Pakka Limited (516030) Earnings Call Transcript & Summary

Good evening, ladies and gentlemen. A very warm welcome to the shareholders, investors, analysts and other participants joining us today for Pakka Limited's Investor Call to discuss the financial and our fiscal performance of first quarter ended 30 year June, 2026.

Good afternoon, everyone. Sachin, if you can just keep muting everyone so that -- yes. Sorry. Yes. [Operator Instructions] So first of all, on behalf of the entire team, I'd like to extend a very warm welcome to all our shareholders and stakeholders to the quarter 1 investor call. And thank you for joining us today. Before we begin, a quick introduction of our leadership team, Mr. Ved Krishna, who is the Group Lead; Mr. Himanshu Kapoor, who is Non-Independent, Non-Executive Director; Mr. Mayank Jindal, Manufacturing Business Head; Mr. Shubham Tibrewal, Food Service Business Head; Mr. Manoj Maurya, Finance Head; Mr. Sachin Srivastava, Company Secretary. My name is Pranay, and I lead the Brand & Marketing at Pakka. So I shared the presentation now. All right. So with that, we'll start the presentation with a brief footage of our newly launched delivery containers, something that most of you were waiting for a very long time. [Presentation]

With that, I hand over to Ved to highlight the -- to showcase the key highlights of the first quarter. Over to you, Ved.

Namaskar to everyone. Thank you so much for joining. Let's go ahead, Pranay. So we are happy to report that we have now clocked the highest ever quarterly revenue. We are continuing to work towards peaking this and also generating more and more bottom line and profitability as we go along. The funding has been completed for project Jagriti and project Jagriti is back on track, and we are ensuring that we will try and commission machines within the next couple of months. So more or less in the next quarter. There has been significant movement, and Shubham will talk you through the Food Services side, and we have built a very, very strong outsourcing model now. We have about 5 or 6 partners who have started producing for us, and we are slowly trying to move more and more into the outsourcing domain, and that will also result in better profitability numbers apart from the top line. As you saw when I started that we have officially done a lot of trials with customers now. And now we are ordering the first facility, which needs a certain kind of coating system, et cetera, and that should be in place by the time we meet. And on the FlexC side, again, pilot trials for the base paper that would be produced from PM4 are underway, and within the next 2 months, the pilot size will be completed and then, of course, we start with the soft launch.

Over to Mayank sir to take us through the financial performance.

Yes, good afternoon, everyone. As Ved also said that last quarter has been really good for us, and we have surpassed many of the records in this quarter. So as you see in the revenues, we were 42% up with respect to the Q1 of the last financial year and 14% up on the revenue from the last quarter. And similarly, the EBITDA also, we were 31% and 36%, respectively, in respect to the last year and the last quarter. And PBT also does a good jump, and it is 34% and 59%, respectively, for the same period. And coming to the Wrap & Carry, particularly to revenue was 101 cr, which is 43% higher than the revenue in the same quarter the last year and 15% higher than the last quarter. And on the PBT side, we are 45% up on the same period last year and 16% [indiscernible] lower because of the some points, some costs were taken in this particular quarter to the bank [indiscernible]. And that's the reason why the PBT has gone down, otherwise, on -- we have done much better. As we see, on the challenges side, we really go ahead on this. So right now, the -- okay, for us, the challenge is on the PM4 startup that we are expecting now for the end of October or November, the machine start. And product adoptability that whatever the product that we make in the PM4, that how it will sail into the market. And the Middle East crisis, which is still going on, and we're just bringing some [indiscernible] of our exports. And of course, last but not the least, the high cost of the finance for the project Jagriti which we have taken. And -- but looking forward, that how we will overcome all these challenges, PM4 has start up. So the good thing is now we are on [indiscernible] find the stage and [indiscernible] 85% of [ election ] was already completed. So machine is already in shape. You'll see in the subsequent slide, the [indiscernible] able to give more confidence to you. So that is that we are very, very much confident that we'll be able to really start this machine by the end of October and then [indiscernible] November. And power boiler, recovery power, which is also part of the project Jagriti. This is already the final stage that [indiscernible] has already taken. And now we are expecting the start-up by end of August or in the first week of September that we want to target the data. And that is the PM4 particularly so -- as Ved has also said, that we are already planning a lab and there is a pilot trial in Europe and we are hopeful that we'll get the real samples from the client tiles for the sharing with the customers as well within September. Then we can make a real soft launch of our product. And okay, you can see the -- most of the equipment is already on [indiscernible] now. [indiscernible] boiler. So that was the real machine stays. So that building is almost complete now, except the finishing house that will -- still going on. But most of the equipment are already in place. So that gives us a real good confidence that we'll be able to roll out this machine by end of October.

Thank you, sir. Over to you, Shubham, for the Food Service business performance.

Good afternoon, everyone. I will walk you through the Q1 performance for the Food Services division. In terms of revenue, we have achieved INR 18.5 crores in Q1. This is significantly higher by 34% in comparison to what we had achieved in the same quarter last year, and 9% higher than the Q4 of the last financial year. Of course, please bear in mind that the first quarter for Food Services is generally a very intensively low season because it's the summer and it's probably the worst quarter we have in the year because of the seasonality. In terms of PBT, we reported a loss of INR 1.6 crores in the same quarter. Now this loss is slightly higher than what we had last year due to some structural changes which we are making in our manufacturing. But going forward, we are looking at bringing these losses down to 0 and making Food Services a profitable division. Of course, when you compare it to the last quarter, we had already covered this the last time, but there were a couple of one-off items and impacts which were booked. So looking a bit deeper into Q1. The revenue has grown 34%, so from INR 13.7 crores to INR 18.4 crores -- INR 18.4 crores. This is, of course, our strongest start to the yield yet, and we are quite confident that this level of growth will continue for the rest of the year. This growth is primarily driven by the B2B side, which grew 46% in Q1 from INR 11.4 crores to 16.5, and it has what has -- it is what has driven the growth in this quarter. We also continue to work on the B2C or retail side. So we were previously present only in 3 platforms, which we have now increased to 12. Our goal for the year is, of course, to be present on every major quick commerce, e-commerce and big box retailer in India. And we are gradually working towards that goal. Although we have onboarded 12 channels, it takes time for the revenue to get to the optimum level because inventory needs to reach all the locations. But we are very, very confident that the B2C business will grow faster than the B2B business in the remaining quarters of the year. Our goal, of course, for the year is to reduce our losses and get to breakeven, which we are again very confident because as we grow our revenue, our costs will not grow in line. So the gross margin gets directly translated into PBT for us. We -- again, like we said, the confidence for this growth and the continued growth comes from the fact that we are making structural changes and a lot of work has gone in at the ground level. On the B2B front, we have made truck available in 22 new cities and added 34 new key customers in Q1. We have significantly deepened our distributor and reseller network in India, and that is what has actually contributed to the growth of the B2B segment. And this growth will be amplified during the next 2 quarters, which are the festive season quarters for us. The B2C side is also scaling. It's grown 3x compared to the last year. And of course, with the new change that we've added, it is only bound to grow exponentially. We are now live across every single major quick com and e-com platform. And the new platforms are going to be our primary growth factors in the coming months. Another area which we are working on quite aggressively is to optimize our COGS to do the same. We have pursued an asset-light growth model because to sustain the demand, we have started working on an outsourcing model where our capital investment remains limited. And the gross margin is therefore much higher on the new production that we will be making at these outsourced sites. We continue to develop new products and explore new technologies to bring new solutions and unique solutions to the market to solve the challenges raised by our customers. One of them is our cost, our delivery range. It is now developed. We continue to work on it to further optimize the costs, and we are currently in process of doing large-scale trials with [ marquee ] customers. Thank you so much.

Thank you, Shubham. Over to [indiscernible] to illustrate the product development plan. Go ahead.

So the big one we are focused on is the FlexC base, and you see a sample look and feel of how it will look as we go ahead. We have a few products in our hands. Basically, what it looks like is a translucent sheet of paper with much higher strength to be able to retain what is in sight. So lab trials are being completed right now in Europe. The pilot trials are slated for early September, that Mayank also spoke about, that we are going to take those products and do soft launches for the distributors in October. And then, of course, as the machine starts producing at commercial scale, we start doing a commercial launch, hopefully, by November, and then stabilization by next January. Also have been asked time again what the initial applications are. We are very clear that basically, we'll remain focused on food packaging. But within that, there are some segments such as medical packaging, which we are also exploring with various customers and things like seat packaging, which we are also exploring, which is a little bit beyond food, but similar. But the broad segments that we are looking at is wrapping for confectionary, snack pouches and suite pouches like you see up above. There are different sachet structures that we are looking at, including tea sachets. Also, we've started looking at various seed packaging, which is also an interesting area. So these are broadly the domains, release liners, dry food liners, tea pouches are broadly the domains that the initial products will be looked at, and we'll keep looking at creating better barriers as we move more and more into food packaging segments. Let's go ahead. So the other big decision that we have taken in the last quarter is to move our material science facility from Bangalore to Ayodhya just so that we are investing much deeper into this part of the business because innovation is very much core to Pakka's future growth. And we are building our innovation center or the material sciences center now in Ayodhya. By the time, hopefully, you come to visit the site, you will also have a material science center to explore, and that will, of course, be as soon as the machine starts. The broad focus areas for the materials science center are -- the research includes the base materials, biotech, conversion systems, biodegradation and valorization of our substrates. In the applications, you guys are fully aware of Wrap & Carry flexibles food services, which we will keep growing and we'll add on rigids. There's numerous ideas that we are working on in terms of collaborations, in terms of incubation and acceleration. We already have a lot of global R&D tie-ups working a lot more with global customers and converters. We are also, of course, adapting a lot of technology, and that includes large language model building for speeding up our research, cross-pollination of ideas utilizing biomimicry or learning from nature and the packaging there, looking at fermentation, microbial multiplication, also having our own design lab is something that will be within the material science center. And of course, the idea is to attract the best talent in the world. It is a task that we feel will be very, very energizing for the organization. We are already building global university tie-ups. It's creating an infrastructure which is second to none, and ensuring that there are numerous internships available in our facilities and building a strong leadership. I think by the time we meet next, you'll start meeting a lot of -- a lot more from the innovation team as we used to in the past. Go ahead, Pranay. So what are our commitments for this quarter? Jagriti, we plan to commission the recovery in power plant and PM4 will get very ready for plant trials. As Mayank said, late October, early November is when we start plant trials, and we'll build upwards from there for commercial trials. Like Shubham and I talked about, the delivery setup is being done for initial launch. And by the time we meet next, we should be in good shape there and starting to supply to some marquee customers who we've been doing trials with. Innovations, like I mentioned in my last slide, we are building our material science center in Ayodhya, and we hope to showcase it to you when you visit the plant next. The FlexC pilot trials -- FlexC-based pilot trials are being completed by next month, and the soft launch would have happened by the time we meet next. And of course, building on profitability, we'll continue to build our top line as well as bottom line, and you'll see significant changes as we move forward. Okay. Back to you, Pranay.

Thank you. Thank you [indiscernible].

We'll move to the question-and-answer round. So some ground rules so that everyone gets a fair participation. [Operator Instructions] So let me start. A lot of you have already raised your hands. [ Mr. Kosto ], you can unmute and ask your question.

Hi, can you hear me?

Yes, yes. We can hear you. Please go ahead.

So I wanted to understand on the pledge details first. [ Ved ], could you share what's the current pledge? If you could just explain as to exactly the contours of the pledge details, who is pledged to, when do you plan to -- what is the process to get this back down, risks associated with it, what could go wrong? That's the first part. And the second part is on this container trucks product range you had a success recently. Could you describe the market opportunity for that?

Absolutely. Thank you for your questions. So of course, like we discussed last time, there has been a significant shift in terms of our borrowing structure there in order to make sure that PM4 project goes ahead, the Jagriti project. We've switched from bankers to an AIF called Neo asset management. And part of that deal is that we are going to pledge our shares, the promoters holding. And of course, this is more a short-term kind of high-cost deal where we are expecting to kind of go back to the banks within the next year, 1.5 years. And at that time, we will unpledge the shares again. So it's part of the security that Neo has asked from us. It is all against the loan that they have provided. They have also shown a lot of confidence in the company by investing 30 crores of their own money in the -- on the equity side. I have, of course, also raised my stake [ into ] parts to about 48% to 49%, which will also give more confidence to the investors. So that's broadly the pledge that should go away as soon as we retire Neo and bring back the bankers, which should happen after the machine is stabilized, the production has happened and the overall financial system is working way better after the project has been commissioned. In terms of the containers, this is a -- this is something that has been on the drawing board for a while. Again, we've been discussing this with the investors. It's taken longer than we had assumed. But if you saw the video right in the beginning, it's an absolutely new way of thinking about deliveries and utilizing the fibers on innate capabilities of being global, et cetera, et cetera. So the idea here is, like Shubham talked about, optimizing cost further. But that said, what we are doing is that we are starting with a smaller facility so that the customers who are at least ready to get on board start getting material. As soon as we are in the market, there'll be a much more understanding and we can keep optimizing the cost. We are currently priced a little bit, almost 40% to 50% higher than a plastic container, but that also comes with a lot of advantages, not just in terms of the packing and unpacking experience, but also in the food profile as the chefs have been telling us who we have been doing in trials with. So that said, we are basically buoyant about this effort. And hopefully, as we speak next quarter, there'll be a lot more to report.

[ Mr. Darshil ], you can ask you your question, please.

Hopefully, I'm audible, sir?

Yes, please go ahead.

Yes, yes. Sir, I just wanted to know, like we've had really great growth in Q1. So are we going to maintain this across both the segments like Q3 -- Q2, Q3 will be, I think you would [ believe ] the higher quarter. So how would you see the FY '27 playing out in terms of revenue, sir?

Darshil, it's difficult to give an exact number. But like both Mayank and Shubham talked about, the idea is to keep growing both the top line and bottom line. And our effort will remain to end up with a much stronger year than what we have had. We have had a bit of a slippage last year with some shutdowns getting delayed, et cetera. But that said, we are more or less out of that situation. And what we can assure you is that as a team, we will continue to work towards growing the top line further from quarter 1 and definitely the bottom line as well. We are not yet happy enough with what we've achieved. But that said, at least the growth is in the right direction.

Okay. Fair enough. So Q-o-Q, we can see some growth, right? Like if that would be a fair assumption, I'm not saying it will be -- I'm not asking for a range, but if you can see, we'll have positive momentum continuing, right?

That will definitely be an absolute effort.

Yes. That's really helpful, sir.

And [indiscernible] changes will, of course, come in at least even this year in the top line, once PM4 is commercially producing because that, of course, means another significant quantity coming into place. So at least in the top line this year and then next year we would stabilize and also come in with better bottom line.

Okay. Fair enough, sir. So sir, the PM4, what is the cost of the project? And like how much is it expanding our capacity by right? Assuming this is coming in the -- towards the end of the year, so next year will be the full year of operationalization, right?

Yes. So the total cost of project is INR 753 crores right now, and it expands the capacity by a little 30,000 [indiscernible] a year, a little like over that. And -- but I don't think it's to do with the capacity itself, it's the quality of materials that we are going to produce. So the idea is to get more and more into flexible packaging and produce the best possible substrate for that product. So the effort that the team has been making is to create something which is, again, similar to CHUK that has not been seen on -- envisaged by the world yet. So we are, of course, hoping to present you with a product that will delight our investors as well as our customers.

That's good. I have a few more questions. Can I ask or should I join back the queue?

Yes. Darshil, if you can circle back and join back the queue. All right. Mr. Raghav, you can unmute and ask your question.

I hope I'm audible.

Yes. Please go ahead.

I have 2 questions. My first question is regarding the FlexC-based paper. So what I understand is that we are going to produce the base paper at PM4 and then we'll give it to converters to convert into the final product to start with. So I just wanted to understand, when we say that we are doing lab trials and pilots in August and September, how are you exactly doing them? Is it through a third-party manufacturer? And then the eventual scale-up of it, is it contingent on PM4 starting? And if yes, what are the time lines because I think if commissioning is in November, it would take some time to stabilize and then scale it up. So if you can just help me understand our strategy here.

Absolutely. Great questions and delight to hear the detail that you're going into. Yes, so the initial idea is to produce the FlexC base. So basically, what we are doing is to produce an extremely translucent paper, just to put it very, very simply, a very translucent paper that you can see through. It is extremely low porosity so that it doesn't consume much chemicals and coating. And it has also got a decent strength so that it runs on any converters machine that has been running [ poorly ]. So basically, that's the broad structure of the flexible that has been -- that has been envisaged and is being worked on. You're absolutely right. The pilot trials are being done in Europe. There is a machine -- we went through numerous machines across the world. And we chose one that mimics the final machine that we have put, which is difficult because we designed the entire machine from scratch as well with the concept that we wanted to create something that is unique. So our machine is literally like no other in the world that the PM4 that is coming up. So basically, that pilot machine mimics the final machines. So the trials that are going to be done in August, September are on a similar machine that will produce a few reels of paper that looks similar to the one that we'll produce in PM4. Why we do that is one, that we are right in our proof of concept. It gives us confidence. But the second bigger part is that we are able to introduce a similar grade to the distributors and the customers to do smaller trials before the production kicks in. So that's the idea why we are doing the pilot trials in Europe. The PM4 that is -- you're right, it is going to start doing trials in November, which means, yes, it takes a month or 2 to stabilize. So you're looking at a commercial production early next year, say, January, to stabilize and to start providing the market with the material that we are looking to produce. I hope that I've answered all your questions.

Yes. Just one follow-up to this, Ved. So greatly, the strategy makes a lot of sense. But I just wanted to understand 2 things. Firstly, because the paper quality would be dependent on the substrate, which we are using, which is sugar cane bagasse in our case. So are we shaping the same raw material out to Europe and getting the same output with the same input? And secondly, I might be wrong here, but I feel that like maybe a 2-, 3-month window seems too short for a pilot and a successful outcome of a pilot. So like are there some certain defined parameters or time lines or performance benchmarks, which we have aligned to with our initial pilot trial customers to ensure it gets turned in time? Essentially, what I want to get to is what is the risk of this time line be extended by a few months or so? And what are we doing to mitigate this?

Yes, absolutely. Again, great questions. So yes, absolutely. The substrate is exactly what we are going to use in our facility. So we have shipped pulp from India. So it is exactly the same, not just the bagasse, but we also do a lot of trials with the long fiber, which is basically softwood. So we zero in that this is the kind of softwood that we need. So although the facility can easily buy a softwood in Europe, we haven't done that. We've shipped the softwood from here to know the exact ratios that we are going to follow. So the bagasse pulp as well as the softwood has been shipped from there. Not just that, the chemicals. So it's not just to do with the pulp, it is also to do with the chemistry that we will follow. And especially in terms of what we call surface sizing or closing the surface mode. So those are things that are basically being mimicked. You're absolutely right, but the trial itself will happen in September, but the whole effort has been ongoing for the last 6 months, even more. So with the -- so it's not that trial, like there is a certain process that you follow. There's a design of experiments that you create based on certain lab studies that you do, et cetera, et cetera, over time. So that's not -- so that's been coming for a while. We've been on it from even before we conceptualize this machine actually. So -- but this trial organization, where we are doing it, this is only about 6 months of effort right now. You're right, sometimes the stabilization will take time. So the way we are mitigating that risk is that, ultimately, we will be able to produce certain grades that we already dabble in. So say, if we were to produce a release paper or we were to produce a grease-proof paper or a parchment paper, those are market grades. Those can any ways be produced on the same machine and introduced. That said, the effort is to keep it very, very narrow and to keep it very focused. But you're right, sometimes things take longer than we had envisaged. So the effort -- the fallback will be to produce grades which are already sold in the market by us and by others.

Understood. Just one last...

Sorry, Raghav, you can join back the queue and we'll get back to the questions. [ Mr. Randhir ], you can go ahead and ask your question, please.

Hello?

Yes, please go ahead. You are audible.

Can you hear my voice?

Yes, yes.

[Foreign Language]

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[indiscernible]

I think, first of all, the EBITDA margins for the first quarter is not 13%, it is about 14.5%. And definitely, with the revised increased production coming into place, the EBITDA margin should go up. We were consistently working at an EBITDA in excess of 23%, 24% all across 2023, '24, '25. And as Shubham has said, that if CHUK, for the first time after so many -- 8, 9 years of operation turns profitable, definitely, there is no doubt that the EBITDA margin should be about 18% or 19% on the total sales, which comes for FY '27.

Okay. [Foreign Language]

[Foreign Language] So definitely, we improve it.

[ Mr. Kenil ], you can go ahead and ask your question.

Am I audible?

Yes. Please go ahead.

So my question is regarding the factory, which we are going to put at the U.S. so that we had postponed. So can you please update us to what are we looking at? When are we looking to start with that because that is one of the main things which everybody is looking at. And secondly, the debt, which we have given it to some third person -- the third party, so what are we looking to do about that? Because therefore, that also we are additionally paying 2 percentage of additional interest cost. Basically, I have the 2 questions.

Yes. So I'll answer the first, and maybe Himanshu can take the second one. So Kenil, ultimately, the idea is to go back into a global expansion mode, and that's the effort. What we did realize last year was that we were spreading ourselves very, very thin. We were trying to raise money in U.S. while we were trying to set up a unit in India, stabilizing that. And the markets have taken a bit of a beating. The world geopolitics wasn't helping either. So with that in mind, we've kind of tried to close the taps wherever we felt there was expenditures being done without returns. All those projects are in the standby mode. We continue to engage not just in Guatemala, but other Latin American countries because we had already initiated a lot of relationships. So the effort from our side remains that we want to make sure that we generate packaging solutions scale way beyond our capacity to scale, so to say. In the sense that we have to grow beyond our own means. So that will remain the effort. But of course, ultimately, sustainability of the current business is most important. So with that, all our energy is being focused right on project Jagriti. This comes onstream this year. And as soon as this is stable, we will reinitiate those conversations. That said, our growth in U.S. continues in terms of we are looking at exports. We are looking at some -- providing some materials from India. But in terms of setting up manufacturing in Central America, we'll hold it for another 6 months or so with softer conversations that are happening and our people who remain engaged on that site. So the ultimate aim is to get back to that. Himanshu, maybe you can talk about the debt.

I didn't understand. What debt at what, 2%, I mean, I didn't understand the question properly. Can you please repeat?

So we have given the debt altogether to somebody and we are paying a charge for it, right?

No, no. We've not given debt to anybody. I mean where is that [indiscernible] coming from?

No, no, no. So we are taking debt at an additional cost than the market is bearing. I mean, correct me if I'm wrong because this is what I had understood.

Himanshu, he's talking about -- he's talking about the Neo transaction, I think.

Correct. Correct. Correct. Absolutely correct. I was not getting the name correct, yes.

So the Neo transaction is a very different transaction as Ved has already explained. And I think last time in the call when the Neo transaction was there, I was specifically there to answer the queries. And the reason was that the Jagriti post project was not getting commissioned basically because there was a shortfall in terms of -- there was an increase in project cost and there was a shortfall in terms of our contribution. So had we gone the normal route of contribution, it would have taken roughly about 15 to 18 months to actually commence the entire transaction because the internal accruals could have only been loaded to the thing. So what the promoter has done in this case is he's taken the burden on himself by taking some equity by borrowing that money in a structured transaction. And completing the transaction, thereby the borrowing had to go from the current rate of 11% to roughly about 17%. And this transaction is specifically only for roughly about 18 to 20 months, within which time the company thinks that we will be able to stabilize the entire thing and then they'll be able to refinance this debt, basically. So net-net, what I had said last time also that the total outflow, which was perceived between 1st April 2026 and 31st March 2028, and that is how the transaction has been structured, was roughly including the bank interest as per the bank loan roughly coming to about 150, 155-odd crores. And in this transaction, which we have done in spite of an increased rate of interest, it comes to about INR 120 crores, INR 122-odd crores. So still -- on a cash flow basis, on a profit and loss basis, definitely, there is a [ dent ] at the end of the day. But on a cash flow basis, definitely, it improves and it gives time for the company to come out of whatever problems have been gauged through the project, price and cost of the project and the internal accruals that were to put in to give them a breather for about the next 18 months and then come back on track. I hope I have -- I could have answered it.

Yes. So to sum it up, about 18 to 24 months is the time frame you're looking at? After that, that might reduce it to the original 11% to 13% from 17%?

We can do that earlier also -- we can do that earlier also, but that has a bigger mark in terms of the repayment structure. So I think what you can take is between -- if the debt is to be retired, it will take about 16 to 18 months, but net-net outflow in terms of what is getting charged is still lesser than what the company would have expanded had been gone with the banks basically.

[ Mr. Ravi ], you can ask your question now.

Yes. Am I audible?

Yes, please.

Yes. First of all, congratulations on a good set of numbers. I think for the past 3 years, I have been following closely, and this is probably the first quarter where we have shown real growth. So my first question is to Mr. Ved. So Ved, what is your assessment of the trials so far in terms of the new substrate that we are planning on PM4, right? So I think we spoke about a lot of substrates last time. It looks like I think you have finalized on something. So what is your initial assessment based on the lab trials and the trials that are going so far? And this new substrate, what will be the realization? I think last time when we spoke, we were probably talking about something like INR 150 to INR 200 a kg for this new substrate on PM4. So just wanted to get your feedback.

Thanks, Ravi. The -- see, ultimately, let me kind of put it more in perspective. Ultimately, as Pakka, there are 3 segments that we tackle. How do we transform the Wrap & Carry segment. How do we do better with the Food Service disposables. And of course, now the effort in the last couple of years has been how do you transform the Flexible Packaging segment. So the whole effort in terms of the PM4 has been to tackle that Flexible segment. What we have realized is that the barrier coatings are still a relative challenge in terms of not just efficacy but more in terms of acceptability, in terms of cost by the customer. So we are taking smaller steps there. So what we are doing is we are starting with the flexible base paper. And there, it goes back to what somebody asked before, I think it was Raghav, who mentioned the idea that the substrates that we are using. So in terms of bagasse, we have to get back to what is -- every fiber has its own pluses and minuses. So in terms of bagasse, it's a much shorter fiber. So if you can imagine it, it fills the sheet more. So it is a less porous paper that it creates. It's also a much lighter fiber than -- in terms of density from a wood fiber. So what happens is there's a certain see-through property that is created. So those are inherent properties of bagasse and that's what we are playing with. What bagasse doesn't offer is a very, very high tear strength. So how we compensate is it that -- is with the ratio of blending in about 20% to 25% certain kinds of softwoods that provide the additional tear strength that is needed. So based on that, the whole trials, the whole product has been conceptualized. Ultimately, we are, of course, extremely kind of buoyant about what we are going to produce. Of course, for us, it's all about how do we create something that has not been created before. And that's the effort when we go to trials and the pilot machines. Those are the trials that we have been taking in the past. And of course, as soon as the machine comes, the machine is way more sophisticated than literally any global machine today. So in terms of -- we haven't left any stone unturned when it comes to achieving those properties of porosity, translucency, strength and smoothness. Those are the 4 big properties that any coating substrate needs. So it will be good for coating for any kind of structure. What we look at when we look at the financials is not what the NSR is going to be, but what the contribution is going to be. So the effort is continuously to work towards a better contribution than we have ever achieved with any of our products. And that's the target. I cannot spell it out just from a perspective of just trade kind of understanding. But let me assure you this that the team is continuously working and we are pretty confident of achieving a contribution level that is higher than any of the grades that we've ever produced. And of course, it does result in a better revenue number also, but that's not the one we focus on. We focus a lot more on the -- ultimately, the contribution that any grade is going to make. And internally, we go down to focusing on contribution per hour that any machine produce. It's not even contribution per [ tonne ]. But that's the key figure for us. So if any of us you ask who are in operations, we will always know any machines contribution per hour and how it's doing today.

My second question is to Mr. Shubham. So last August, specific to Food Services, I think we had mentioned that we will probably reach 10x of what we are today by 2028. I think we spoke about INR 680 crores of revenue for Food Services. And I think last quarter also, you mentioned that we are on track. So one specific question there is, again, correct me if I'm wrong. Today, I think Food Services is around 3,000 tonnes. So for us to go 10x, I think it will be 30,000 tonnes, right? So all of this, I'm assuming we are probably going to get through outsourcing. Is that the plan? If so, what about the pulp, because the pulp that we -- additional capacity that we have here probably will go to PM4. So what is -- basically, I just wanted to understand the plan from an execution point of view.

Right. So indeed, the additional incremental volume growth that we are looking at for the business is going to come through outsourcing sites. Of course, at our mother plant also, we may consider in the future to do something. But primarily for this financial year, we are focusing on building capacity through outsourcing partners. On the pulp side, while PM4 reaches optimal capacity, at least until then, we are quite confident that we will have the pulp that we need. But that being said, there are multiple other avenues for procuring pulp domestically and through foreign parties. So that should not be an issue. Of course, we would prefer [indiscernible] coming through our own plant. But, yes, that will be [indiscernible].

[ Mr. Darshan ], you can go ahead and ask your question.

I hope I'm audible.

Yes, you are audible.

So my first question is, currently, what are the margins in the existing products? And what are the margins we are expecting in the new products? So my reason for asking this question is how we are so comfortable and how we are so -- giving the guidance of 19% EBITDA margins on FY '27?

So broadly, what we focus on, Darshan, is 3 markets. All 3 are related with food. The primary business has been wrapping and carrying of food. So things like the QSR bags, wrappers, that's the primary focus on our Wrap & Carry division. The second one that we've been talking about and growing is the Food Services disposables. There again, the effort is to grow that division by creating better substrates for food service. And the third one that we are now looking at is Food Packaging, which is more on the flexible side right now. And eventually, we'll also go to digits. But that's the broad differentiation in market. We have operated at 23% to 25% EBITDA, as Himanshu mentioned before. So it's like 19% is not something that bothers us. We have been stabilizing some of our expansions, which is kind of given us a little bit of a hit. But that said, we see things stabilizing. So I don't think 19% -- I would even go ahead and say that 19% is also a low bar for us. We will have to go towards bettering 25% and above in the future. We will continue to work as a team towards that. So don't get too flustered with 19%. Our targets are higher than that.

Secondly, what is the current utilization level on the existing plant? And how are we seeing the ramp-up of the new plant coming, which is -- go live in December.

Sorry, what was your first part of your question?

What is the current utilization levels on the existing plant?