Coversation with “PAKKA” leaders
summary of the main talking points from board/management.
Ved Krishna, Non exdcutive vice chairman:
Focus is to achieve global scale with bagasse (sugarcane residue) and create three solutions.
We created breakthroughs in compostable, flexible packaging substrates and it is time to take the leap of faith to commercialize our offerings. The expansion was necessary given the fact that the Company had already reached around 94 percent capacity utilization during the year.
I must communicate that the cost of manufacturing compostable flexible packaging is slightly higher than the conventional alternative but as we increase capacity and make innovation-driven changes in processes and materials, we expect to become competitive. Besides, if we sell bagasse-based paper today we address realizations of around USD 1000 a tonne but if we manufacture bagasse based flexible packaging, the starting realization pay would be around USD 3000 a tonne. The delta available to us, combined with our installed capacity, should translate into an adequate re-investable surplus that kickstarts growth that is profitable and sustainable.
Jagdeep Hira, Buiseness head paper & pulp:
last year Following increased instrumentation investment, the quality of bagasse pulp improved and is widely recognized as the best in India. In the manufacture of paper, grammage and moisture variations across different batches of the same product declined nearly 80 percent; the result is that there was a sharp reduction in quality issues at the customer’s end from the second half of the last year. For compostable, capacity utilization improved to 52 percent in FY 2022-23 and is expected to improve to more than 65 percent in the current financial year. This business was under preforming last few years, expected to improve in future,
Satish Chamy Velumani, Head of compostable division:
Challenge is the cost of petrochemical based packaging enjoys large economies of scale and will always be cheaper – by a third as a quick estimate – than agro-based packaging. But the overall cost of the compostable packaging, despite being relatively expensive, would still account for a nominal share of the overall meal being ordered.
There are some other positive attributes that we have built: our brand (CHUCK) is national; the brown colour of our cutlery sends out a message of naturalness; the shape of our compostable tableware is proving to be a differentiator in a me-too marketplace.
During the current year, we expect to double revenues once again (a trend we expect to sustain for the next few years, making ours the fastest-growing business within the Company). This growth will be sustained through arrangements with more moulded fibre product converters, an asset-light way of growing our business. We also intend to commission two greenfield plants to service a total addressable Indian market of 2000 tonnes per day.
Neetika Suryawanshi, CFO:
The Company is attractively placed to build around a robust Balance Sheet. At the close of the year under review, the quantum of long-term debt on the Company’s books was negligible, indicating that it was virtually debt-free. The Company’s interest cover was strong, indicating an extensive comfort in meeting lender obligations. On the other hand, we possessed INR 213.48 crores in net worth as on 31st March,2023. We believe that these fundamentals will empower us to borrow affordably and adequately for our capital expansion without stretching the Balance Sheet and without compromising the prospective earnings capacity of the Company.
Disclaimer: Invested and biased
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