Pakka Limited (516030) Earnings Call Transcript & Summary

Thank you, sir. Before taking on the notice items, I draw attention to the statutory auditor's report forming part of the annual report. The statutory auditors have expressed an unmodified opinion on the stand-alone financial statement for the financial year ended 31st March 2026. Their report includes an emphasis of the matter concerning the company's investment in its overseas subsidiary. and temporary pause in the construction of the manufacturing facility in the Guatemala. Their stand-alone opinion is not modified in respect of this matter. The statutory auditors have expressed a qualified opinion on consolidated financial statements. The qualification concerns capital work in progress of INR 3,197.81 lakhs recognized by Pakka Inc. Project activities were temporarily suspended during the last quarter of the financial year because the necessary finance has not been arranged as at the date of auditor's report, the funding has not been obtained. Consequently, there was uncertainty about the resumption of the project, recoverability of the capital work in progress and whether an adjustment to its carrying amount would be required -- the financial effect of any such adjustment could not be determined. The Board explanation is set out in the report. Management does not presently envisage impairment as a substantial portion of the expenditure related to the detailed engineering and other project work expected to be used when the project resumes. Management is evaluating financing options and other areas and will reassess the carrying amount as further information becomes available. Any adjustment for necessary will be recognized in accordance with the applicable accounting standard. The consolidated auditor's report also draw attention to an overseas subsidiary working capital deficit and its dependence on continued financial support from related parties and shareholders. The emphasis of matter does not modify the qualified opinion. I also draw attention to the secretarial auditor report in form MR-3 annexed to the Board's report and to the Board's explanation. The secretarial auditor reported a delay of 73 days in the review of Pakka Inc audited financial statement, a consequential delay of 73 days approval of audited consolidated financial results for the year ended 31st March 2025. A delay of 150 days in submitting the related party transaction disclosure of NSE of that period, although it was submitted to BSE on time and 1 day delay in subsequent related party transaction and delay in certain overseas investment and financial commitment reporting, including Form FC, annual performance report and FLA returns. The Board's explanation and corrective measures are set out in the annual report. These includes stronger subsidiary reporting and consolidation time lines, exchange-wise filing checks, assigned compliance responsibility and closer monitoring of overseas investment filings. NSE granted a waiver of the fine related to related party disclosure. The secretarial auditor also observed the company's compliance system and process required further strengthening. The Board and Audit Committee will monitor the measures being implemented. Members may raise questions on either audit report during the discussion. Over to you, Chairman, sir.

Thank you, Sachin. I now request you to take up the business set out in the notice dated 14th August, 2026.

Thank you so much, sir. The notice convening the 46th AGM dated 14th August 2026 had been circulated to all the members. With the permission, I taken the notice as read. I will now introduce each of the 6 items briefly. The full text of the proposed resolution and the explanatory statement is set out in the notice -- after all the items have been introduced, the Chairman will invite members questions and their comments. Starting with the ordinary business, item #1, to receive, consider and adopt the audited stand-alone financial results of the financial statement of the company for the financial year ended 31st March 2026, together with the reports of the Board of Directors and auditor's report thereon. Going to item #2, to consider and adopt the consolidated financial statements of the company for the financial year ended 31st March 2026, together with the reports of the Board of Directors and auditors thereon. Item #3, to appoint a director in place of Mr. Gautam Ghosh, Executive Director, who retired by rotation and become eligible for offer his candidature for reappointment. Item #4, to appoint a director in place of Mr. Himanshu Kapoor, who retire by rotation and being eligible, offer his candidature for reappointment. Item #5 related to the alteration of Article of Association of the company by insertion of provision relating to an observer and Nominee Director. Item #6, that is related to a clarification notes in the object clause of the AGM notice issued on 5th May 2026 with regard to issuance of the fund through preferential issue -- with this, I request -- I hand over the session to Chairman, sir.

Have you covered Item #6?

Yes, Sir, I have covered Item #6. Now I am taking up the rest of the items sir.

I now invite the registered speaker shareholders to share their questions and comments. I request each speaker to keep their questions brief and avoid repeating points already raised. We will address the questions after the speakers have had their opportunity to speak. Yes. Moderator, Sachin, can you invite speakers one by one?

Sure, sir. So thank you so much. Ladies and gentlemen, as announced, we will be now taking up question and answers from the registered speaker shareholders. The first one on the list, we were supposed to have with us Mr. Praveen Kumar. Unfortunately, at this moment, he hasn't joined this meeting. Hence ahead to the second speaker shareholder, we have with us Mr. Jeet Gala, Mr. Jeet, we request you to please turn the video if possible and then proceed with the questions, sir Yes.

Can you hear me?

Yes, sir.

Good morning to the entire management and Board of Directors of Pakka Limited. And thank you for allowing me and giving me this opportunity to ask the questions at the AGM. Sir, I've been a long-time investor in Pakka. So I'll just keep my questions very focused for at least, I mean, the outcomes that we can expect in the next 12 months. So with respect to that, sir, one question that I had was, sir, in the recent annual report, I think there is very little or even, I would say, zero mention of how we plan to crack [ flexi ] coated products. So I think we were bullish a couple of years back, and I think the product is now again back to lab. We are working on bringing the costs down and even improving the performance of the paper that we are trying to launch. But sir, can we expect any sort of launch to happen in the next 12 months? I'm just trying to understand, I mean, how our NSR. So if I assume the base paper NSR from PM4 to be in the range of, say, INR 130 to INR 150 a kilo. So how do we plan to move this trajectory upward towards, say, INR 180 or INR 200 a kilo even without ordering a coater. So what I understand is even in PM4, there is an option of doing an online coating and not offline coating. So just at least in the next 12 months, nothing beyond that, but at least in the next 12 months, do we have any plans or any products under pipeline that we can launch, we can -- which can effectively increase our NSRs upwards to INR 180 to INR 200 a kilo. So that is my one -- first question. And sir, second question is with respect to innovation team. So I think we've made a decision to move our innovation team from Bangalore to Ayodhya now. And I think many of the talent would be -- not be possible for them to relocate. So we are in the process of reshuffling and recreating our R&D team. And we've been without an R&D head for a while now. So because Pakka is -- we want to be an innovator company. So how do we plan to fix this problem of getting talent together and then eventually roll out innovative products that we've been talking about. Because what I assume is without innovation, it's going to be very difficult for us to even think of going global, doing expansions outside of country. So just 2 questions from my side, sir.

Thank you, Jeet. Next speaker, please.

Sure, sir. Going ahead. The next person to be joining us on the list would be Mr. Reddeppa Gundluru -- Reddeppaji let's take your question, sir. Pleasure to have you with us.

[Foreign Language] Please give me 2 minutes after I have another meeting. Please give me after 2 minutes, sir. Thank you.

Going ahead, serial #4, we were supposed to have Prince Polyplast Private Limited. But at the moment, nobody has joined representing Prince Polyplast Private Limited. Hence, we would like to go ahead to Serial #5, Badri Vishal Bajaj. Mr. Bajaj, pleased to have you with us. Let's have your question, sir.

Good Morning.

Can't hear you, Sir.

Are you able to hear? sir?

Now, able to hear.

A very good morning, Pradeep sir. I have heard you detailed Chairman speech, where you have listed the bottlenecks and concerns in achieving commercial production, including the financial steps you have taken. But the video which I have shown to the shareholder, it gives the confidence that we are going ahead with all this struggling episode as Pakka being engineering and [ges] company, new products launching around the world. I always appreciate being HNI, really a lot of efforts are involved to your team and particularly the PM3 machine and PM4, you are struggling a lot because of that. And -- but now as per your speech and the confirmation and your assurance project to the shareholders, I appreciate and please keep up this company to greater height with this struggling and a lot of changes globally. Please, sir, take it confidence level and take it to good height. Thank you, -- good day. I'm Badri Vishal Bajaj from Hyderabad.

Thank you Bajajji. Next speaker, please.

Thank you so much. Going ahead, we were supposed to be joined by Mr. Manjit Singh; at the moment, he has not joined the meeting. Hence going ahead, we are next going to be joined by Muskan Drolia. Please proceed with your questions.

Good morning to the Chairman, Board of Directors, management team and fellow shareholders. My name is Muskan Drolia, and I'm attending this AGM on behalf of Mahant Vanijya Private Limited. Firstly, I would like to congratulate the management and the entire team for their continued efforts and for the company's strong focus on sustainable and compostable packaging. It is encouraging to see Pakka building a business in such an important and growing sector. I have gone through the annual report and I would like to see clarity on 2 points. First, what are the key initiatives planned by the management to further strengthen the company's profitability and margins in the coming years? Second, could the management please give us a brief update on Project Jagriti, particularly regarding its revised completion time line and the measures being taken to ensure effective cost control. Thank you. I wish Pakka and the entire management team continued success and hope the company creates strong long-term value for its shareholders.

Thank you, Muskan. Any more?

Thank you so much, sir. Sir, we have reached the end of the list. With your permission... we would like to reconnect with Mr. Reddeppa Gundluru, who was unavailable previous time when we called him out. Mr. Reddeppa, can we go ahead with your questions, please?

Thank you, moderator, and company MD, sir, company Secretary for giving this opportunity to speak. Good morning to respected Chairman, Sri Pradeep Vasant Dhobale sir, Managing Director, Sri Ved Krishnaji or all other Board of Directors and also company Secretary, Sri Sachin Kumar Srivastavji, and our [ Nisha ] madam and fellow shareholders, good morning, sir. Myself Reddeppa Gundluru attending this AGM from Hyderabad. As a shareholder, I'm very happy proud about the company performance of financial '26. We are celebrating 46th Annual General Meeting. First of all, I would like to sincerely appreciate the management, continue the pioneer work of eco-friendly packaging, the compostable tableware and also packages based on sustainable products. So my company, Pakka's focus on the conventional packaging with the environmentally responsible alternatives highly relevant to the changing the needs of the global customers. I also congratulate my Board, my MD, my Chairman for the preferential capital raise of INR 114.62 crores and also subsequently, the listing-related approvals. And I would like to understand how the additional capital will be translated into the capacity, expansion, stronger international business and also sustainable shareholder value. Sir, annual report is full of information, full of all the directors, sir, MD sir and also Chairman sir smiling -- keep smiling, sir. Your smile is creating the positive vibes in my company. All the employees, CEO, CFO, all the wonderful professionals they are -- they call me, they send the annual report, sir, whether received -- or not, they send the link also. So all the employees, thank you so much for a wonderful professional approach of speaker shareholders. First of all, the first question about the debt reduction, please comment. Second question about the capacity expansion, exports, please comment. And also third question about the margin raw material. So what the procurement strategy for long-term contracts for the pricing mechanism or you are protecting the operating margins, I would like to know, sir. Fourth and final question is on the amended governance framebook -- framework. With the proposed provisions relating to debenture holder absorbs the nominee representation. Could you please explain how the company will maintain the clear balance between the lender oversight and also board operational strategic independent? I would like to place and regard my appreciation to the company Secretary, team and their professional support to the facilitating the shareholders' participation in the AGM. Finally, the annual report -- sorry, finally, our special tribute to our beloved founders, KK. Jhunjhunwala sir, is deeply meaningful. So I pray god to give you comfort his families, and legacy will continue. And I'm praying to you, the entire family, the other will be comforted. So his vision, the inclusive progress of the sustainable development continue to guide Limited Pakka -- Limited years ahead. So congratulations for all the best, namaskar sir. I pray god to give you, entire Board of Directors. Thank you so much.

Thank you so much. I want to say something to him. Moderator, can you bring Mr. Reddeppa back?

Sure, Sir. Tech team, can we have Mr. Reddeppa... Sir, he has already left.

I heard all that -- his fourth question, which I could not get. He speak so fast.

Sir, I think he is in another meeting. That is why he muted.

We'll go ahead with -- all right. Ladies and gentlemen, it's good that we're having lady shareholders also speaking on this occasion. So I think I'll take questions one by one. First, Jeet asked about flexible products innovation, what's happening and he expressed concern that our innovation lead position is vacant, et cetera. So I really appreciate the concerns which you are mentioning. But certainly, these are receiving full attention from the management. Mr. Ved Krishna himself has been taking so much interest in this. Just for your information, last week, he was in Slovenia. You may ask why Slovenia of all the places. So we have to find out because our machine is not yet ready, we have to produce pilot plants for our trials. First laboratory trials, pilot plant trials and then it comes to the paper machine. So some trials which are going on there, and he was personally present there, and he was very encouraged to see what was happening at the lab level. And going forward, it will be done at the pilot level also. So just -- I'm just mentioning this to give you confidence that the work has not stopped when it comes to innovation of the flexible products. It's very much there. It's very much on the card. And as we mentioned, in spite of some setbacks we have had and some delay in the projects that we have got through, we are definitely on the move to achieve these products. You mentioned about coating not being there in the beginning. So yes, you are right. But the products have already been identified. In fact, this morning in the Board meeting itself, the management sort of explained to the Board members what the product the machine is going to start with. So as you probably are aware, bagasse lends itself to making very dense papers -- very low porosity, very, very dense papers. So those are the kind of paper, which are used for food packaging in many sectors. So many cases, the coating happens outside. So we make the product on the paper machine and then it will be coated outside. So we are already in touch with this coating people who have these facilities. Some of them have even visited our factories. In fact, they have conducted training program for our people on what kind of product quality and product parameter they're expecting. So these are certain things I thought I'll mention to you for the concern that you have mentioned. There is also collaborative R&D. So everything you don't have to bring in, inside your own factory. So we can have some basic level of equipment. But then we collaborate with other laboratories anywhere in the world. And Mr. Ved Krishna, partly operating in U.S., partly operating here. He has developed so many contacts there with different laboratories and academic institutions. So they also help us in developing the products that we are wanting to make in a period of time -- over a period of time. Yes, your point about going from INR 130, INR 140 per kilo product to maybe INR 200 per kilo product. So they will emerge out of these different products that we are trying to develop. I'm not going to mention that we're going to -- in the next 12 months' time, we're going to have the ultimate product that we are looking for to replace the flexible packaging. No, that's not. We have to go through the steps. And at the moment, the focus is in starting the machine and stabilizing the machine. Typically, a paper machine of this size will take 3 months to stabilize. During that period, you have to make products which are relatively easier to make. I would call them conventional product, which still go into the ultimate objective of food packaging, where the conversion is happening outside. So those are the products we'll start the machine with. And then over a period, we will bring on the more value-added products. So those are some broad comments I thought I'll make regarding the queries mentioned by Jeet. Then Muskan asked for initiatives for profitability improvement. At the Board level, at the Chairman level, I can only say there are only 3 ways of improving profitability. You increase the volume and increase the revenue or you increase the pricing or you reduce the cost. So all 3 are priority for the management. Volume increase, yes, most of our machines had reached the peak volume. And therefore, PM3 has been modified and PM4 is coming on. So that will give us a volume and NSR increase. If I remember the figure correctly, we'll get about INR 600-odd crores of additional revenue when PM4 and PM3 go fully operational at full capacity utilization that we have planned for. And that will automatically -- our overheads are not going to increase proportionately at all. So that is how we will find the improvement in profitability. You also mentioned an update on the Project Jagriti. Yes, the cost is being looked at very, very carefully. There is a finance committee headed by Mr. Himanshu Kapoor. They review it apart from the operating management. And we are actually towards the end of the project. Everything has been ordered. Most of the machinery has already been delivered to site. So I don't expect any further increase in the project cost. We have had some hiccups because of the foreign exchange fluctuation. We all know in the last couple of years, rupee is touching -- 96 -- dollar is touching INR 96 now. But I think that it's behind us now. Most of the imported machinery has got dispatched or it's already come in site. So I don't expect much issue in the project cost going forward from here. Commissioning time, yes, as I mentioned earlier, our commitment -- we have revised our commissioning date to January 2027 for the commercial production. However, the operational production will start earlier. As things stand today, we revised this even this morning. As things stand today, we are hoping that for Diwali, we will be able to get some product out from the machine. So that's an update on the question which Mr. Muskan asked. Reddeppa's questions, debt reduction. The whole idea of because the project cost over that we have gone into, we had to move to NBFC. And that is how this major loan has been contracted, and we have retired the loans or borrowing that we had from the banks. And the idea is -- in our mind, this is like a bridge finance that we have for a period of year, 1.5 years till the machine stabilizes. Once the machine stabilizes, our internal cash flows will be so strong, our ratings will improve, and we can actually substitute the high-cost debt with lower cost debt. So that's the plan going forward, and that's how we have entered into this agreement. You asked about exports. Yes, we do see a very major opportunity. Our current products, you will be surprised to know. I don't know whether you are aware. I think it's mentioned somewhere in the annual report that we export 25% of our production -- the revenues coming from export. Of course, last year, the figure was 30%. But all that has happened in the world, the geopolitics, so on and so forth, we are at 25%. As far as I know, I don't -- I think any paper company is exporting 25% of their product earning them through foreign exchange. So our company is already doing great performance as far as exports are concerned with the PM4 bringing out new products and also from Czech products, we expect going forward, more export earning coming through this as well. As far as pricing of raw material is concerned, our main raw material is bagasse, as you all know, and that is anyway on the long-term contract. We have sugar mills in the UP with whom we have these contracts. And we have these agreements as long as 5 years in many cases. And we -- every time we review them. And the terms of payment are also flexible to that extent because it's a long-term contract. The seller has trust in the company as far as the receivables are concerned. So it's going in a very well-planned manner. So there's no concern on the availability of pricing of raw material. I'm sorry, there was a fourth question related something to do with debentures, but I didn't hear that properly. So I'll skip that, but probably the secretarial can answer that question by e-mail to Reddeppa garu. So I think I've covered all the questions which the shareholders have asked. Once again, I would like to thank all of you for the interest that you are showing. I mean it is heartening to know that shareholders are reading the annual report. We do have a very long annual report. I must confess that. But the question that you asked, the anxieties that you expressed, all that helps us to improve our performance and the Board takes note of it as well as the management and take required actions going forward. So thank you members for your participation, questions and suggestions. If any questions raised today remain unanswered, you may write to the company Secretary using the contact details in the AGM notice. The company will respond appropriately. Members attending this AGM who have not voted through remote e-voting may cast their vote through the NSDL e-voting facility. The facility will remain open for 15 minutes after the discussion concludes. as arranged with the NSDL. I request eligible members who have not yet voted to cast their votes within that period. The scrutiniser will consolidate the votes cast through remote e-voting during the AGM. The results together with the scrutiniser's report will be submitted to the stock exchanges and made available on the company's and NSDL website within the prescribed time. On behalf of the Board, I thank you, members, my fellow directors, the auditors and the Pakka team for joining us. I now declare the proceedings of the 46th Annual General Meeting concluded. Thank you, and namste.