Pakka setting up $250 mn bagasse-based packaging paper plant in Guatemala

Regenerative packaging solutions firm Pakka is setting up a 400 tonne per day bagasse-based packaging paper plant at an investment of around Rs 2,065 crore in sugarcane-rich Guatemala, South America

Regenerative packaging solutions firm Pakka is setting up a 400 tonne per day bagasse-based packaging paper plant at an investment of USD 250 million (around Rs 2,065 crore) in sugarcane-rich Guatemala, South America.

The company, began as Yash Papers in 1981, is also nearly doubling its capacity of the Ayodhya plant with around Rs 550 crore of investment from 130 tonne/day to 230 tonne/day.

The Ayodhya-based company is into regenerative packaging solutions for the food packaging and serving segments.

The paper-based food packaging industry or those making compostable packaging solutions, is highly fragmented and is led by Ecoware, Fomex, Dine Earth and Pakka, among others.

"We have finalised a plan to set up a 400-tonne per say bagasse-based plant in the Latin American country of Guatemala at an investment of USD 250 million. We are in the process of identifying the land. We need around 90 acres for a Greenfield plant of this scale," Jagdeep Hira, the company's managing director, told PTI here on Monday.

Eduardo Estrada, chief executive of Pakka US, said that they have sort of zeroed in a land parcel but are scouting for more locations.

"If we get the land over the next three-four months, we can begin construction and get the plant commissioned by mid-2025," Estrada said.

Hira said the company will be looking at multiple sources to raise the equity capital for the plant, including divesting stake in the American subsidiary or debt.

On the domestic brownfield expansion, he said it will involve around Rs 550 crore, which will add 100 tonnes per day to the existing capacity. The Ayodhya unit's pulp production capacity will increase by 30 per cent with this expansion.

At present, 87 per cent of its around Rs 420 crore top line come from paper packaging and the rest from moulds for food serving, which the company entered in 2018.

We could not build scale so far as the segment is highly price sensitive given that the moulds come 2.5-3x costlier than existing non-degradable products. We need to build awareness about the ecological benefits of our products to reach scale, he added.

The company is targeting USD 1 billion top line by FY30 and also increase the margins from the current 24-27 per cent to mid-30s by them and this will be achieved through widening the moulds market, Hira said, adding, from next year, he expects the revenue from this segment to touch 20 per cent.

The Guatemala facility will be among the world's largest compostable flexible packaging and moulded fibre facility, based on bagasse fiber.

The company has signed an agreement with major Guatemalan sugar companies to procure sugarcane, which is the primary raw material used for the company's products.

Its mould are branded Chuk and lists large food service operators like IRCTC, Haldiram's, Amazon, Google, Bikanervala, KFC, Borosil, Air India, Vistara, PVR Cinemas, Inox, Baskin Robbins, Iskcon, Blinkit, Chai Point, Starbucks, Zomato's Hyperpure, Wow Momos, and Devyani International, among others.

Pakka posted its highest annual revenue of Rs 420 crore in FY23 and also earned the highest net income of Rs 72.3 crore driven by exports, which fetched 27 per cent of the volume.