projected scales could impact the BBB rating.