Okay. Hi, good morning, everyone, and welcome to the third quarter's investor call. I'll just introduce the company leadership. So we have Ved Krishna, who is the Group Lead and Vice Chairman of the company. We have Satish. Satish is leading the U.S. business. He's the U.S. business lead. I'll just request everyone to be on mute. Thank you. And we have Rolando. Rolando is the Group CFO. We have Gautam, who is the Executive Director, and we have Sachin, who is the Company Secretary and Legal Head. So we'll proceed with this quarter's presentation. I'll just share my screen just a bit. Yeah. Sachin, is my screen visible? Okay. All right. So we'll just, for the benefit of the new investors, start with a short introductory video. I request you to please go through it.
It represents, you know, what we are trying to achieve here at Pakka. Is the sound coming? Okay. Sorry. I'll just share again. That was a short glimpse of what we are trying to achieve and our vision. Now I would like to hand it over to Ved. We'll first go through the India business performance, international updates, innovation updates, and financial updates. Then at the end of it, we'll take questions and answers. Request you to please take over, Ved.
Thanks, Pranay. Good morning, all of you. I'm, of course, not supposed to take this section, but Jagdeep is on his way to Colombia. He's just landed, and he requested me if I can do it because he's still on his way to the hotel. Hopefully, he'll be able to join us in some time, and it's a good thing because we are trying to do a big business possibility exploration there, but yeah, let me take you through the performance that we have achieved, so first of all, I'd like to inform that it's been a very, very tough quarter. Overall, if you see, the packaging business has not, has been very challenging. That said, we are extremely proud of our team to maintain at least very similar numbers to the last quarter and also a little bit up from the quarter, same quarter last year.
So if you see the top line, it's at INR 111 crores, and the bottom line is still quite profitable, which is at INR 17.45 crores, which is of course higher than last year the same quarter, a little bit lower than this year's last quarter. Let's go ahead. So if you look at our main business right now, which is food wrap and carry, which comes from our paper operations, you'll see that there is a significant again maintenance of the overall business. And in fact, it's a little bit higher when we compare it to last year's nine months. And this has of course been a little more challenging. It is a little bit higher in terms of revenue, but of course we continue to struggle on the side of the profitability, which is in the next screen, which is the food service disposables.
If you look at, sorry, this is again food wrap and carry. So of course, again, quarter three, compared to last year, we are up, but if you compare it to quarter two, it's been a little bit poorer. Yeah, this is where the challenge lies. And I know you all have been very, very concerned about this area. We continue to struggle. This is primarily because of a large influx of players in this field. About 50 new players have suddenly come into the field. And the pricing has been completely arbitrary, which means that in the short term, we have to face a lot of competition. And that has meant that, you know, we've had to kind of take a few shutdowns. There's not been enough orders. There has been a stock buildup.
And now we are looking towards restrategizing how to move this business, and make it stronger. But again, we can only say that we are concerned and, of course, apologetic as well because we were very buoyant about this business, but it has taken a hit when it comes to this year. We are very, very happy to state that Project Jagriti is going well, despite facing a lot of challenges because of we are situated in Ayodhya, which is right now going through the Kumbh Mela, kind of. I would say total mayhem because of that. So we are not being able to take trucks in. The cement is kind of stranded. The machines are stranded. But that said, I think the team has again been working day and night to find ways to get it in. The main, overall progress is that it is 44% complete.
The main line is, of course, the flexible packaging line, and we'll be delighted to know that, you know, it's the progress is good. The machine is coming from a wonderful French company called Allimand, which is specialized in these kind of applications. And again, we've designed the machine with a lot of thought, and it is going to really, we are definitely hoping to create a big difference in this domain as we go along. The idea is that by the end of this year, we start with our base paper production, and then we set up coating operations early next year to convert it to real flexible packaging. There are some more glimpses of the project progress, just to give you a little bit of an insight.
I am told by Sachin that there may be an investor visit in March, so you'll get to see a lot more action when you come to the site, but the ETP is almost complete. We always try and take our responsibilities very seriously when it comes to the environment, so we've already more or less commissioned it. There is a lot of progress on the recovery boiler, pulp mill. The paper machine building has started. This is a little picture of the puja ceremony, but this will ultimately lead to the flexible packaging line. Let's go ahead. Hand over to Satish.
Good morning, everybody. Thank you, Ved. I have been handling innovation for a little bit for the last two quarters. Very excited to announce that Dr. Sam Song has joined us as the new head of innovations. He's going to be operating out of Portland. Dr., can you all hear me okay?
Yep. Satish, you're good.
Great. Great. I've had some issues with my headphones. So Dr. Sam comes with plenty of experience in material sciences, working with large teams, managing over 150 researchers in the past. Great innovator. We are super excited. He has done plenty of work in sustainable materials with LG Chem, SC Johnson, Samsung, Amcor, and DuPont. In fact, he just joined us today at the Portland office. We are super excited to have him on board. And I would want to give a good update on flexible packaging. We are making great progress with NM development. And the strategy today is to accelerate the non-metallized flexible packaging development. And while we are doing that commercialized M3, there is a great demand that has come in from both the U.S. market and India. And we are looking at commercializing M3 with outsourced operations right away.
And while these two are happening, again, these two would definitely lead us into commercializing non-metallized. So if you look at, I mean, we go by quarter by quarter. So the first quarter, which is April, May, June, I'm pretty positive that we would have the development completed. And in second quarter, we would commercialize M3. And in third quarter, we would go ahead and commercialize non-metallized. So that's what we are looking at.
M3, just for investors, is a metallized substrate, which is our first edition of the product.
Thank you for the clarification, Ved. Sorry, I should have been clear. We have been using internal line, and I'm so caught up, my head with NM and M3. Let's go. And on the food service disposable side, our entire focus has been on the delivery sector over the last few months. And most of our investors can recall that we have been working tirelessly on coming up with the best possible design for Indian food service applications, which is probably the most challenging in the world. And we have cracked it to about 95%. So there's a slight delay in development. Now we are accelerating this further. Again, I know we have just shown only one picture here, but there are multiple slices, but they all look the same. So this is our new family of delivery containers. We're pretty excited.
There have been lots of discussions that are going on around the world. In fact, Ved, I had great conversations today with the distributor in the U.S. market, a large one. While we are working on the actual delivery containers, the takeaway market is also something that has been growing on the compostable disposable side. So we are developing our clamshells for both India and the U.S. market. So between the delivery containers and the clamshells, we would have a full range of products. Again, I've given the slices on the right and the left side of the delivery containers. This is pretty exciting stuff that's happening on the food services. Back to Ved.
Yeah, I'll take over on the international growth. Let's go ahead. Lots of updates here, and of course, as Satish said, very, very excited to have Dr. Sam Song join us. It's taken a long time. We've interviewed maybe between Satish, me, and some of the board members. We've probably gone through over 20 very, very high-quality talents. Ultimately, we think we found our person, and as Satish said, he's just joined in today. And we are starting, in fact, he'll be in India, beginning later this next week, actually, and spending some time there understanding. And then, of course, working towards moving the lab to our Portland location. The other one is, again, lots of progress on the Project Kawok on Guatemala side. Full load engineering plan is underway, which is one of the concerns the investors had raised.
We are now planning to conclude the full load by March. The U.S. launch, which Satish is leading and hopefully can put in more speed now that Sam is there for innovations, is again. Strategy has been built. As Satish said, we are meeting distributors now, appointing distributors here. You call many of these distributors brokers. So, this month, we are planning to appoint at least five who will represent us in different areas. Of course, different collaterals need to be built in terms of ounces versus liters, etc. So those are things which are underway. The other concern that the investors had shown was on engineering and EPCM contracts. Here again, we are almost on the verge of closure. It will be done within this quarter.
We'll have our EPCM contractor for the Project Kawok as well. And it's just the final choice that is being done now. As Satish said, flexi trials are underway in the U.S. In fact, our first reels reach tomorrow. So it's that fresh. And we were going to convert it for a customer who's asked for it. And we are hoping that orders will start coming in post that conversion, and we can start moving the product, which is the earlier phase of material, which is the metallized substrate. But then, of course, this month, we are also planning to have a lot of non-metallized trials and hoping or working towards finalization in March so that we can start moving that material as well. The partner has been finalized as well for conversion.
Again, like I said, with Sam joining, Product Innovation Lab location has been finalized as Portland. We looked at some other locations across the U.S., and the team building has just kind of begun where we've started thinking about what are the areas we need people in and who all will be shipped from India and what is the new, kind of, people we'll need in the U.S. lab. This is the Project Kawok timeline. As you see, the land purchase is complete as in we've paid the initial money. This month, we pay the remaining amount, and then we start building. The government permissions have started. We've started getting a lot of quotations from different suppliers.
Jagdeep, me, some of the team members are heading to Europe next week, and we will be finalizing more or less our technology providers, the main technology providers, which is again flexible packaging, and also for pulp lines. Then, of course, the idea is again that by the maximum by the beginning to middle of 2027, we start production here. This is what the render looks like now. This looks not as big as it is. It is actually 60 hectares, so 150 acres of area, is what the site is. I think it has been designed really beautifully because the way we've designed it is that it is, it'll produce about 360 tons a day right now of flexible, but it has the capacity, a mirror capacity to produce another 360 tons.
The total possibility of production here is 720 tons a day, which translates to almost 300,000 tons a year, which is a decent capacity to make our dreams of a cleaner planet more visible. Okay. Hand over to Rolando.
Thank you, Ved. Good morning, everyone. So, in terms of key ratios, as you can see, for 2024, 2025, we have decreased our ROE and our ROCE. This is mainly due to the fact of the preferential equity that we issued. Obviously, this has a dilution effect, and therefore, the ROE and the ROCE come down. In terms of debt to equity, we are at 0.36, which is very good, and below the industry average. So, pretty good results in terms of our key ratios. Next slide, please. I'll hand it over back to Ved. Thank you.
All right. So the commitments we had made and, where are we now? So commitments that we had made was to build a distribution system in the U.S. Again, like I said, broker network is being built, and distribution mechanism, at least for molded fiber, will be done, within this quarter. The delivery solution, like Satish said, that has been delays. We've gone through numerous trials, and our team refuses to budge. Even I keep telling them that it's okay if it's a 5%-10% problem, but Satish is smiling because even today we had a discussion where he said, "Nope, not moving till it doesn't leak at all." So at least, I'm hoping that what we come out with will be, like, much better than what I had expected. And of course, we talked about metallized flexible solution.
Both are, like I said, there's been a product stabilization issue. And then, of course, the idea is to now stabilize and launch along with our partner in the U.S. this quarter. The idea of the next commitment was the team build-out and sales initialization. This is on. There is a little bit of a delay in distribution and sales mechanism, but I feel that we will catch up in the coming year. The organization structure was being made much stronger. It has already been put in place. And then we have our annual planning this month, and we will further strengthen the structure and the incentivization. We had committed that the Jagriti key ordering, which is our India project, will be complete, and Kawok risk mitigation strategy will be in place. Both are making strong progress.
For the U.S., the idea is that quarter one, which is April onward, we will be on the road for raising the money for the Project Kawok. That’s the update and the commitment to the investors for next quarter. Over to you, Pranay.
Thank you, Ved, and thank you, Satish and Rolando. We'll now take questions, and we'll try to answer as much of them as possible. I request you to please, you know, press the hand raise button on the Teams window. You can also post your questions on chat, and we'll try to respond there as well. So, I'll just go. Please limit your questions to a maximum of two so that all the investors get a chance to ask their questions. So, the first hand raise was by Mr. Jeet Gala. So please go ahead with your question. Mr. Jeet, you can unmute and ask your question.
Okay. Can you hear me now?
Yes. Go ahead, please.
I have two questions. One is, what is the status for the Guatemala project fundraise? So what we understand is there are a lot of things that are probably, you know, holding back. So for example, one is the off-take agreements. Second is, you know, other risk mitigation points probably, you know, revolving around, say, having a flexible paper solution because we are still not, you know, we've not cracked the non-metallized version of the solution. And that is what we are going to do ahead, right? So metallized is not going to be done with. I mean, all the capacities are going for, are going to be the non-metallized ones. So what kind of reaction are we seeing from the investors on having a visibility on the solutions and even on the delivery container range?
Because that is also one part of the capacity that is going to come up. So with respect to that, I mean, what are the major hindrances that we are seeing, which is, you know, stopping or delaying the fundraise project? And second, of course, is around detailed engineering, which also took a lot of time. So, I mean, where are we exactly stuck over there? So that's my first question.
Okay. I'll take that one. So great, Jeet, as usual, on top of your research. Yes. So there were five issues that the investors pointed out to us. This was back in, Rolando, was it November, December, something like that. And we committed to them that we will conclude them in, yeah, three to four months, which is now. And the five issues were, the first was that our engineering was there, but it was still at a basic level. So they wanted much more what they call full load engineering. So the team actually sat down, when was it, last month, and basically with our engineers from China, the Guatemala team, and the India team. And by the end of this month, we'll have the full load engineering complete.
The second concern was the quotations that we had were not from the final suppliers because we had said that the final suppliers are going to be some of these front kind of the leading European ones. Most of our quotations were Indian and Chinese. So they said they want because of course they don't want the project cost to go up in the middle of the project. So so again like I said we are now made significant progress. We also have quotations but apart from that we are meeting all the main suppliers next week actually. And and then they will be invited to Guatemala at the end of March where we will start finalizing the LOIs. So that was the second concern.
The third was that although we have experience of running similar companies, similar projects, but we don't have it in Latin America and don't have it in this size. So they wanted a very strong EPCM contractor. So we've now had four kind of discussions. We've shortlisted one, and that's a very, very competent EPCM partner that we will finalize within this month. The fifth was that all our patents were actually Indian company oriented. So they wanted that they should be part of U.S. because that will be the company they'll be investing in, which we also felt was a good idea because it's a stronger jurisdiction. So we've started moving those to U.S. The fifth was exactly what you said in terms of off-take commitments. We did have off-take commitments, but they were promissory letters. They wanted to convert it to contracts.
So that work has now begun, and we've drafted a contract. We are now talking to various people. And you're absolutely right. The non-metallized substrate is not perfected as yet. So those trials do need to take place, so we are still hoping that we will end up doing some trials in March based on which we can start getting some initial interest in off-take. That said, even if the off-take is not complete, we will hit the road show by April. And the idea is to at least start pushing the investors and try to get hopefully the right valuations as well. As far as the molded fiber goes, just a correction, we went through a lot of financial exercise, and now the Guatemala project is entirely flexible. It's not molded fiber at all, no molded fiber at all in Guatemala.
So it's going to be 360 tons of flexible packaging. That's it. Single line. The returns are way better when it comes to a single line and more efficiencies, et c . So I hope that answers, Jeet.
Understood. Thank you, sir. And so my second question is again on the flexible side. So while we are saying even in India, we'll be probably, you know, doing our commercial volumes on the metallized M3 version of the paper. But eventually, like you said in the earlier call that, you know, doing metallization involves polyethylene and doing it at scale also is not possible. Of course, then, then this is all about, you know, building relationships, right, until you eventually find a solution in a NM kind of a grade of a paper solution that you eventually find out.
But what is the, I mean, probability of putting up a capacity or it's 100%, I mean, zero, I mean, the putting up a metallized capacity is not a possibility. Is that so?
No, you can always put up a metallized facility. That's not a challenge. There are a few complications that could happen. Number one, there are two types of metallizations that you can do. The first is transfer metallization, which is fundamentally what you gathered from the last call, where you take a metal kind of aluminum kind of on a polyethylene roll, you stick it together with the paper. So that's called transfer. The other is deposit metallization, which happens on PE kind of material like you see in the potato chips and stuff. That's actually a spray metallization, and you call it vacuum metallization or deposit metallization. That is not possible on paper because paper is fundamentally hills and valleys, so you know, Sachin, you may have to mute someone who's unmuted. You might have to see that list.
So basically, well, I wouldn't say it's not possible. It's not great. We've tried both. What happens in that methodology is that you don't get the kind of barrier that you want. Plus, it's a batch process. So the only way it works is 30 tons of batches. So you have to have multiple metallizers. So yes, in theory, it is possible, but and the second side of it. So one is, okay, let's consider it's possible. The challenge is that we want all our products to be home compostable and recyclable in the paper stream. It'll remain home compostable if you make it metallization because metal demineralizes. But when you come to recyclability, if it's put into a paper stream, if it's put in lower volumes, you won't even notice it.
You can imagine at a higher volume, there will be some shiny substances that will come on the recycled paper. So we don't want that. So that's the other reason why we have to have non-metallized. Now, when you come to non-metallized, the second part of your question, the important thing is that we want to do it at scale. That's our big thing. You know, we want to really devote ourselves to building scale. So in non-metallized, we can do dispersion coating, which is a water-based solution. And you can do it at a, like, you know, we're talking about a six-meter machine, six-meter wide machine in Guatemala running at 800-900 meters a minute. And we can do it, dispersion coating online.
So, Guatemala machine, we are talking about online coating, not even, so it won't even be a paper and then metallize, and then coating. It'll be one line. And that's only possible, and you immediately save 6%-7% material, right? Because if you're going to transfer it twice, then there is a 6%-7% loss, which is a huge loss when you look at the life cycle. So that's the only thing. Now your concern, there are numerous levels of barrier, right? It's not just one that I can do potato chips and it needs 0.5 WVTR and under 2 OTR or Oxygen Transmission Rate and Water Vapor Transmission Rate. There are numerous applications that we have, and we have a whole grid now. Certain applications like tea, for example. Satish, what is it, 20 OTR and 10 WVTR?
20 is what we achieved, and we gave it to [audio distortion]. I mean, they said 100-120 is even acceptable for tea.
Yeah. So there are different applications. So if you look at the tea bag, it goes for 100 OTR, instead of under one. So like that, there's hard-boiled candy, there's granola, there is, there's sugar sachets and et c . So we now bracketed.
Spices, yeah.
Yeah, spices. So there are numerous applications which we'd be able to tackle. The only part now is that how do we make sure that it is lowest amount of coat weight and the lowest amount of cost? So that's what we are kind of working on, and that's why a little bit more time.
Wonderful. Well, thank you for the detailed answer. I have a few more questions. I'll come back with you. Thank you.
Thank you. Mr. Paras, you can unmute and go ahead with your question.
Yeah. Thank you, Vignesh, for this opportunity. Just wanted to understand what kind of valuation are you looking for the Guatemala project in April, you know, that investment that fundraise that you're targeting. So that's one. Secondly, I wanted to understand what is your strategy going forward with the molded products? You know, that has now again switched back to loss. That's a bit of a concern, you know? I mean, the higher you grow and, you know, if the losses increase, it just eats out from the, you know, frontline business. Just one last thing is, if I understand correctly, Project Jagriti will be completed by the end of this calendar year or commissioned. Yeah, is that understanding correct?
I'll answer the second two and hand it over to Rolando for the pre-money valuation expectation, Rolando. But, yes, the last question, the idea is we are definitely planning to commission Jagriti within this calendar year. The molded fiber, absolutely, you're bang on, very deep concern for us. We are looking at numerous ideas and options. Two parts to the challenge. The number one remains a huge issue, which you are all aware of, is our choice of technology, which has always been troublesome, right? From the beginning, we've struggled with it. We've got it from 30% capacity utilization to 55%, but that's not good enough. So we have kind of stuck at 55%, 55%-60% capacity utilization. Really not great. So now we are kind of in the middle of thinking how do we do this?
So there are some machines that work at over 80. There are some machines that work at, say, 50. So average is out to 55, 60 because the bigger machines are working at a lower capacity. So that's a technology selection mistake, which, mostly I am responsible for. But we are trying to now, see how we can bite the bullet and alter the technology. So then what happens is that we become by default the lowest cost producer in the world. So that's, that's the one target that we have. The second is how do you create deeper value for the customer? So that's a debate that we are having internally. The initial idea was to focus on larger scale QSRs and institutional catering.
But we are now actually even thinking, and maybe you guys can guide us also. One of the debates that is happening internally is that do we go more B2C, where we start doing more like the. We're already doing a decent. We didn't expect. Now it's gone to over 20% of our revenue is coming from the Zepto's and the Instas, Blinkits of the world. So, so, you know, do we do more that side, you know, start selling more because the profitability and the margins are definitely better there? Because obviously, as soon as you have a bigger customer, there is always more suppliers, etc. So both ends we want to tackle well. We are meeting at the end of the month. The team has been kind of exploring numerous options.
There will have to be a strategy shift for sure on the food services side. So that's for sure. Of course, we remain hellbent on succeeding. So that's something that we will keep striving towards. But that said, you're totally on the mark. We felt that we are out of the woods, but we've again gone into the deep end, which is a challenge for us. The team is again really working hard to get us out again. Rolando, over to you.
Thank you, Ved. Yep. The first question had to do with the amount of equity raised for the project in Guatemala. So the original size of the project is $380 million, out of which $180 million is equity and $200 million is debt. Now, out of the $180 million, Pakka Limited has already committed $10 million. So, we were, we ideally were looking for outside investments of, outside equity investments, sorry, of, $170 million. Now, as Ved mentioned, we have changed a little bit the scope of the project. We are focusing now, 100% on flexible. The original project had 80% flexible, 20% molded. So given this change and given the fine-tuning we're giving to the engineering, that number may change, a little bit. So it's going to be anywhere between $140 million-$170 million. Still not finalized depending on the final cost of the project.
Thank you. So, Rolando, the question was more around the valuation, so, so the pre-money valuation is about $500 million, right? And so we are expecting a dilution of 30%-40%-ish, right?
Sorry, yeah. Yeah, that's correct. That's correct.
Thank you. Ms. Manali, you can go ahead with your question.
Hi. So just a follow-up with what Paras said. I mean, while we are looking at a dilution of 30%-40%, but considering the current market scenarios, you know, how things have developed, is it really possible to raise that kind of money at 30%-40% dilution? Or we, I mean, we may have to progress ahead with the figures because, things have changed completely. I mean, so that's one question. Second is, while we are looking at, you know, we are seeing this food delivery concerns there. Now this is ramping up since a very, very, very long time now.
So, I mean, now also, even with a strategic change or something, would that still be able to? We will be able to pull it off considering, you know, I mean, like now we were having the delivery containers, which were water resistant, which we have. We were speaking about that in the last phone call, but nothing on the same lines has come, you know. We were expecting it to come here, but possibly that's taking a little more time and we may be moving, you know, ahead. But, you know, having with so many things going around, what is the possibility of the real possibility when we see that, you know, to move out from that range or, you know, metallize will perform first? Or, you know, how is it? I mean, I just want to understand.
No, great questions as always. Yeah, huge change of scenario and every day, you know, the world is kind of shaking. There's definitely so there are two, one kind of negative, one positive. So in terms of sustainability, it's taken a backseat for sure, especially in the U.S. market. Of course, the other markets still remain important. Now it's like, yeah, even we don't need paper straws and all those kind of statements are coming out, which is obviously a point of concern, but the second side, Manali, is very interesting. Economics is buoyant. A lot of investors are very interested in investing suddenly on the U.S. side. So the only way we'll get to know is to hit the road. So actually we don't know, and of course, it depends on what is the kind of interest we are able to generate.
At least our bankers are no more concerned yet. They say that, you know, it's a good project. It doesn't matter what government, what policies, etc. Then, once the risk has been mitigated by the factors we said, they feel that it is still doable. That said, again, first rodeo for us also, so let's go out into the market. Let's see what they say. What we are clear about is that it's a great project. Something, something has led us here, so that kind of universe's collaboration will keep happening and we'll be guided one way or the other, so it won't go futile that we are very sure, and that's also taking us, like I said, in the beginning. Jagdeep has just landed in Colombia. I'm joining him day after there.
There is a partnership opportunity there, trying to make products there, supply it to the other markets while we do our own Guatemala project, etc. So lots of things in the air. We remain focused on our agenda of, you know, building these products. We do have a pivot a little bit and we are looking at Europe as well now. Earlier we were not at all looking at Europe. And let's see if that's the case, we'll start supplying in Europe. And that's again another thing we are doing in May, again doing a lot of meetings in Europe, within May as well. The second, again, like, like you said, it is a challenge. So there are two ways, like I said to Paras, there are two ways we are tackling it, become the lowest cost producers in the world.
One is cost competence. Second is, of course, you know, we've always had a strong inkling towards design, but there is a delay, definitely. I would say a shortcoming at our end that we were hoping in fact to launch the delivery containers, I would say two quarters back, not even last quarter. But it has taken a hit. I would not. There is no excuse in the end, which is our responsibility and we did expect to launch. There has been a gap. There has been a gap in the team. There has been a gap in the execution of the project. It's not. It's not rocket science end of the day. We should have been able to crack it. We haven't given up on it yet if you're asking me that.
We haven't given up on food services because we know we can be the lowest cost producers and the highest quality producers. We just have to up our game. So, so not there yet where we say that, oh, we are giving up on food services because it's dragging us down. This month later, the team is going to provide us their strategic direction because we've also said that there is no use dabbling in a business which is going to generate 60 crores of revenue and two crores of profit or no profit. That's obvious. So we have said that we have to have a significant market share within the disposables market. So the target is at least 20% of the total disposables market, not the molded fiber disposables market. How do we march towards that is something that we are kind of exploring with the team.
Let's hope that they will come out with a good strategy and we'll be able to update you in the next quarter. Rolando, do you want to add anything onto the first part?
Well, I think that's a wonderful question. Wonderful question. Yeah, that dilution comes out of a financial exercise, right? And that's still up for negotiation. However, I do think that the fact remains that we are bringing in all the know-how, and we have taken most of the risk, right? Coming into Guatemala, signing the MoUs for the raw material supply, investing the first $10 million, etc. So, you know, we believe that these arguments, in addition to what Ben has mentioned, gives us a very strong argument to maintain that dilution, that dilution. I do think, however, especially with the first investors, there may be some negotiation and it may come down a little bit, but I think I feel comfortable we're in a pretty good position when that negotiation comes up.
So I don't think that number, that dilution number is going to move a lot. Thank you.
Okay. So just, I mean, with, like you said, cost of production is something that you're now working on, but, you know, now it's been a very long time that we are working on this. Now, it's bagasse, if you consider bagasse is like, that's a cheap raw material. You have power in your hand. So when these two major things are with you, I mean, in spite of this, we are still, you know, struggling with cost of production. So now, I mean, what major change would you bring in which would actually lower it? Because, like now you said that there are 50 new players that have come in, you know, this XYZ. So one is that, that how are we, I mean, what kind of strategic change is going to come? Because we already have two very good strong points in our hand.
Secondly, it is more also about that how much really is the lifeline of this? I mean, how much are we really ready to still give it? And what would be the point, you know, that think that no, now this is the stop and, you know, this is it, like there's no more, you know, this is how we're going to go about it, that this is the stop here. Beyond this, there's nothing possible.
It's a singular issue. You're totally right. We are the lowest cost bulk producer globally. We have our power cost to be, I would say, one of the lowest, if not the lowest. And those are the main inputs apart from some chemicals. So those are the three big inputs. And, so what, what the other companies do is save on chemicals. That's by lowering the quality. So, so that's fundamentally it. So the only singular challenge has been machine efficiency. And that really brings us down because our fixed cost is high. We have a very, very much stronger, much, heavier, management setup, team, etc., branding, marketing, all those costs are way higher than everybody else. So we are looking at those fixed costs. The biggest one is, of course, machine efficiency. You can't, you can't expect to make huge money with 50%-55% capacity utilization.
And that's the one mistake which we have to amend. So yes, there may be, if we are convinced about the team strategy, then we might bite a bitter bullet one more time where we may say that we'll take a write-off on the current machines and invest in new machines. That is a possibility. Now, how will we do it, etc.? How will you fund it? It'll probably be a European machine. We'll take a supplier's credit, etc. So again, that's again something that we will decide later this month. Happy to, you know, inform you guys, even like it doesn't have to wait for the next investor's call. We can take a release out and inform you on the decision. We are definitely hopeful that the team will come out with something strong. I totally agree with you.
If it's going to be just, you know, like a little bit here, a little bit there, that doesn't make sense. Ultimately, the projections have to become better than our wrap and carry. Simple as that. If you're going to say that you're going to do so much work and so much effort and generate lesser revenue and lesser profitability than the basic wrap and carry segment, then it's not worth it. So that we are clear about and that's something that's been communicated very well. But in the end, you know, like we can't, it's our team, so we can't take the responsibility. We can't blame anyone else. We choose the team. We choose the team players. We generate the enthusiasm within them. So, you know, that said, we will definitely try to turn things around still.
Not given up yet is what I would say. When will we give up? That's a million dollar question. I mean, of course, we won't take the company down. So, of course, at the stage where we feel there is nothing coming, we will give up, but, hopefully that day won't come.
Okay. Thank you.
Thank you. Mr. Vignesh, you can go ahead with your question. Mr. Vignesh, you can unmute and ask your question.
Hello. Am I audible now?
Yes, please. Go ahead.
Yeah. Hi. Thanks for the opportunity. So my question is on our ongoing CapEx, which was expected to, you know, complete by end of March. But due to the ongoing, I mean, Kumbh Mela, would there be a delay of a month or so on the project?
No, it was supposed to be completed by the end of this year. We will complete it by the end of this year. It's still, still the same. Yes, Kumbh Mela has. We had a more aggressive target internally. That's kind of been a little bit dashed. But that said, you know, we have a crazy team. They are still running around in vehicles 2:00 A.M. trying to get cement in and metal in and all that sort of thing. So Gautam is smiling because he has been fighting day in, day out to find ways to get trucks inside the factory, etc. So yeah, so we are trying our best, but that said, yes, about a month has been, what would you say, Gautam? About a month of compromise?
Got it. Got it. Yeah. So basically, your aggressive target has been normalized, is what I would say, right? So, yeah, my second question is on the, I mean, geopolitical scenario, I mean, with such a huge CPGs coming up, right? So, you know, a company like McDonald's is eyeing 2030 for a, you know, 36% or 40% lower emission. I mean, and that is targeted using, you know, more eco-friendly ways. So, what is the change in political environment going to impact the targets that have been set by such MNCs, right? To reach a goal of a greener, you know, way of operating.
And, in case of any slowdown on such target of reaching by 2030, what would be our competency to match, you know, our cost or our realization for that matter with products which are, you know, not like environmentally friendly, but they're quite cheaper, available? So what is our way to tackle this?
So, like in everything else, there is a plethora of companies. There has been a lot of sliding of targets that people have set. You know, we have Coca-Cola that had said 28. Now it's moved to 2030. There is various others. So we are seeing that change. But what we also see is that there is a desire for change for multiple reasons. One is, of course, the government regulation. That's one part of it. But there is also customer awareness. Gen Z is a different breed. And then we find that there is a clear understanding in the companies that it does give them stronger brand value if they use more sustainable solutions.
Now, ultimately, we as a company feel that, you know, there is no reason to think that sustainable products are going to be poorer in performance and more expensive in cost. I think that's a misnomer. We need to defy that. So, so ultimately, the idea will be how do we perform better at a lower cost? So that's something we discuss day in, day out and explore. So, so I think this whole idea that the starting point needs to be that of which sustainability will have to pay more and expect less. We feel that that's, that in itself is a, I would say, a wrong place to start with. So we continue to speak to various companies and we again see various companies who are totally focused on what the government says. There are companies who are, self, kind of, enthusiastic.
But the big challenge for companies remains also availability of material at scale. So that's something that they cannot compromise with. Like I said before in one of the calls, like if you think about a company like Unilever, they need 16,000 tons just for their small shampoo sachet. Now, who's the company that is going to provide 16,000 tons becomes a challenge. First is, of course, quality of material and then how are we going to provide? So both those things need to be addressed. And we purely look at it as an economic play. We have to provide better products at a better price. And the right price, I would say, not a better price. So that's something that we continue to look at and we will try and match the current substrates in terms of both.
Okay. Got it. Got it, sir. That's all for me.
Thank you, Vignesh.
Thank you. Mr. Hiren, you can go ahead and ask your question.
Yeah. Hi. Good morning. I already understand that obviously management is also concerned about the molded product business and already other investors have already asked. But my question is mainly regarding, see, Pakka being even pioneers. So we understand that obviously whenever any company is pioneering any product, company faces lots of cost in developing the market, training the market, and having lots of the, going through various trials. And whenever new entrant comes, he can leverage this particular learning of the pioneer company and may not have to that much the cost of the developing or training the market.
Maybe based on the whatever mistakes, like you rightly said, that maybe because of the technology selection or machine efficiency, they may be able to now, whoever the company is new entrant, they may be able to. They don't have to face this particular cost and may be able to have more competitive products at lower cost. Because Pakka's main now valuation and all the future strategies on the type of this those new product and services which are not available in the market at right now, including the flexible packaging. Do you foresee this type of continuity in the other product also, like mainly on the flexible packaging for which the main strategy of the Pakka for the coming and years foresee future? That may be also case that at present there are not so, not a lot of company who has a similar product.
But when it will take some time, one or two years for Pakka also to be launched this product in the market and in next few years or times, obviously new entrants would come based on the technology or whatever has been developed by Pakka. So what will be the unique USP of Pakka to ensure that being a pioneer will also help you to gain the market share and being low cost? Because this is the product which doesn't have that much product differentiation. People are obviously, as you rightly said, that it would be the cost competitiveness would only drive the market if it is similar quality of the product. So what would be the main USP that Pakka would ensure that this particular thing would not happen in the future for this new products?
A few thoughts. Great question again. But the good thing in life is that, whatever happens to us is our responsibility. So we cannot blame markets. We cannot blame others. You know, nobody stops us from innovating. Nobody stops us from cost, improving our cost. Nobody stops us from moving ahead. So there is nobody else to blame in life. So that's very strongly in our ethos. So yes, it's a good thing that others are copying us than us copying others. So we'll definitely prefer that than the other way around. So, so we would rather keep charging ahead and innovating and creating better products. The second and the bigger part, and this may sound a little utopian to, to the investors because you're coming from a financial discipline, but fundamentally, why do we exist as Pakka? We exist because we want to leave the earth cleaner.
So that's the big goal, right? The business is to support that goal. So end of the day, we would love it if more and more people come, right? If we were to create something and more people came, that means that goal is being supported, right? The more the people are, the more the material is, the more the innovation is, the more the push is for us to excel. So, right? So we do have things like design patents, but we haven't yet taken anyone to court. There's enough copying of design that is happening. But we say, you know, okay, there's a lot of other ways to do this better. We can have better customer service. We can have a better consistency of product. We can have, you know, numerous things within that to be able to excel.
Similarly, in flexible packaging, for sure, there will be chemistries that will happen. There will be structures that will be copied. It again depends on how good we are. Are we able to do our job well? Are we able to fulfill the promise we are making to the customer? Are we adding value to the customer? If we are not adding value to the customer, then we don't have rights to exist, right? In the end, you know, if we are just doing that because of protectionism, I would say that will be harmed at some point or the other. That would be challenged at some point or the other.
So I would say the key for us is to build a strong innovation engine, to build a lot of strength in our cost excellence, to build much stronger customer connect and relationships and consistency, which is what we've done over the last 40 some years in Pakka and paper. Today also, you know, in the R-g rades of paper, we are probably the most expensive. But the customer doesn't switch because they know the kind of service they're going to get, the kind of consistency they're going to get. So we have to build the same engine. So the good thing is, you know, we are the only ones to blame. We can't blame anyone else. We do have, like what Manali was saying earlier, we do have pulp, we do have power.
So if we can build more excellence in our operations and our customer service, we will succeed. So I would say more people come, the better it is overall.
Thank you, and the second question is related to this already discussed point that in now U.S., the government being changed and obviously that focus is on the more pro-oil Trump being a more pro-oil and that, and it may divert some capital, but obviously, as you said, that ultimately it would be the consumer who may push the market, but if considering that U.S. market doesn't show that much demand in at least near 4-5 years of the timeline, and as you said that you are also targeting European market, but how much would be the transportation cost or whether it would be the negligible part because this product obviously is a volumetric product and doesn't have that much in one container. Obviously, the cost of the product would not be that much, so transportation cost would be more.
So, but even if you are, exporting from the Guatemala to European market, would you be still able to compete on the cost part?
Let's look at the two businesses we are pushing. The first is the food services, which is where your point comes in of volumetric. So that's pretty well established in the U.S. And U.S. is not the only market. There's decent market in the Latin America region as well. The other good thing is that, you know, China already has a 35% duty. Colombia or Guatemala at least doesn't, maybe Mexico does, already, but even Mexico and Canada don't yet. So let's see what happens there. There is a lot of geopolitical drift that is happening. But again, as businesses, we have to see what we can do. So of course, as far as the Project Kawok or the Guatemala project goes, we are not going to build a molded fiber facility. But are we going to supply food services of molded fiber? Yes.
But we are doing it through an outsource model there. So it's a little less risky, a little less capital intensive. As far as the flexi goes, it's a pretty strong product to transport because you do fit 26 tons in a 40-foot container. So it's similar to reams of paper because it's strongly bound. So that we'll be able to ship, but I still hope we won't be shipping to Europe. You know, there is enough possibilities in Latin America. There will hopefully be conscious companies in North America just so that, you know, there is a conglomerate of companies that is just in the, I don't know if you've received it yet, Satish may know, but they've committed 220,000 tons of material from us if it meets the specs that they want. It's a conglomerate. It's multiple companies coming together under one umbrella.
So they've said we want to take, even this is after the election, yeah, not before the election. So they said we are hellbent that we want your products to succeed because we are trying to also save old growth forests. It's not just petroleum. So it's also to do with, you know, not wood-based, but, you know, renewable fiber-based. So they are we are going to produce 140,000 at the peak. And they are already saying we will make sure that you sell 120,000. And that's in written form, right? It's not a contract, but at least a promissory letter. So there are good things and there are challenges, and only time will tell what happens. The key again remains the same questions. Is our performance as good or better than the current substrate?
Is our price or cost competitive? Are we adding value to the customer? So those are the three basics of business according to me. And if we are ticking all those boxes, it doesn't really matter what the, unless Guatemala gets a slap of 25% duty, which is higher than the others, then we'll find another way. But we feel that, you know, those three, if we are ticking off, we should be okay.
Thank you.
Thank you. Ms. Priyanka, you can go ahead and ask your question. You are on mute.
Hello?
Yeah. Now you are un mute.
Great. Hi, hi everybody. So first of all, congratulations on your new hiring of the, I, I think he's titled as head of, you know, no, not head of innovation, but I think head of products, is it? So, great that we have another head within products and innovation. So is it safe to assume that the research will now move to Portland and, or we'll have two centers of research, one in India and one in, Portland?
The main center, so we are dividing it into two, the product innovation lab and the process innovations. The main innovations will be in Portland. There are four areas of products that we work on. Two or three of them you are very aware of. The fourth is something that we have been quietly working on, but it'll become noisy in some time. The first one is flexibles. The second one is wrap and carry, which is our traditional, but we also work on other materials, apart from celluloses. It is the food services, which you are aware of the molded fiber, but we also work with your friends on, say, forming PLA and stuff like that. The fourth area is rigids, which is your cupboard kind of ready to eat meals, frozen meals.
So those are the four big areas which will be in Portland. That's kind of decided. We feel that even if it costs five times, we need to have the right talent. Talent is everything. They're talent collaboration. So we are biting the bullet there. We've kind of decided we are not going to move away from there. There are also four process areas that we tackle. The first is base material research. Of course, we know that the world doesn't start and end with bagasse. So we work on soy hull, we work on hemp, we work on corn, we work on whey protein, etc. Anything that we can find beyond 100,000 tons of material post-industrial based. So those are the two category criteria that we kind of base ourselves on. The second is Green Chemistry.
So, you know, utilizing water as a solvent rather than the chemicals that we use today, enzymes and things like that. So that's the second area. The third area is waste valorization. So how do we add more value to calcium carbonate, to rice husk ash, to bagasse pith? Because they are all great materials. And then what can we create from them? For example, we are also the largest egg tray producers from our sludge in our area. So those are things that have come out of that discipline. And the fourth is ultimately to reduce the ecological weight that we put on the climate, on the planet. And our aim is ultimately things like how do you become carbon neutral? How do you become carbon positive? And, you know, so that's the four.
So the four process ones are going to be more oriented towards the plant. So in India, as well as in Guatemala. But they will have a direct line to Portland, to Sam, and a dotted line to the India operations head. So that's the way we are structuring it for now. But again, these are evolutions and then they will happen. But these are the eight broad areas we do research in.
Sure. Sure. Thank you. The other question I wanted to understand was you said that there are about 50-60 more competitors in the molded product space. Are you limiting these numbers only to the bagasse-based molded products or you're thinking about the others as well? And are they centralized in UP because of some government they have, you know, suddenly come up or these are, you know, located pan-India?
Sorry to lighten my utopian side, but I'll call them collaborators than competitors. So 50-60 collaborators who have come into the bagasse side. And it could be bagasse, it could be fiber. So I, they may be using wood or they may be ITCs coming in and they'll mostly have wood. So you know, so some kind of renewable fiber, I would say. And they have been cropping up for a while, I think, as somebody was saying before, you know, like when they've seen Pakka and the noise we've made, not the profits we've made, the noise we've made, they've kind of entered the fray. The good thing is, Priyanka, that we do sell pulp to them. So our pulp sale still makes money even if our molded fiber doesn't. So you know, so that's the idea.
They've cropped up all over, and I'm amazed that they've cropped up without any tie-up for raw material or anything else. So yeah, so they are all over UP, yes, but not majorly in UP. They're pretty much. I don't know, Satish may know what the distribution is, Satish, but yeah, but it's not just UP, right?
So, at any stage we are not. Sorry, yeah, you were saying, Satish.
No, go ahead.
So at any stage we are not envisaging any dearth of raw material because of these competitors, right?
So the collaborators are basically buying pulp from us. So none, apart from ITC, Satia tied in between, but they shut down the molded fiber side. Apart from ITC, none of them produce pulp. So pulp they will have to buy, whether from us or there are some paper players who are giving pulp in the interim. Mondi does, Century does. They're importing from Thailand. But they could have dearth, depending on if we are selling or not. So we'll, of course, stop selling once our flexible packaging operations are up. We won't have any pulp to sell. So we do have. If we do sell, then it'll be to our outsourcing partners only.
Right.
So we have about four partners right now. So those are the partners we continue to support, but otherwise we won't have pulp to sell.
Sure. So my other question is with respect to the metallized flexible packaging that we were talking about, are there any trials still going on in India for metallized packaging or we are totally going to move towards non-metallized in India as well?
Satish?
There are plenty of interests that are coming about, Priyanka. We continue to work with Brownie Bear. There is also another chocolate company, you know, Smoor. They continue to stay interested. There are plenty of opportunities that are definitely knocking on our doors, but we are metering them out. Definitely there is a lot of focus that we have to give to non-metallized. So I'm making sure that the R&D team is so focused on metallized because that's what we need to make. And we are commercially addressing what we can today.
Okay. So we hope to hear good news from you on the non-metallized and metallized part also soon. And, with respect to the U.S. market, of course, most of my questions have been answered and they were asked by other people, but just trying to understand, do you see any change in the expectations of U.S.-based companies on their sustainability targets or do you get an inkling that probably they would end up not wanting to spend too much on sustainability efforts now? And in that respect, would we want to, sort of reconsider the project costs based on maybe what kind of money we can make now that the entire thing seems to have changed?
I would say early days still, and I see a spectrum of companies in the conversation we are having there. For sure, you're right. Like there is enough companies who are saying that, okay, you know, we don't have to, this is not high priority anymore. They don't see it as, I, at least I haven't heard from anybody overtly where they say that we are not interested. They say that it's not a priority right now. We would rather do other things. It's, as Trump says, drill, baby, drill. So, you know, so there, if you drill, baby, drill, there is going to be other polymers that will come out as well. So that's understood, but like I said, in the end, we are not there to replace petroleum or plastics. I think that's a low bar according to me.
It's if as humans we feel that we want to replace plastics, we are setting a very low bar. We want to create better materials. That's a very different thing, right? And when you want to create better materials, you want to create for better performance and better value creation. And I'm not saying better price, but value creation. So one way or the other, we need to kind of think about that and be adamant on that because, you know, it's only 70-80 years back somebody created a styrene or an ethylene, you know, so it was a gas, right? They just captured it and created ethylene. So if it was created 70-80 years back, personally, I don't see any reason apart from our own inhibitions why we cannot create something that is better and more value added.
So I would not yet worry about it too much. Maybe by the next quarter I might be sounding more worried, but we'll, we'll wait for another quarter for that.
Sure. Sure. Thank you. Thank you, Priyanka. Okay, Vishal, you can go ahead with your question.
Yeah. Hi. Good morning.
Yeah. Good morning.
Yeah. My first question is, in 2024 during the phone calls, you had mentioned that you were, you know, very confident of 20% + margins. So on the same lines, can you please provide a guidance, for your revenues and margins you expect for 2026 and 2027?
My board is already very unhappy with me and, you know, these forward-looking statements, so I'm going to avoid that. What I can assure you is that we will definitely continue to work the way we have been working and we will try and make sure that we do our utmost to maintain what we've been doing so far.
Okay. Question two, I think a lot of people have asked this, but, you know, I've invested in Pakka since 2016, 2017, so it's been almost eight, nine years. And I've been following the molded products quite closely. So I believe it was launched somewhere in 2018. And since then we were, we have been, you know, struggling to make profits in this. So can you please give us a guidance on the plan you have right now in place to make it more profitable in the coming years? And since we've given a lot of time, how much more time do you need or you anticipate for it to turn profitable?
Million dollar question. And Manali already, you know, asked me on this. So give us another month. We are meeting the team later this month. They are supposed to provide us a plan for significant impact. And then we'll be able to decide within March the direction we are headed. So either Sachin, if you can make a note, we can especially send in what is our methodology, Sachin, to can we send a communication or maybe we can send it through BSE, right? We can send a communication to the investors because this is a valid question. Sorry, you're muted. So yeah.
We can send it actually, sir, to the investor also through email and also upload on the stock exchange.
Okay. Great. So let me give us another month. What we will do is, Sachin, let's make a note of it post our annual planning, so maybe end of March, we send a note on our plan for the food services business.
Okay. Thank you.
Thank you. So Mr. Paras, you can ask your question.
Yes. Sorry, I think you see what I'm highly impressed, sir, with, you know, the thing that, you know, you've been saying that it's your responsibility in terms of molded products and entire business decisions. So that's a very good, you know, sort of positive approach towards the business. But, and I don't want to pressurize my part, you know, just one thing that I feel on this molded products bit, obviously it's been quite a long time, you know, for it to turn around. It did turn around. It seemed like it turned around and then it dipped into red.
My only suggestion to you is to sort of reconsider the entire proposition, you know, probably back from scratch because, you know, the longer this continues and probably, you know, if you try to increase the turnover, probably this may have a further impact on the profitability of the company, which otherwise without this could be doing very, very well. So, I mean, obviously it's up to the team eventually, but it needs a deep consideration. And, in my opinion, what I wanted to suggest is a set deadline, you know, beyond which, sort of, you know, you try and curtail the exposure to this segment is my understanding.
It could be a little bit premature in general, but I mean, from the many businesses that I've seen across, you know, in terms of investing, you know, I feel some at some point in time, you know, you should just reconsider and take a decision with a deadline. That's the only suggestion I have, sort of. Do you have a deadline in mind at all, Ved, on that, or it's still?
Like I said, we will send a special communication to all investors within March. I do have to give our team possibilities. The team is working hard towards finding the overall scenario. Like I said before that, you know, we have given a clear target that if we cannot capture at least 20% of the disposables market of the country, there's no reason for us to be in the business. You can back calculate that amount. If we are.
Need to be profitable about it.
Yeah. Yeah. Of course.
Yeah.
Yeah. I would say to be in the business if you're not profitable. We are not looking for revenues only for sure.
Absolutely. Yeah. Because, you know, you've seen, you know, various new-age businesses just targeting revenue and market shares, but do not really deliver bottom line.
They have SoftBank money. We don't.
Yeah. Yeah. And just last thing, Ved, on this, this was on this, Trump administration and whether, and there have been some discussions, I heard that whether that Trump administration does have an impact on our fundamentals in your opinion, you know, you've been traveling, you meet people, you meet investors and your suppliers, customers, likely potential customers, etc. Now you are in the, you know, process of sort of offtake agreements also, which will make it very clear to you, you know, where do you stand. But in general, what's your sense, you know, with Trump administration coming in, is business for you going to be as usual, prior his administration or things could be tougher?
I don't think business will be as usual anywhere in the world. So that's clear. You know, like, of course, things will be shaky with the kind of decision-making that is happening in merely three weeks. So we are clear about that. But that said, like I said, the fundamentals of business are at the end of the day, make a superior product, make it consistently, provide value to the customer. So those three have to be adhered to in any business, and that's what we will focus on. The only other thing I'd like to add is that if you look at the U.S., the U.S. is not merely a federal-led country. States have a lot of sway. So you know, what are the big markets for renewable sustainable products? It's the West Coast, which is California, Oregon, Washington.
It is the East Coast, which is the New York region and then down to Florida. So they will, they will remain with their own jurisdiction. SB 54 is the California law, which is coming in that will still remain. It will not be, it will not adhere to what the federal guidelines are. So the within the United States, it functions as various countries when it comes to say various laws. So we, we'll see. Of course, geopolitics will clearly impact, but that's not, according to me, again, that's not a, if we are, if we are hampered just by that, that means we never had a good product to start with.
No, absolutely.
Not for that reason. Yeah. So, we have to look at the basics and build our product up to spec.
Yes. And just lastly, I would like to say that, you know, your approach in terms of, you know, making it a superior product and not targeting an alternative to plastics is a very solid approach. And I think that's how you should sort of look at it. Thank you. I think it's a really positive approach.
Thank you. Mr. Venkatesh, you have a question.
Good morning. Hi, Ved. Hi, Satish. Hope all of you are doing well. Boss, I want to just give a, I'll take three, two, three minutes, one minute of premise because I've been tracking a lot of people's questions and I think I would love to moderate this discussion. Everybody's question is revolved around, one factor, which is something that is out of our control. And I think the core, core thing I think we, any business focuses on is the core process, the capital, and the customer. There are three Cs that people look at. I think things like Trump, Modi, all this will come and go. I know we play life accordingly. I don't think that is something that is broadly under our control. I'm very happy that you paid respect to a lot of people.
The fact of the matter is as we navigate as we go along. So full credit to you for accepting the questions. The second question is the people also asked about the core process in terms of what do you want to do about the molded fibers business mode? I think the same repetition in different ways. My sense is that my request is that, sir, you guys know what you're good doing. Your company is $120 million market cap for which we are getting a basic paper and pulp business. You guys are trying to innovate and you're also trying to set up something fantastic in Guatemala. So that's completely a venture capital investment. If that optionality works out, it's great for everyone.
So, my sense is you should don't. I would really think that don't put yourself under pressure that one month you want to take a decision or anything because you never know where you're going to hit. Maybe you just want to figure out this is the kind of money that I'm going to put in there and I'm not going to waste any more of this or, because we are all financial analysts and fund managers. We are looking at this year's returns and next year's returns. To be honest with you, a lot of people don't think 10 years or five years yet. Okay. So that's one. Second, sir, most importantly, sustainability, one of those questions that keeps cropping up across the board, is whether sustainability makes sense and whether things will change. I think sustainability is going to be very good economics going forward.
A lot of people will realize that you will make a lot of money if your business is sustainable because you draw out of nature and give it back to nature. Something that I don't think you should give up quickly. One suggestion, I have two questions and one suggestion. The question is, in terms of the team, we are talking about the India business. Jagdeep was there. He's doing a great job. We got a head of innovation products. What about Satish moving to take care of the U.S. business? Whose baby is the India customer B2B or the B2C business? If the molded fiber business is going to take off and we want to attack and we want to take 20% market share, who is the person responsible to get it there over the next 12 months or 24 months?
That's my first question. Second, in terms of organization structure, is this enough for you in terms of business development, go-to-market? Who decides whether you want to be a B2C company or a B2B company? Because my question actually is, if you, in a, in a typical day's mind space, how much of your mind space goes to B2C and B2B on the molded fiber business? How much is on the core business and how much is on Guatemala? If you think about it, I think you may get some answers. That's my first question. And, if you can answer that and then I'll come to the suggestion part. Yeah.
Again, as usual, Venkatesh, it's always great to get to hear from you and get your views because they always spark more thought. So just a side note on your timeline. So when we were finalizing the land in Guatemala, our CEO there, Eduardo, said, you know, why are you buying this land and spending $1.5 million or something on this? You know, we can just lease it and it's only going to be this much in Guatemala. I said, sure, if it's for 500 years.
Yeah.
So, you know, you're talking about one year, two years, quarter. At least as Pakka, we are thinking in terms of 500 years, you know. Can we create something that will create value for humanity for beyond, at least beyond a hundred years, if not 500 years? So that was the kind of thought process that we went through when we purchased the land as well. Absolutely spot on. I think the biggest challenge for any leader is building the right team. And I would say that at least my greatest achievement in the last year has been surrounding myself with absolutely spectacular people. And you're seeing a few of them on the screen right now. And you've met some of them in person as well.
And, you know, Jagdeep well and, you know, absolutely like has kept us part of the reason why we are able to dream that we are, what we are dreaming is mainly because of his leadership in India, you know, to be able to kind of go beyond and think beyond. So yeah, so great team. You're noticing Satish taking over U.S. again, spectacular shifts since Satish came here, Rolando coming in and building a finance, solid finance, kind of structure. And of course, we are in the middle of, kind of, finalizing the India finance structure as well. Totally right on the, with Satish leaving, we don't have a business lead in the food services business is what I would call it. And that's something that is an active search right now. So, you know, we are looking for a person.
We have a good sales guy, but that won't fly, right? In the end, you have to build a business. So Jagdeep is actively looking for that person. My personal time only goes when he identifies and shortlists the person. So it's not my time that goes on it. In terms of B2C and B2B, we do data-led discussions, you know, what is paying, what is not paying, how is it moving, where do we create value, where do we not create value, how do we shift. My whole thought process or our whole thought process works from how do you keep it simple? How do you go for lesser number of SKUs? How do you go for lesser number of packaging solutions? How do you go for lesser numbers of distribution systems and create volume? So that's the fundamental questioning that we do.
That comes from a singular idea. What is Pakka as a business? Pakka is a business that is trying to build scale in manufacturing. So that's our bottom line. So anything that is not adhering to that, we will drop. So we've dabbled in a lot of things, but we ask the question again, is this going to create scale in manufacturing? Because it doesn't feed our ultimate goal, right? Which is, which is a cleaner planet. So if you're going to do a little bit of dabbling here, a little bit of dabbling there, that's not going to create impact. So, so it's a singular idea, which is built on this. So that's the only question we kind of ask again and say yes or no based on that.
Just a little bit, I think. It was Hiren who was asked, talking about lots of guys coming in, 50 people, more technologies coming in. My sense is if you get your product right and decent cost structure and the team, I think it's pretty easy to fight the unorganized market if you're really targeting only 20% market share. So my sense is, please take your time and figure out whether this business works or not. And I think you've got something right. I think we just need to fine-tune. My suggestion was, since you talked about the process that goes on at Guatemala and you talked about water as a solvent, four sources from which things come into the factory. So and you talked about 100,000 tons.
I was just looking at Google Maps and I found that Guatemala is pretty kind of; there's a Pacific, but it's quite close to Ecuador. Ecuador is the world's largest banana-producing nation. And banana, as you know, is a compostable, fantastic, ecologically sustainable product. You may want to think whether bagasse, while bagasse exists, while you can that be used as a feedstock as well? Because in, you know, something that I thought I should bring it up to your radar because they produce 360,000 tons of bananas every year. What happens to this? The second is, I think the U.S. market is quite huge, trillions of dollars of economy. Trump, no Trump, I'm sure there are a lot of guys who want to take this product.
I mean, so, and again, Latin America, Brazil, Argentina, Canada, as long as it exists as an independent country, also has a good market. So, so that's what it is. Yeah.
Even if it exists as a 51st state, it'll still be.
Perfectly. Yeah. Perfectly. We just want to sell. Yeah.
You know, banana is something that we've actively worked on, banana and Abaca, which is a cousin of banana. There's a few challenges with that, like any other fiber. First is it's not post-industrial. So collecting is a big challenge. It has 90% water in the stem, which means you have to squeeze in the farm because it acts, the water acts as a fertilizer for the farmer. Third is the inherent silica is high. The inherent silica is almost 20%. So in the process itself, what happens is that you have a challenge when you are trying to recover the chemicals. So it's good for alternatives like textiles. But when you look at, or, you know, like you have an Abaca, which has a lower amount of silica. So it goes into tea bags, non-wovens. Those are mostly an Abaca, which is again, Philippines.
So well aware of the fiber. Guatemala itself, I know Rolando knows this well. Eduardo, in fact, owns a lot of banana plantations. So yeah, Guatemala itself has a lot of plantations as well.
Super. Where, when do we get to hear on the India business end?
For the food services business?
Food services business. Yeah.
Fingers crossed, search is on. You know, these things take, you know, when the stars align, hopefully within the next month is what we are targeting.
Super. That's it from my side. All the best.
Thank you, Venki.
Thank you. So we'll take the final question from Hiren.
Yeah. Just, just a follow-up question on this particular project progress. You have already mentioned 44% progress has been achieved for Project Jagriti and 15% for flexible. But, can you provide some distribution like, generally it is being monitored on EPC based on S-curves, how much engineering, how much procurement, and how much construction progress has been achieved for Project Jagriti as well as the Project Kawok, just in terms of EPC? So we get a better idea of the completion.
Rana is going to kill me. They actually had the slide and I haven't had him remove it. I said, don't give complications, you know? They literally had each area-wise, you know, what is the progress? How much is the, has it, what will investors do trying to see how much you've done in recovery boiler? How much? So Hiren, he can email you that slide.
Oh my God. Thank you.
On the Kawok side, it's more on the engineering. Just the land procurement has happened and we'll start building a boundary in the next month or something. So Kawok is relatively straightforward. It's more on paper. The Jagriti side is, of course, different sectors have different progress sides. But from why I said to Pranay that it's unnecessary, fundamentally depends on the flexi line, right? Everything else is serving the flexi line. So there are two. From a revenue standpoint, there are only two additions, the PM3 expansion and the flexi line. Those are the two big ones. There are a few delays in PM3. So it's middle of the year now. It was earlier targeted for March, April. There are a few delays in supply, not at our end. So it's going to be June, July.
So there is a kind of about 15% increase in production because of that. And of course in quality. But the big one is end of the year. So, so it's going to be, everything else is in service of that. So even if you see a lot of progress and say our ETP, it's 95% or actually they commissioned it, so it's 100%, right? But you know, what good does it make from the?
Yeah. So we are on track to be completed flexible packaging, like as you said, by the maximum by early next year, means 2026, February or March.
We are on track to create the base paper for flexible packaging because the NM has not been proven yet. We haven't in India ordered the coating machine. But that said, the base paper is a grease-proof paper that'll sell regardless. But so that we'll start stabilizing that. And like Satish said, if he gives us the formula in the next quarter, then we'll order the coaters and that's typically a six to nine months play. So we should still meet the next year early deadline.
Hiren is asking these questions because he's an engineer in procurement. He has done work for Adani. You probably hired him as a consultant. He comes on board. Yeah.
Good. Good. Thank you, Hiren. That keeps us on our toes. Next time I won't get Pranay to remove that slide. Just for you.
Okay. Thank you.
Thank you, guys. As always, thank you all for your support, your questioning, your guidance. We keep looking forward to these calls. It's always so much energy and excitement for us. So thank you so much for your support.
Thanks. Thanks for patiently answering.
Thank you, everybody.
Thank you.
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