Good evening, everyone. My name is Pranay, and I lead the Brand and Marketing at Pakka. On behalf of the entire team, I'd like you to extend a very warm welcome to all of you to our Q2 of financial year 2025-2026 investor call. Thank you for joining us today. I'll like to introduce the leadership team, Mr. Ved Krishna, who's the Business Head, Ms. Neetika Suryawanshi, who's the Finance Head, Mr. Shubham Tibrewal, who's leading the Food Service Business, Food Service Business Head, and Mr. Sachin Srivastava, he's leading Legal and Secretarial. He's the Legal and Secretarial Head. I am leading the Brand and Marketing function. I'll just share my presentation to get started. Okay, I hope my screen is visible. Yeah.
Okay, so just to set the tone for today's presentation, I'd like to begin with a short video, which is a short glimpse of our upcoming Project Jagriti, and how it is progressing, and with this, you know, we are gearing up for our next phase of growth, so I'd like to play the video now. Just a second, just give me one minute. I think I've matched the sound. Yeah.
That was just a short glimpse of the upcoming project. With this, I'd like to hand over to Ved to start the presentation and setting the context.
Namaskar, everyone. Thank you, as always, for joining, and we are, of course, very excited to share progress with you and also to, of course, understand to answer all your queries. We understand there may be some concerns cropping up, and we are very happy to address those, but for us, of course, there is a lot that is happening, and we find that we are very much strongly back on track. We are doing various things. I'll bring you up to speed and set the context, and then, of course, talk about the numbers, but I think this is a quarter where we will have to probably look beyond the numbers, and we'll get you up to speed on that. Let's go ahead .
So the first is that there is a lot of progress on the innovation side, and there is a lot of breakthroughs, particularly in the Food Services side, as well as in the Flexibles. We will talk more about it. Shubham, in particular, will address some of the products that have been launched or are about to be launched. There were certain bottlenecks that we were facing, but those have now been, more or less removed. And again, there is a significant, turn that we have made, and I'll talk a little more about the flexi side as well as we go ahead. The PM3, part of the Jagriti Project was optimizing PM3. The press change that we had thought about has been done. We are now stabilizing the machine. We have now come back to the original production levels and are now looking to surpass that.
So in the next quarter, you will see things changing on the PM3 side, which produces specialty food-grade food service grades. Again, Shubham will talk about Food Services. We are building a very strong model to make sure that we utilize the maximum efficacy of the business, not just by optimizing our own production, but by outsourcing significantly and building scale. And those are being led very effectively by Shubham and the team there. Again, Pranay started with Jagriti. There were some bottlenecks and some delays that we have faced, mainly on account of certain fund release, and resulting from that, certain delays from the suppliers. But we are working on speeding that up.
We may not meet the timeline we had set last time, but we are still making sure that we try and meet the second quarter or the first quarter of the next financial year. There is a lot that we have done in order to go asset-l ight. There are some things which you will notice in this quarter coming ahead. We are outsourcing products which are similar to ours and building a stronger base with our buyers, ensuring that they get more products, especially where we can produce pulp and take offtakes from suppliers. And I'm not talking about Food Services. This is mostly in the Wrap and Carry segment. Again, like I said, there is a significant shift that we have made on the flexible side.
As you're aware, we had launched a few products a couple of years back, but it has been slow on the off take. One big part of that was, you know, for the supply chain, because we were buying this special paper from Europe, getting it to India to get two kind of conversion processes done. Now we have developed this paper in India successfully, and we have gotten the supply chain much more optimized, actually resulting in over 40% cost reduction. So again, you'll start to see those changes coming in the next quarter. In terms of business performance, we have a short one. I'm sure you guys have a lot of questions there. The main issue that the company faces is the extended downtime that we took in order to start PM3.
There was a challenge that we faced because one of our energy producing divisions, part of that is an alternator. There was a short circuit there, which meant that we had to rewire the alternator, which actually was supposed to take 45 days, but we managed to condense that and start in 25 days. But that meant that the shutdown actually got extended, which meant there was a direct hit on the sales, production sales, and of course, the bottom line as well. We are back on track this quarter in terms of profitability as well. October has been very good for us, and we are sure we are going to show promising numbers in November and December. So by the time we meet next quarter, you would see a very different performance from this. So we are not discussing too many numbers in detail.
I'm sure you'll have a lot of questions, and my team and I would like to, we would definitely try to field those. So in terms of Flexibles, the idea is to stabilize the performance for two of the grades, one is M1 and M3. We have done a lot of efforts in terms of the supply chain. Our team, even today, is sitting in England to do the NM, which is a non-metallized structure. We are expecting that to be completed within this quarter so that we can actually order the paper for PM4 as well. As you know, it's the same for any project that we are doing outside India. So those will also be finished this quarter. But the good thing is that significant customer inquiries are starting to come in. We have about 60 active customer engagements.
We also have about 20 trials that need to be done this quarter, resulting in certain orders coming in this quarter. Shubham, over to you.
Good afternoon, everyone. I'm Shubham Tibrewal. I'm leading the food service business at Pakka. Pranay, if you can move to the next slide, please. So, just wanted to start with sharing some highlights on the business for the past quarter. We implemented quite a few initiatives to grow our revenue, and those initiatives have started to bear fruit this quarter already. We'll see that a bit later in the numbers. I think that the real impact of these measures will be felt in all the subsequent quarters that we will have. We are on the right track, and the growth prospects are very positive. A big area of focus for us was to increase our B2C share of revenue.
Historically, the predominant area of business for us in the Food Services was B2B, but we have now started aggressively investing and growing in the B2C category as well. And that is being reflected by a doubling of our revenue between April and September on B2C channels. So from INR 40 lakhs to INR 80 lakhs. We will further look to grow our share of sales from this channel by actually increasing the number of customer touch points. So currently, it's three. We're looking to go to 10 touch points, and these include both online and offline channels. We've also implemented a very customer first strategy to target key accounts where we think there is a lot of business potential in terms of volume, in terms of brand notoriety. And one of those such accounts is IRCTC, which we are very pleased to announce that we received a first order from.
The last and final thing which we are working very intentionally towards is to basically change our product mix and add more high margin products, which will basically help us increase our revenue and, of course, the profitability basically to optimize our gross margin. One of the big drivers of change that we've already started seeing and which will continue to impact and drive our growth story is the new products we bring to the market. We have successfully launched clamshells. In the first month of launch, we achieved INR 20 lakhs of sales, which was a very, very positive result for us. We look forward to growing this category significantly in the coming months. We have also planned a lot of new launches and new product categories in the rest of the year.
Our aim is to double the product offering by the end of the financial year, which will again be a significant growth driver for the top line. Some of the products that we will be launching in the coming quarters will be a new range of delivery containers, which will basically include round and rectangular shapes, a range of delivery meal trays, and an assortment of ancillary products to really be a 360-degree food service full-stack one-stop shop supplier to our customers. Lastly, another big product category for us is our leak-proof delivery containers, which we are hoping to launch in Q4. In terms of the financial performance for the past quarter, our revenue was INR 15.74 crores, which was up 14% from the previous, the same quarter in the previous year and the previous quarter. Our PBT, though, took a hit in comparison to the previous quarter.
The previous year number was slightly biased due to a subsidy which we had received. But yeah, so we had a slightly more than one crore loss in the previous quarter, which is primarily due to our increased presence and activity on the B2C front, which meant we invested more in marketing in the last quarter. Over to you, Ved, for any comments.
Yeah, so I know it's very, very early for Rolando, so I don't think he's able to make it. So I'm going to help him with the updates on the Americas side. Let's go ahead. So, so we have basically looked at. That's a spelling mistake, molded, but basically looked at finding ways to increase our speed in the Guatemala project, where we realized that because of the current geopolitics, there's a huge opportunity for the molded products, primarily because the production has had to shift from China, Vietnam, India to other places like Thailand. And we feel near shoring will give us a lot of advantage. So we are looking at a lower investment, which means that we can swing it through much faster, which will result in a revenue and an EBITDA.
We are looking to finish it within the next year rather than taking a longer time for the larger project. The larger project continues, and we are looking to raise this debt, which is currently being done. Then we'll move ahead for the larger 300 million in the background. What our basically focus has become is to quickly launch in Guatemala rather than going in for a delayed production. The idea is that we capitalize on what is available right now, and that also enables us to focus more on India at this stage. This is in terms of just the timelines. Like I said, you know, by quarter four, 2026, we want to start production and make sure that the products are available in the Americas by then.
Okay, just the quarterly plans that we had promised last quarter, we are very happy to inform that most of them have been moved forward with. So we have rationalized, as Shubham talked about, the Food Service Division, and we are expecting very big changes in the next coming quarters. Again, the supply chain, Shubham didn't talk about this, but ultimately now there are four outsourced suppliers, and there is a rationalization which he talked about. And also we are looking to launch various new products, and some of them have already been launched. Innovations Lead was important, and it is in progress. That remains one of our big, like big things that we have to do within this quarter. And I'm sure we'll find a solution to this. I know this has been long pending. Again, it has been optimized.
We did hope that we will find ways to get it done within this financial year, but it seems like it will go to July 2026, and the team is working day and night towards this aim. In terms of the international project, we have looked towards it and making sure that we move ahead by quicker molded fiber project rather than going in for a $300 million project, which was taking up a lot of our bandwidth and energy. We felt that let's swing the smaller project, get that done so that there is more capacity for a bigger project. We are also making certain commitments for this quarter so that you can hold us liable for those, so we will launch the delivery range, as Shubham talked about. The team is already moving for the right technology.
It is a game-changing solution that has been created over time, and you will see it hopefully in your homes in the next three to four months. Again, there's a lot of work we have done in terms of product range rationalization to be able to reduce the number of products, to optimize the machines, and to optimize the production. We are also looking to do various innovations on an asset- light model like that, like I talked about. You will notice a significant shift in productivity in the next quarter as well. Like I said before, I have come in as an interim CEO for India to make sure everything is stable. We have started the search now for finding the right person. In case you guys have any recommendations, they'll be more than welcomed.
And of course, we have been on the search for Innovations Lead, and we will try to close both these within this quarter. We have significantly stepped up the gas on the flexible side. There will be a buildup. Like I said, there is a significant pipeline that has been created, and the idea is to scale it up significantly before the PM4 comes in play. Again, like I said, there will be a speed up of the Guatemala project. Hopefully, by the time we meet next, it would be well on the way. That's a repetition. You can go ahead. Thank you all. Pranay, back to you.
Thank you.
Thank you, Ved. With that, we can start with a question-and-answer round. I know a lot of you have already had your hands up since the start of the presentation. So, but we'll move sequentially. And to ensure everyone gets a chance, please limit your questions to two per person. You can also ask on the chat, and we'll be responding over there, or taking it up in the live session. So I'll just start sequentially. Y ou can go ahead with your question.
Oh, yeah. Can you hear me, Pranay?
Yes, I can hear you.
Perfect. Thank you so much. First question is, if you can help us explain Jagriti-related numbers in a bit detail. I mean, what is the CapEx which has been done till date and with revised cost now coming in? What is the pending CapEx to be incurred? And then with this pending number, how do we plan to fund this pending CapEx? So how much is it going to come from undisbursed bank limits which are already tied up but undisbursed? And how much is it going to get, you know, funded with some additional debt because of cost overruns? Probably if you're looking out for additional debt for further new tie-ups. And how much will be raised via equity dilution? Because we are assuming Carnelian is not coming in.
So, because we'll have very little accruals coming in in the next six to nine months, say somewhere roughly about INR 20 crores-INR 30 crores max. And if this dilution were to happen, it would happen at what indicative rate? Because given where our stock is right now, and further from the presentation, we saw that we are planning to infuse another fresh $8 million towards Guatemala. So with the strain in the balance sheet, how are we managing these numbers is what we wanted to understand in a bit of detail.
Thanks, as always, for your very incisive questions. And Neetika, I might need your help if I miss out on anything. But the CapEx that we have already incurred is about INR 400 crores. There is another INR 350 crores odd with the increase in CapEx from 675 to 750 that has to be incurred. You're totally right. We are not sure whether Carnelian will come in. They did ask us for a six-month extension because they have an 18-month period. That said, we are still speaking to them. And of course, with all the initiatives that you have seen right now, we are also hoping that, you know, the markets will respond accordingly as we begin to launch these products that you have heard of. And of course, as the numbers begin to come back up and also improve further.
So that is, of course, a hope in terms of Carnelian. They are people who do stand by their word. So I'm expecting them to come back. That said, you know, like you're right, we have to keep the project moving. So we are looking at numerous options right now in order to structure it. We are mainly looking at ways to go for a structured bridge kind of capital rather than going in for a long-term expensive capital. The idea is definitely not so far; it's never been to further dilute. You're totally right. You know, at this share price, we don't think; we think it's undervalued. So the only dilution that might take place is I might borrow and invest money and love to invest at even a higher price than what is there right now. So I might borrow in a personal capacity and invest.
But beyond that, we are not expecting any dilution to happen. So you can rest assured on that. Guatemala, no. We had total commitment that the board had allowed was $10 million. We stand by that. The current exposure we have done is about $8 million. So we still have to provide another $2 million. And that will be part of the structured capital that we are going to raise, because that is needed for the project to go through and also for the opportunity to be able to capitalize on what we have already created there in terms of the U.S. market, the ability to build a team, et cetera, et cetera. There's a lot that has gone in there, and we want to make sure we capitalize on that.
But yeah, from an Indian equity holder perspective, you can rest assured that we are not expecting a significantly higher sum than two million, which has already been committed to them. But of course, there'll be no stress on the Indian balance sheet. We are not expecting to stress. We would not want that ourselves. So it will basically come from the structured capital that we bring in. Neetika, anything I've missed? Otherwise, Jeet, back to you.
No, all good. Anything else, Jeet, that you wanted to add?
No, no, no. If you can just give us the breakup. I mean, the pending Capex is INR 350 crores, right? So from here on, how will this INR 350 crores be funded? So how much from, say, unsanctioned or probably to be sanctioned bank limits? How much from internal accruals? And how much is probably coming from the new structure that you're now looking out for?
So basically, sorry,
I'll continue and then you can add on, Neetika. The gap is only the amount of funds that were supposed to come from the equity and a little more maybe. Maybe instead of 75, it would be 100. And correspondingly, the banks will provide 200 crores-250 crores. That's the gap we need to fund, say a little over 100 crores. That is what we will fund. Of course, there are many, many opportunities that are coming our way where a structured fund is saying, let me take the entire 600. Those are also being weighed out depending on the cost and the tenure. We know that the company is extremely healthy and the possibility is that, okay, we want to move really fast.
You know, for us right now, more than the cost, time has become of essence. So of course, those are also opportunities that we are assessing where a fund comes to us and says that, okay, let me take the entire 600, including all the banker's share. That way they are much, they have much more collateral. And there are others which say that, okay, let me just give you 150, say INR 150 crores to tide over the issues. And you, against that, for the funds that have already been committed by the bank, you are able to draw those out. So though that should more or less suffice for us. And we are expecting to tie that up by December. Neetika, anything I think added?
No, all good. Thank you.
All good.
Oh, perfect. And so my second question is, if you can explain how our new product pipeline is evolving. Because in your opening remarks, I think you said that probably in this Q3, I think you are closing in on non-metallized and probably you'll end up ordering a coater. So when you're about to order a coater, which means you've already finalized the recipe, and that happens after trials, is what I understand, right? So now, are we going towards non-metallized or again, we are first considering barrier substrate, which we spoke about in the earlier phone call, or barrier substrate, or I mean, the barrier coater is out right now because you found success in non-metallized. So how are we looking forward with respect to research and development for Jagriti coater is what I want to understand. And then by when can we expect optics to come in?
I mean, how close are we on this success of non-metallized?
Yeah, superb. So again, in terms of the this is of course our biggest play. And if you look at my personal time, I would definitely prioritize that over everything else. So again, in parts your question. So let's start with what we are doing right now. So staying with the metallized and offtake, I'll club those two together. So the first one is that what we decided to do was to bring the supply chain into India. And that has resulted in almost a 40% cost decrease and quality improvement as well. So that we are already working on at least 20 customer trials and maybe over the team said a little over 60 pipeline. So there is a significant effort that is happening in that direction.
Of course, it all depends on how many successes we have, what is the size of that offtake, et cetera, et cetera. The second one, of course, is the big, hairy, audacious goal, which is the non-metallized. I'll club the non-metallized and the barrier coating. It's more or less the same thing, just the non-metallized structure is much more dense. So as we speak, actually, we've conducted trials last week in India. Our team is actually stationed right now in England. I'm actually flying tomorrow to England to see the finals of those trials. Then we are again meeting somebody who we are exploring for innovations, who's a barrier specialist, and seeing if they can also come in so further accelerate.
So in terms of timeline, what I think we can commit to right now is to definitely commercialize the metallized substrate further this quarter, and find a solution for either the perfect solution. Let's hope for that in the non-metallized thing, failing which deciding the barrier-coated applications and finalizing the solution. Those two should take place within this quarter so that next quarter onwards we can, like you said, you know, we have to order a coater. Ultimately, coaters are also going to take time and the project is much more viable with the coater. So I would say those are the timelines in our mind.
Perfect, and so last, just to follow up, I mean, so barrier-coated is smaller shelf life is what we understood and non-metallized is like larger, it's flexible, right? Which is larger shelf life, probably, you know, difficult product like chocolates. So what our eventual end goal is, do we want something like a sugar sachet, which is a smaller shelf life, or our eventual goal of something like a chocolate? I mean, where, where are we headed? I mean, basically these two are again, two different things, right? I mean, where you're putting your energy on. So just when you're deciding to order a quarter.
Yeah, they're not different. They're just a different complexity. Ultimately, both are barriers. Typically, a sugar sachet has a barrier layer mainly for heat sealing. So that's a very different application. You're right. It's a much shorter shelf life. The bigger issue is, of course, the moisture and the air resistance. So that's the bigger issue. And of course, for us, the holy grail is when you hold a packet of chips, in your life, a couple of years down, you hold a paper substrate and that is compostable and marine- and terrestrial-safe. That's the holy grail. That's what the team works against and works for. Everything else is, you know, work in progress. It's a step in the right direction. So whether you talk about a sugar sachet or even a chocolate packaging is work in progress, actually. It's not a potato chip bag.
Ideally, you want a nitrogen flushed potato chip bag that is available at, you know, huge quantities. That is what will give us true success, I feel, because that's the garbage that you see all around. I know I will have to hand it over to Pranay. He's already been,
Thank you so much.
In your three questions you've asked 10, but I'll hand it over to you.
I'm sorry, I'm sorry. Thank you.
Thank you. Kashi, you can go ahead with your question.
Thank you for the opportunity. My first question is largely to understand quarter two. Because even considering the shutdown effect, it is very difficult to analyze. What led to sharp fall in the profitability? Even if we consider the extended shutdown, the top line seems fine, but there is a sharp decline in EBITDA, which dropped to around 2%. What led to this sharp decline? And have we faced any NSR pressure? Can you quantify that? Also, our employee expenses have been in the range of around INR 12-13 crores in the last 12 quarters. And we were aware about the ESOP effect, but have we faced any material talent exit post Jagdeep to justify this fall in employee expenses? If you can explain this in a bit detail.
I'll go ahead and take this.
Yeah, in terms of the EBITDA decline, Kashi, in terms of the raw material, I'll basically break up into five main concepts that we have. In terms of the raw material consumed, the prices have remained fairly stable in terms of raw material and the chemicals. There were some issues with the stabilization of PM3 and also the pulp machine, and that added to higher cost of goods sold. Because when the machine starts, then there are certain operational expenses that are usually higher than the normal ones. In terms of carbon and fuel, a slight increase in the consumption because of the rainy season, so the consumption is generally higher.
For the employee cost, there were some provisions that we had booked for bonuses, but because of the present situation that the organization is going through, and as you see quarter two as well, we decided to lower our cash outflow for this quarter. So those provisional impacts have been reversed, and finance costs remained, more or less stable. And so were the other expenses more or less stable. I hope that answers your questions. Ved, sir, if you want to add anything.
Oh yeah, okay. So my second question is to understand our operation. So post shutdown, can we expect a INR 100 crore top line of sales run rate to clock in quarter three, plus additional improvements that will be coming from PM3 expansion, new pulp mills, and new power plant? And also, can you explain how did our bagasse pricing go for the upcoming offtakes? Did we face any pricing increase?
I'll answer one by one. In terms of the going ahead commitment, citing a number would be incorrect on this platform at this stage. All I would say is that we are all working towards achieving where we want to be and where we should be. So, we have seen improvements happening, and we definitely should be back on track with this quarter. And, if things go as planned, quarter four should be even better. In terms of, sorry, that was on the operations, and you asked the last question was, I missed it.
I can take that. Bagasse pricing.
Bagasse pricing, sorry.
Yeah. So bagasse, Kashi, what we do is that it's very important for us to have a long-term focus for all our operations. What we tend to do is to do five-year tie-ups with our sugar mill partners, and this year was interestingly the year when it rolls over. So we did roll over with an increase of about 3%. There was a 3% increase, and it is actually, you know, this year was 6%, and then it becomes a little bit lesser in subsequent years. Say an average increase of about 4%-5% every year is going to be there. And we are actually very happy with that. We want the bagasse or the sugar mill suppliers to feel this is a great place for them to be. We don't want them to start producing other stuff.
So that's something that is strategically important for us. And thankfully, we've had you know 30-year to 40-year relationships with our partners, and that is the basis for that. So we want to keep our raw material very stable. Yes, there will be a 5%-6% increase in the coming sugar season, but that is important for us for the long-term future. Pranay?
Thank you.
Okay, thank you.
Thank you. Thank you, Kashi. Ravi, you can go ahead with your question.
Yeah, hello. Good evening. Thank you for the opportunity. First of all, you know, I'm a great admirer of Pakka's vision and, you know, have very high regard for Mr. Ved Krishna. So just I have one question, you know, basically on the repeated execution delays. Please give me a couple of minutes to explain the context. I've been following Pakka closely for the last several years. Let me give you some examples, and you know, sorry, I'll be blunt here. We've seen delivery containers being, you know, delayed for more than five, six quarters, and then development target date keeps getting pushed. I remember, you know, Project Jagriti. It started in mid-2023, and I think the project was supposed to be complete by 2025, but then it got moved to 2026, thereafter 2027 May. Last quarter, I think it was mentioned 2028.
And now, unfortunately, Jagriti is also delayed again. So I think it was moved to 2025, calendar year end, you know, to financial year end, and now again, you know, August 2026. So as an investor, you know, and also as a consumer, actually, it's very disappointing to see all these delays, you know, literally in every important project. So I think, you know, I'm sure you also would agree that even customers, you know, will probably, you know, lose interest at some point of time. So, when management shares, you know, such growth projections in, you know, in your formal terms, you know, like annual reports or investor presentations, and then missed by a big margin. So I think it's unfair, you know, to all the stakeholders who trusted the management.
So Pakka's market cap, I'm sure, and if you've seen after the recent results, it's come down from INR 2,000-odd crores to INR 500-odd crores. You know, the growth is stagnant for three years, and I think this will be the fourth year in a row, you know, even if you take off the shutdown effect. So honestly, it's very, very hard to believe this is happening to a company which is very innovative and has quality products. You know, I personally have tried your products, and it's, you know, it's top-notch. So my question to you know, Mr. Ved Krishna is, what according to you are the reasons for repeated failures by your team, in spite of knowing the importance of all these, you know, time delays, and what are the corrective steps that you plan to take to ensure that this is not repeated? Thank you.
Yeah, thanks, Ravi. Thanks first of all for being so appreciative and for following our progress. I couldn't agree more with you. And ultimately in life in general, we only have ourselves to blame. So there is nothing else but our own learning curve. And you've given some examples. I can give you many more, where we have failed in terms of delivering on time, on spec, on quality. So there is definitely an erosion of trust. I cannot, if I was on your side, it would be the same, 100%, that there is an erosion of trust that will take place if we, you know, once or twice people don't worry about it. But if we are continuously doing the same thing where we are committing or setting up larger goals and not delivering, there is a challenge.
We have been, I personally, and also I think along with this, the Pakka team, we've been doing a lot of introspection around that, and we definitely need a stronger skill set. Like I said, I've stepped into the role of the CEO or the Managing Director for the interim. It is not my strength, I assure you for that. I know that my strength lies more in the side of collaboration in terms of conceptualization, expansion, but there has to be an exceptional executor. Of course, we have had strong executors, and wherever we have had that, we have felt the difference. That is, I totally agree with you. Ultimately, we can make all the excuses in the world for all the things that you pointed out, but the reality is our own acumen in the end.
So what I can say from a person to a person who has trusted us is that we are on the job. There are delays, we agree. We probably don't understand the nuances when we make commitments. My wife calls me a delusional optimist. You know, I think that plays through sometimes. I'm learning, with experience and age, to temper my optimism, at least in commitments. I don't think I'll be able to temper my optimism in spirit, but I'll work on tempering my optimism in the commitments I make. That's something that I will personally take responsibility for. I do feel that we have an exceptional team. Like, it is mind-blowing. I'll encourage you to come and meet us in Ayodhya, or in Noida, and you'll see the spirit of Pakka.
And that is well and alive. We all believe in the cause we are after. What I can assure you is the delays will not affect the longer-term plan. So that is what I can assure you, or we'll keep putting our best foot forward. There are, like you said, there are issues that we've faced with delivery containers, but at least we believe that, you know, what is going to come out is going to be game-changing. So that's what we believe. And it's hopefully not my delusional optimism talking. So that's our belief. We do think that the team has made huge inroads into the flexible side as well. That is also going to come out. Yes, again, our bandwidth is limited in terms of Guatemala. We conceptualized Project Jagriti from our spirit in order to ensure that we do a certain scale.
But we were not able to raise the capital yet on time. So we've downgraded the size and also made sure that we do it a little faster. And that again is going to go through. Jagriti again, there is a challenge in terms of, you know, Jeet pointed out in terms of the coating substrate. Yes, we can take out the base paper, but that's not our game play. Ultimately, as Pakka, we want to take out game-changing products. So we continue to work on those. I cannot even imagine how much it hurts you, in terms of the market, market cap. And I truly apologize for the same. The onus is on us. You have believed in us. And if we cannot honor that belief, then there is a challenge.
So what I can assure you from my side is that we will continue to work in the direction. Please continue to trust us. We will, we will work very, very hard on delivering, on your trust and on the promise. And we will work on tempering our optimism a little bit while still not tempering our mission. So, so that is my, at least my, promise to you.
Yeah, yeah. So I will continue to trust you. And I must admit that the recent leadership changes, you know, with you coming in and also with Shubham taking over the, you know, Food Services. I think it's a very big change. You know, I can definitely see something, you know, at least the issues are coming up. So earlier, I think even the mix of all these two years is fantastic progress in the community. So yeah, hopefully, yeah, you know, the good days will be back soon, and our patience will be rewarded. Yeah, thank you. Thank you.
Thank you.
Truly appreciate it.
Mr. Dinesh, you can go ahead with your question. Dinesh, you can unmute and then try.
Hello. Yeah.
Yes.
Can you hear me?
Yes, yes.
Yeah. Thanks for the opportunity. I wanted to know, like bank funding, we have already tied up with Canara Bank, India EXIM Bank, and Axis Bank. And in the last call, you said that EXIM, EXIM Bank has disbursed the term loans completely. And there was some due diligence work which was going on with Canara Bank and India EXIM Bank. So I wanted to know, like, what is the status as on today? Have they disbursed part of the amount, or still some certain things are pending?
So, disbursement to the amount to the ratios that permit against equity have already been disbursed. All due diligence is completed at Canara and EXIM both. And the 75 of Carnelian, as soon as that amount gets in either Carnelian puts in or we fund the equity side, the balance 150 debt would be reimbursed. So it's a sanctioned limit. Just disbursement not done because of the equity proportionately not coming in.
Okay. So good to know that. And one more thing is in greaseproof paper, okay. Last, in the last phone call, it was said that, because of the competition, like there are many competitors have suddenly sprung up, right? And so prices were also. So how far, like, we are impacted by that? Because now our EBITDA has also gone down. The gross margins have gone down. So, and what steps we are taking, you know, to alleviate? Because this greaseproof paper is one thing, and then there was, we were to launch some tea pouches, okay, and for that, we were to make some trials in London and all. So, what is the status of that? Because I think it has not happened yet, right? Plus, one more suggestion is like, we are searching for some innovation head, right?
Earlier, whoever was there, they were not able to do much on this front. There are some companies, you know, like Praj Industries, which is a listed company, and they are pioneers in bioethanol and bioplastics. Why can't we, you know, approach them instead of appointing our own innovation head? They have made real good progress. We can tie up. I may be wrong, but Mr. Ved, you know more. So you can enlighten us on this. I mean, if a tie-up can be made with Praj Industries and, you know, something can be worked out so that delivery containers that leak-proof, which we want to launch, it has already delayed. Now you have given a new timeline of quarter four. That is all. Yeah. These are the things I want to know.
Thank you so much. Just to kind of explain to you the structure, greaseproof paper is the base paper that we build on top of in terms of whether it's the flexible packaging or barrier coating. So the base paper is needed anyway. The way the system works right now is that you produce a base paper and then you line it up with different biopolymer formulations. And these are, of course, the things that we've been working on for a few years. And that is what the chemistry is what takes time. And of course, you know, it's like everything else in life, it's it has its own challenges, because you're trying to block off air and moisture with a natural substance, which typically any natural substance tends to be porous and bleeds. So that's the challenge.
So it has to do with how you structure the product. So the greaseproof paper needs to be made regardless. What we realize is that greaseproof paper is anyways the lowest denominator for us. We can manufacture it. We can sell it. It is ultimately a specialized commodity. So that can be done. But in an ideal world, from Pakka's mission point of view, what we are doing is we are replacing another greaseproof paper by greaseproof paper end of the day. So in an ideal world, we don't want to do that. We at least want to have a barrier- coated substrate. So that's what we are working towards. Tea bag, of course, is a great option because it also has a secondary packaging. So it helps the structure because inherently paper is not puncture resistant, for example.
So when you have it as a singular primary, primary packaging, as in it is displayed outside or it's hanging in a paan shop, you'll have a challenge. So those are the things that are in our mind as we are evolving and launching products. There is, like I said before, a decent pipeline. Tea bags is definitely a huge part of that. And we will continue to work in those directions. Innovations is very much central DNA for Pakka. As much as we like, that is what keeps us going. So there is definitely no outsourcing of innovation. But let me also clarify to all the investors here that nothing is stopped in Pakka. Whether there's an innovation head or not, we work on eight different areas, eight different verticals of pillars of innovation.
All those eight pillars are well-staffed and well moving in all directions, so four, of course, you see in terms of products, Flexibles, Rigids, Wrap and Carry, and Food Services. Those are things that you see as investors because they are forward-facing. We also have four other innovations where we work on process. We work on waste valorization. We work on ecology, and we work on green chemistry, so those are things that we do internally, so those have different teams in Pakka, different pillars, so those are ongoing. They are not stopping, because again, like I said before, we have an exceptional team, and it's a team of a lot of youngsters with lots of new ideas and deep involvement, so even now, you know, there are a few of us here, whether it's Shubham, me, Satish, we are all deeply involved with that team.
Juan Gabriel, who is our person who is leading the Flexibles now, and he's a Colombian who has decided to shift his family to Bangalore, India. So, you know, there are things like that that we are blessed with at Pakka. Praj does amazing work, and we wish them all the very best. But these are very, very close to us. We do incubate a lot of people. We work on a lot of collaborations across the world. And I'm sure there'll be an opportunity with Praj as well, in the future. And we will remain open to that. But that said, innovation will be very much front and center for Pakka. And we will not be able to outsource that for sure.
Sir, about competition in the greaseproof paper, like how we are impacted and all?
No, we are not because we are not looking to make greaseproof paper. Greaseproof paper is a means to an end. It's not the end for us. Yes, we might sell some greaseproof, but it's not the aim for us. Base paper will dilute what we are trying to do rather than enhance. So what the difference is that you want to create something called a functional paper, which basically typically has some end-use properties. Greaseproof is again a functional paper, but a base functional paper. So for us, we may launch greaseproof for sure, but that's not the end goal. So we'll continue to functionalize the greaseproof paper further by adding barriers to it.
In your opinion, like, what would be a difference between bioplastics, which Praj is, you know, is already, and, what we are actually doing? Because we are also, you know, into like something biodegradable. So what is the exact difference? Because then bioplastic is also fully used.
I'm not fully aware of what Praj is doing. But on a fundamental level, look at biopolymers. Sorry, I'll have to step back a little bit. So the base pillars for any material in nature is one of the two. It's either a protein or amino acid, which is a protein, or it's a carbohydrate or a sugar chain. So those are the two molecular chains that become the base for every product, including our skin, which is mostly collagen protein, or, you know, sugar cane, which is more cellulose, sugar. So you know, those are the kind of structures that are available in nature. So different biopolymers have different blends, and you have polyhydroxya lkanoates, or as Balrampur Chini has announced polylactic acid. So those are all biopolymers that we humans are creating.
There's a lot of companies that are coming into the seaweed domain. Those are alginates. Those are a little bit different. So I don't exactly know what Praj is focusing on, but fundamentally in a cellulosic aspect, it's a sugar chain that we work with. Then we add certain protein or amino acid-based structures for further kind of valorization, right? Valorization is not for further enhancement of the functionality. So that's what we as Pakka tend to do. But I'm not fully aware of what Praj does.
Okay. Thanks, sir.
Thanks.
Thanks a lot. All the best.
Thank you. Y ou can go ahead with your question.
Yeah. Thank you. So my question to Ved is that on the Jagriti Project, this funding part, as we understand that this bank loans has been sanctioned in this around July, August 2025, while our equity raising, I think it was one year earlier, one year back in July, August 2024, something like that. So just wanted to understand why it took so long time for this bank funding. Whether is there any, because finally also we onboarded PSU banks, and is there any acceptance issue among the lenders for the project or something like that, whatever the any issues on the project acceptance or so? I just wanted to understand on this particular part.
Y ou want to go?
So, when we started, basically, approaching the banks, we had a lot of interest coming into various banks, actually. And we even received a couple of in-principle letters, and I would not even say a couple. I think it was seven to be an exact number. We wanted to go with a financial partner who would match our speed, our intent, and be more supportive. So we wanted to do the right choice. That led to a lot of rounds of discussions and then the final discussions and the choices. So that definitely delayed the process, but I'm glad we made the right choice. Ved, is there anything that you would want to add?
No, I think, I think similar. It was a huge due diligence kind of process from our side that took a little longer, in order to understand which banks we want to go with in that scenario. But there was no resistance from the bank. In fact, many of the banks said that they'll take the entire exposure. They didn't even want other banks to come in. But we decided to go with the combination of three, two PSUs and one private bank.
Okay. But for the particular of funding part, so what I understand, there will not be any further equity dilution, at least below the last equity dilution, which happened at INR 272. So we are not planning to do any equity dilution below that recent equity dilution benchmark.
Are you happy if I buy some equity here?
That would be okay, but it should not be below last equity dilution. That would give investor more confidence if you are putting your money.
Are you happy if I buy at a higher price?
Yeah, obviously, because any equity infusion by promoter obviously would give investor more confidence.
That's the direction we are at least working on, to find ways to, if there is an equity addition, it is done by me at a decently higher price than what is prevailing in the market.
Okay. And my second question is on the molded part, because what I understand in Jagriti, we are not going to add any capacity on the molded, and we are targeting very high business revenue next two, three years, through molded business. So that I understand it would be obviously through outsourcing and that model only. But because we are seeing that even we are raising revenue, but profitability is issue. So whether, because if we are not making in-house and we are targeting so much revenue with that, we are aiming for higher profitability to maintain, or it would be hit on the profitability on the outsourcing part.
Shubham, you can add on. I might miss some things, but so great question. I'm glad you brought that up here, because I know that we flip-flopped a little bit on the molded side. I know the investors have earlier asked us for a lot of clarity, and we've gone back and forth whether we'll produce ourselves or outsource the entire thing. What we realize is that we need both. We will have to keep producing ourselves, and we will have to go asset- light to be more nimble in the market and make sure that the customer gets what they want. So fundamentally, what we've done in our internal structure is divided into two SBUs. One is a manufacturing-focused SBU, and one is the customer-facing or the Food Services SBU, which is led by Shubham. So, say today I'm leading the Manufacturing SBU.
My aim is to maximize my productivity and minimize the number of products I do to be able to provide the best cost advantage. So that's what the manufacturing, business lead will typically do. So what we are trying to do is to make sure that we have the right technology in place. And of course, it depends a lot on funding, et cetera. But we have an existing setup that needs to be optimized, which we know for the last six odd years. So we will continue in that direction in optimizing. To be very, very clear, the ultimate decision is that we will continue to run our internal facility and optimize it further. The second part, and this is where the Food Services division comes in, we realize it's a very customer-facing business, and we should not be treating ourselves as a bagasse molded fiber producer.
Instead, we should be talking about ourselves as a Food Services disposables provider, which is in the sustainability space. So Shubham is trying to build that in multiple ways, and I'm sure he'll add on to this. But the fundamental idea is that understand the need of the customer, provide them with better solutions, whether it's molded fiber or beyond. So there is a range that is being built for the customer with our Pakka ideas in mind. And, Shubham, you can maybe elaborate a little bit on that too.
Yeah, absolutely. So just two things there. And also, I think the choice of outsourcing versus in-house production is to be closer to the customer because one of the important cost components for us is the freight aspect of it. So, definitely you do take a hit on your profitability when you outsource versus if you were producing it in-house. But in that, it does have its other advantages in terms of cost of capital, in terms of freight savings that we do. So it does give us operational advantages. It gives us a bit more flexibility. It allows us to diversify the product range, and it allows us to be closer to our customer. So, that is actually the rationale of the way we are looking to proceed further. And in terms of offering, definitely, so the idea is to cover the needs of the customer.
And by that, it's all his packaging needs in the disposable category, because you want to basically increase your share of wallet and your share of business with the customer and to be able to provide him with all that they need. So you essentially want to be a one-stop shop solution for them, which is where our goal is.
Yeah. Thank you. Thank you, Shubham and Ved, for detailed explanation. And yeah, just hope that equity dilution doesn't go below 200, because at least because who has invested at INR 272, they do not feel that hot.
Thank you. Y ou can go ahead with your question.
Yeah, thank you. Just wanted to understand a little bit more about your products in your flexible packaging project. So, could you speak a little bit. Firstly, is my understanding right that barrier coating comes into play if we are substituting non-metallized with metallized? So you try to get the properties of non-metallized by putting barrier coating on metallized. Firstly, is that understanding right in case non-metallized doesn't work? And then, and then the main question really is, [regarding] the flexible packaging products, which are not in R&D, which are certain to be commercialized, could you speak about that? Could you speak about the amount of revenues we can do as a company on those products and the total market opportunity and what that is replacing? So those are my questions.
D eeply insightful question. So there's no other way for me to explain it but without going into a little more detail. So let's start with what the metallization does. The metallization is fundamentally to stop the water vapor barrier. So if you think about a water vapor, which is like, if you think about steam, it will always find the tortuous path. It will find its way through the structure. And what the metallization does, as soon as you have a metal, it kind of blocks that. So that's what the metallization does. Why do we use metallization from Pakka perspective? It's because it still composts. It still decomposes. When you put it in the soil, it will again break down its fine particles of aluminum.
What we do is that we put an aluminum layer to avoid that water vapor transmission to happen. What the customer doesn't see is two things. One is when the only way to metallize on paper, proven way, is to transfer metallize. So typically what happens is because it's a two nanometer layer of metal that you have to add on to a paper, the only way you do it is you actually bring it in a polyethylene film and you transfer metallize it onto the paper. So you still have a lot of polyethylene happening in the process. From a Pakka perspective, that's a challenge because again, we are not looking to greenwash in any way. Process is also as important for us as the final product.
But that obviously puts us in a quandary because then you have a challenge because you have to control the water vapor without having a metal substrate. The second challenge, of course, the customer doesn't see is that when you do a transfer metalization, it's typically done at much lower capacities, which again is a problem if you are to supply a larger consumer. Again, it has added cost, et cetera, et cetera. So, so the only way we, we feel that we can actually make it successful in terms of scale and, at least from a scale perspective, is to go for, what we would call is dispersion coating. And there's different kinds of coating. You know, you might know extrusion coating, which is when you melt a poly and you put it on something.
We tend to go with dispersion, which is a water-based coating, which is of course again more structurally more soluble in nature, fundamentally, because it's water-based. So we have to go for water-based structures, which create their own challenges. The way we try and solve it is to go at a very nano level. When you go at a very nano level, you fill the sheet a little more. And that's the direction. And of course, that's the whole challenge that Pakka has in order to be able to build those structures. But again, just to give you a gist of the question, the holy grail for us is non-metallized and non-metallized. So that's the holy grail. Now to your second question, but we have to sell and we have to make money, right? So because ultimately sustainability, first test of sustainability is to sustain ourselves.
If we don't sustain ourselves, there's not much sustainability that we'll bring to others. So in terms, in order to be able to do that, what we are trying to do is to commercialize metallized in a significant scale through outsourcing that we are continuing to build the order book now. I cannot yet give you a number, but again, just to ensure that I do answer your question, there are many applications which we would call barrier -coated. So again, from a consumer standpoint, you open a sugar sachet probably every day. You probably open a bag-in-box application like a masala thing, which MDH or Goldiee, they'll come in a box, but inside it would be a paper with a metallized kind of layer. You will have different applications. We talked about Tea bag, which is again inside a box.
It becomes a little bit easier in terms of protection. These are the applications which we are relatively confident about that if nothing else, we will crack those. Those are just a cost issue. We can address the cost issue because you are bringing in something which was vertically integrated, which means that you were sending paper to another converter who was buying other stuff from other places and integrating it. In our case, we are bringing it in-house and sending it to the converter only for printing and pouching. We will mitigate the cost increase from a petroleum polymer to a biopolymer through that methodology. I'm not able to give you a number yet, and maybe Neetika won't be happy if I did because my optimism comes into those domains. I'll avoid that.
But that's the broad trajectory we are on. I hope it helps you in raising your understanding of what we are doing.
No, no, definitely. You know, we've just, this is probably a conversation off this chat, but I'm also involved in with some global producers of flexible packaging, and I also sell some products to tea manufacturers in India. So I think I can help you with talking to some people, as you said, because there have been some very high-level R&D now. How do I get in touch with you? You tell me, because right now on this, how do I get in touch with you? I'm also, yeah, so how do I get in touch with you?
Just send me, ping me on LinkedIn. I'll send you my number and we can.
Okay, you want to know?
That'd be great. You know, any, yes, absolutely.
Okay, great. Yeah, produce it.
Yeah, because that will be a huge blessing for us, because the more people we speak to, we find we emerge much more knowledgeable. And it may not be even from a technical angle, but just from a connection angle. I'll give you an example. We were doing a conversion of tea bags, and this will help others, and that's why I'm mentioning it now, is that for the tea pouches, we actually succeeded in the entire conversion because again, like what we have to realize is that when a converter shifts from a petroleum polymer to a cellulosic structure, there is a difference in their machine in terms of the tensions, in terms of the speed, et cetera, which needs its own kind of trajectory.
They don't want to change that because their operators are used to a certain structure, methodology. Actually, where we failed was different. We failed on the heat sealing aspect because the petroleum polymer was heat sealing at 120 degrees. Our structure was heat sealing at 150 degrees. Now that's a 20% increase in energy for them. So, you know, that's the kind of challenge, Kaustav, that we learn when we are able to connect with people who have been in the business for a while. So yeah, do ping me and I'm happy to connect with them.
Yeah, yeah, we'll, we'll do.
Thank you. Y ou can go ahead with your question. A re you there? Okay. I'll move on to the next person. Manali, you can go ahead with your question.
Hi. So my questions are majorly around. I want to understand more about delivery containers. You know, I mean, while we are looking at a launch, say, next quarter, but what kind of volumes are we looking at? Or, you know, how are we going to go ahead and manufacture them? Or also with the entire range that you are speaking about in the delivery segment. So I would, you know, if you could enlighten us more about what's going on. Like now I saw in your presentation about clamshell where you all have launched it and, you know, you all have been able to move to a 20 lakh business. But, you know, again, having to grow with a beautiful number, how is that going to happen? So likewise, if you could speak on the entire delivery range and where are we on the delivery containers?
Like when we are saying that we are going to launch it next quarter, I mean, sorry, in quarter four. So where are we yet? And, you know, what all things do we have to do in addition so that this entire plan comes into place?
Yeah, thank you for the question, and should I take this one? Sorry, Shubham, can I just start and then you can take over? I didn't take my background for Manali because it tends to.
Okay.
Not be able to do what I'm going to do, and you may not be happy with this. So Manali, this is the final delivery container in my hand, right?
Okay.
There is a certain method to the madness where we have created a whole structure. All it takes is this much time to get stuck. The delivery container is ready for delivery, right? These are the trials we've been doing with the customer. As you might see, it's a little shiny. I don't know if you can see.
Yeah.
This is a biopolymer coating that has been done. So there is a certain structure. So the team has just applied for a patent. So that's the first step. We don't want to launch this without that because anyways, you'll see huge amounts of copies of CHUK in the market now. And we've kind of realized that we have to be a little more careful. But it's in my hand because we've been playing with it today. But of course, this has been in the making for a while, but this also to do with the amount of thought that has gone on and to, you know, if you take a plastic container, you'll tend to go like that to close it. Then there's an opening challenge. There's a taping challenge here. You don't need any of that. This is the final structure, completely leak-proof. But that's it, you know.
So there is a lot that goes in after that. For example, the gluing itself has taken the team a long time because it has to be a food-grade glue. It has to have the right tack strength that doesn't tear away the fiber, but yet opens up and doesn't leak. So there's a very big balance that has to be created in terms of the width of the glue, the type of the glue, et cetera, et cetera. Right now, all the glue is being imported from the U.S. So, you know, there's a lot of variables that go into creating a product like the ones that our team tries to create. That said, there is a curve even after that, which I'm sure Shubham will elaborate on. But it means the right machinery, the right system, et cetera, et cetera.
Today, the delivery container market in India is about INR 4,000 crores. That is what we see it as. We definitely aim to take a significant chunk of that. Over to you, Shubham.
Yeah, so maybe just to complete on that, what we have been doing is also extensive customer trials. Because when we launch the product in the market, we want to be sure that it works. It performs in different situations. As we mentioned on the flexible, it's only when you actually do trials with customers, you realize that they may have real-life operational constraints. They, and they have challenges in their kitchen, which they need to solve. So generally, when we are innovating, we tend to focus on the input. We want to get a bagasse leak-proof container, but then there are also challenges to do with real-time use of that container.
How fast it gets packed? How fast does it take to shut? How long can it hold the food? Does it get soggy? Does it get damaged? Can it hold weight if you stack it up? How much inventory do you want to make? Can you limit the inventory? So we try to use common lids for different sizes. That way, the customers need to maintain lesser inventory and lower number of SKUs. So the process takes always longer because you are actually truly innovating. Something like this does not exist in the market. And when you do that kind of innovation, you tend to sometimes get surprised because everything's not as per what you thought or what you planned.
In terms of timeline, where we stand today is we've successfully completed a significant number of customer trials across the country in different locations, different cuisines, different customers, to really understand whether this product is working for them, and we've had product very, very positive feedback, and therefore, we are confident that we can now begin the procurement process for the equipment that is needed to produce these containers.
Okay. And so, also want to understand, I mean, like you said, you know, that there are many things going on. So where are we on the cost front, which is one of your main aspects where, you know, there have been struggles? So just want to understand the cost front over here. And again, now, like, so what I'm understanding is now we're looking at producing this entire range by ourselves rather than outsourcing. So just correct me over there.
We haven't taken a call. I mean, we have the option of doing both. We probably would do a mix of it because again, we have a range of delivery products. For some, it makes sense to, it may make sense to do them in-house. We'll definitely have capabilities in-house because we want to always have the best-in-class technology and a center of excellence in our plant, right? So that, that'll definitely be a part of the goal, but we have the choice to go in either direction. In terms of cost, that's exactly, I think, where we are working right now. So as we've mentioned, currently, the glue we're using is from the U.S. And it's not just the glue, right? Then we have to find the right technology to manufacture these containers.
So, for example, to apply the glue on the frame of the container, right? To that perfection and fast. We are now currently exploring what is the best available technology, which will significantly have an impact on the cost, right? We're looking at how we can optimize that. Naturally, it will be in a comparable price to what bagasse products cost. But I mean, our hope or our understanding is that we are adding significant value in terms of operational efficiency for our customers because, like we've mentioned, the ease of using or packing food in this product will be much better. For example, you would completely eliminate the taping process, right? So today, when you order food and if it's a liquid or a curry or a gravy kind of a food, even plastic containers are taped, right?
So we are seeing a significant reduction in the packing time when you use our solution, which gives them operational efficiency. So we hope that the overall cost component, right? So not just of the product, but if you take product plus process, it becomes a lot more comparable.
Okay. So, you know, you all have done talks with, so not tabs, but you all have worked with Zomato earlier also where this entire range was, actually going to come in. So is Zomato still involved with all of this? Like, yeah, you know, are you guys in constant, like how is it, how is this product being developed with Zomato also coming into view? Because a product like, you know, a platform like Zomato is like where the maximum of your customers, you know, are there. So how is that going on?
We wish and hope to get Zomato more involved. But currently, we've had conversations with them in the past, but the way we would work is, see, the restaurants, of course, make their choices independently of the packaging they would like to use. What Zomato the role they can play, and we really hope that they do, is to incentivize restaurants, right? Or to give them better organic visibility, which they already do. Why? If you go on Zomato, you'll see certain restaurants have a tag of lower plastic or I forget what the exact tag is, but it's a lesser plastic packaging tag. So our hope is that Zomato gives organic visibility or a separate tag or a category, where it would kind of highlight restaurants that are using compostable packaging.
The other advantage we see is now Zomato's allowed recently restaurants to start adding packaging charges, right?
Correct.
So anyways, restaurants are billing that cost in addition to what the food cost is. So we hope that also takes price a bit out of the conversation because restaurants have the ability to then pay this, premium, right? Or whatever it would be.
Fair, fair. Thanks a lot. Thanks a lot, Shubham. Thanks a lot, Ved.
Thank you.
It's a pleasure.
Priyanka, you can go ahead with your question.
Hi, thank you for the explanations to the previous question. Actually, my question is more or less on the line of what Manali was asking. So, it seems that we are still trying to crack the perfect product, you know? It's, I mean, I do understand that delivery containers with a leak-proof sealant, which with a food-grade glue is something that you aspire to do. But I'm still, I'm kind of still thinking that let's say if it's an 80% compostable product, only with the bottom part of the container being compostable, with a plastic lid, with a taped lid, I mean, with a proper declaration that this is only 80% compostable, wouldn't it still work? It takes your cost down.
I know it's not the perfect product, but by the time you can get your costs down with the perfect product, this semi-perfect product is already in the market. The ASRs could be lower and it could still be taken on by a lot of people. I mean, currently, even to get Zomato and with the research, price-based research that we were doing in the market, we find that there is a certain premium that, you know, the Zomatos and Swiggys of the world are ready to pay for sustainability, and that is only 20%. They are saying that they don't want to go more than that, 20%-25%. So my confusion stems from the fact, why are we not trying to sell what we have with the limitations declared on the product and going ahead with it?
You know, we already all have a lot of confidence in your research capabilities. As and when we will innovate and we will, do more trials, once the product is perfect, we can keep on adding more and more product in the market. And once the acceptability is there, the brands know of what the product of Pakka is capable of, they would, you know, then be able to pay a higher product. That similar thing I wanted to understand from the base paper and barrier -coated paper perspective also. We don't really need to go and sell the perfect metallized or non-metallized flexible packaging product. We can, as, as we've mentioned, that you would start with the base paper, but then that is not the goal. I understand.
But can we start at least thinking on the lines that even if that is not the perfect paper, that is not the most high-margin product, but at least roll it out? Because at this point of time, the numbers need to improve. I mean, today the stock is at 120. We need to do something about it right now as we speak. So my suggestion and my request is that please roll out your products. We still have a lot of faith in the brand that Pakka is, but we need to seed the market even if it is 70% compostable and the rest we are using products which are probably not compostable initially. It could be an interim kind of model, and we can keep innovating and seeding the market with those perfect products.
Priyanka, I appreciate your point of view. There are a few things Pakka is anal about, and it's important that the investors know that. We will not produce anything that is not home compostable, and I have deep apologies for that, but I cannot tell that to the cow that will eat those products, and we'll not be able to tell that to the fishes that eat that product, and I understand it's utopian, but ultimately our business is in service of that higher goal. That said, like I said before, the first S of sustainability is to sustain ourselves, so we do understand that, but what we have, what I also realize is as soon as you lower the bar, the bar gets lowered for a long, long time. That is what we have seen.
What happens is that you start earning money, and that's a huge challenge because then you don't want to phase out that product. Typically, what the team will come and say is that, "Let's keep this. Let's add one more." And there'll be a lot of arguments on that because they'll say that customer will leave us. This customer will leave us. So it's a huge call that we've taken. There are four Pakka promises. It will be home compostable. And why home compostable? Basically because we are not in control of where it's thrown. And if it's thrown anywhere where there is not enough heat or not enough moisture, it will still become dust end of the day. It will be, for now, recyclable in the paper stream, any product that we make because there is an economic value attached for the rag picker.
They will pick it up, because they will get money. So the idea is that 80% will at least get downcycled. With that in mind, what will also happen is that ultimately, see, the difference between a petroleum polymer downcycling versus a paper or a cellulosic downcycling is that there is an out. It's a complete misnomer when we say petroleum or plastic recycling. There is no recycling. There is downcycling, and there is no out. Ultimately, it'll become a polyester shirt that'll lie somewhere catching fire. That's the reality of humanity. The third and fourth promises for Pakka are marine safe and terrestrial safe. We don't need to check toxicity, but as humans, I think it's extremely important that we do.
I don't think as humans we have the right to harm other fellow species, even if it makes a lot of business sense, because how will you explain it to that animal whose life is going because of certain products that you consume? Sadly, Pakka is totally attached to that idea from an investment perspective. But that said, you're totally right. We do not miss progress for perfection. I assure you of that. So we are very clear about that. Even the products, so Shubham was talking about the product launch. We're launching it without lamination. We know that it's not perfect, but we know that if we go for lamination, we are talking another three months. So yes, we will do that, but both the laminate structure and the non-laminate structure will be home compostable. So that's something that we will stick with.
The structure, we know that there are certain products that we will not be able to package in the non-laminated structure. We know that some of it may become a little soggy, but that's a call we are able to take. As you say, saying it is not perfect, but we will launch it. Similarly, on the flexible side, we launch various products where we know it's not perfect, but we, those four values are deeply embedded in us. We don't want to compromise on it because the bigger challenges if we start compromising on this, our level of innovation will go down. Our total attachment to this idea that we are there to leave the planet cleaner will go down. We will start finding substitution. We will start putting, you know, the ideas around the sales ahead of what we really want to do.
So I assure you, you've trusted us for a while. Continue to trust us. You will see products come out. You are long-term investors, and I assure you that this will be a blip. It will not be a longer-term issue for you. Apologies that we are not able to do petroleum-based. It hits us in the gut when we think about us selling plastic. So, and of course, we don't control that. That said, a lot of players do take our product and add a plastic lid or something else, and we are not in control of that, and nor are we going to say no to them. That's their choice. But as Pakka, if you, I don't think we are even capable of selling plastic. That'll be tough for us. It was a tough call that we took.
Some of our products were getting damaged in the wild while they were on the shelf in the food service category, and we got a lot of complaints, and we did shift to a petroleum polymer for a short time, but like even now we shifted for like, okay, let's find a substitute in the next three months and shift back, but we haven't for six months, so that's the challenge that happens. You get into comfort zone, and we cannot allow ourselves that. I apologize.
Sure. We'll wait for the products to get rolled out.
Thank you.
We'll take, probably the last question, time check. So Nitin, you can go ahead with your question.
Yeah, I'm an auditor. Hello.
Yes.
Thanks for the opportunity. Okay, thanks for the opportunity, and I was hoping you had a sense of what your sales run up for your mold division is, either on a quarterly basis or a, or a yearly basis for the CHUK division.
I don't understand, but Shubham, do you want to take a shot at that?
Oh, you wanted to know what the past sales buildup has been?
I mean, what a quarterly. I was hoping to get a breakdown of your divisions. Sales, I mean, division-wise sales, and you do have a mold division, right? And how much would that be contributing to your quarterly sales? And how has that ramped up over the last maybe three, maybe four quarters as opposed to pulp sales?
Got it. So I think it's, Neetika, maybe this is more for you. It's the revenue split of the group, between the divisions. So basically.
I think that is, yeah, these segmented results have been declared. It's approximately 15% where we stand as of now. I think going forward would be a forward-looking commitment, which we will not be able to give.
Okay, got it. And one more thing. I mean, we have tied up a lot of, we have secured a lot of, bank funds for the Jagriti Project, for the, for the Jagriti Project. And I think we have availed and we have got sanctioned of something like INR 450 crore. So as and when the project gets commissioned, so what's the cost of capital? And the second point is, what would be the rep, what would, what would be the repayment cycle be? Are we getting some level of moratorium from their end as things stand now? And when do you expect the project to actually, break even? Because ultimately this is, this is gonna be a INR 750 crore rupee project based on the, based on the revised estimates.
When do you actually see what sort of capacity utilization are we looking at in the initial, maybe two, maybe three years?
Okay. I'll start with the first one. In terms of the loan sanctions that we have already received, the average cost of capital as of now is about 9.5%. We are in talks and discussions with the bank. One of them has actually reduced it to nine. So we are looking to have the others follow suit as well. In terms of the repayment schedule for now, the planned date for the commissioning date was April 26th, and hence the repayment started July 26th. With the extension that we have already announced, the dates would be shifted accordingly. In terms of the breakeven, for now, the projections that we have done for our internal calculations, we've taken the first year at 60% capacity utilization, and we hope that this will be achieved.
In terms of staggering, we plan to achieve 90% by the time we hit year three. That's all theoretical.
Okay, got it. And just if I could squeeze in one more question. So what is our maturity profile like? Because I think this year our current long-term that repayment liability is something like 12. So FY 2026, 2027, or 2028, how much, what sort of are we looking at in terms of repayments of long-term debt?
That will basically depend on the sanctions that we get from the banks. I think I'll update you by the next quarter because we are still discussing with them in terms of the extension of the commercial data formulation, so give me another two months and I'll update you on that.
Okay, got it. Thanks.
Ranjeet, just before you close, I think one thing that I think is mentioned somewhere in our communication that we made, but I think it's very important for me to reiterate that we are part of the UP government's industrial promotion scheme, and there is an INR 240 crore subsidy that also will come. It just reminded me, Nitin, when you were talking that that will also come into play because that is also being sanctioned. It is just waiting for cabinet approval, which is more of a rubber stamp. That will get done in December too. The company will be receiving INR 240 crore subsidy from the UP government as well, which will further enhance the project as we go along. Thank you. Wait, just one more question, which was there on chat for a very long time from Ravi.
He wants to know what is the NSR of the barrier -coated versus NM?
So I guess it's a difference between NM working non-metallized and the barrier -coated. There are so many applications and so many products, but let me take the ones that we take as anchor products. Everything that we measure usually is on a per sq m basis because the yield is what the buyer actually gets. The target for us is a little over INR 20/sq m when we do our NM application. I'll compare it to an application which exists today. Apple to apple, if you look at a, say, a chocolate application, the petroleum polymer structure is between INR 16 and INR 18. It's about a 10%-15% differential in terms of the product. We are hoping that that either will get more optimized or accepted either way. That's more or less the structure that we are at.
When you look at a barrier -coated application like a sugar sachet, I actually don't remember the exact numbers, what, what it actually costs, but again, it's a wide variety. But I would say that, it'll be about half. So per square meter, it'll be about INR 10 a square meter. And we'll have to see where we land in terms of the meterage because again, the, if you see the structure, the grammage goes down. It's much thinner. So you get a much more yardage. So the yardage increases and hence, you know, but there we are, we are working to match the price apple to apple because that's the only, it's a more of a, a commoditized segment. So the brand value proposition for the customer is lower.
So we wanna make sure that we meet more or less the cost of the structure to be able to sell at scale. So that's the broad idea. But as we move along, we'll continue to learn and update you more.
Thank you. Thank you, Ved, for answering all the questions. And, thank you everyone for attending this call. Any closing notes, Ved, from your side?
No, just I know it is totally understandable from an investor perspective, the kind of nervousness that you might feel or you might even feel a dissatisfaction with the organization because of the market cap and the share price. What I can assure you from our side and the team side is that everything is on track. We are slowly gaining momentum in different structures, different systems, different projects, et cetera, et cetera. We, you have been very supportive of the organization. Many of you have been with us for years, and we continue to seek your support, and I can assure you from our side that we will leave no stone unturned in our mission towards a cleaner planet, so thank you all so much.
Thank you.