Perfectpac Ltd Management Discussions

[Schedule V Regulation 34(3) of SEBI (LODR) Regulations, 2015]

1. INDUSTRY STRUCTURE AND DEVELOPMENTS

The packaging industry in India holds significant growth potential, driven by rising demand from key end-user sectors such as processed food and beverages, personal care, electronics, pharmaceuticals and the rapidly expanding e-commerce segment. In recent years, the industry has witnessed substantial investments in technological upgrades and capacity expansion. This growth is further supported by demographic factors like a growing population, rising income levels and evolving consumer lifestyles, all of which contribute to increased consumption and consequently, higher demand for packaging solutions.

Corrugated paper boxes are extensively used for packaging across various sectors, including FMCG, e-commerce, pharmaceuticals, electronics, textiles, and industrial goods due to their durability, cost-effectiveness, and eco-friendly properties. The corrugated packaging industry in India is a vital segment of the broader paper and packaging market, with a 2024 estimated market size of Rs. 40,000-45,000 crore.

Given the environmental impact of packaging materials and the plastic waste management crisis, consumers world-wide are demanding the use of eco-friendly/recyclable packaging. Accordingly, all manufacturers are looking towards opportunities to innovate and manufacture more sustainable packaging products, and the organizations who will be capable of such offerings will have an edge. Corrugated packaging, being easily recyclable has universal acceptance. Investment in modern technology and automation is leading to improved product quality and performance.

The Indian corrugated packaging industry remains highly fragmented, with no single player or group holding a dominant market share. The sector comprises approximately 600-800 automatic plants and thousands of semi-automatic units.

2. OPPORTUNITIES & THREATS

Indias macroeconomic conditions are expected to remain favorable, supported by the continuation of a stable government and the implementation of growth-oriented policies. India continues to be one of the fastest-growing major economies in the world. Rising demand from key end-use industries, coupled with the rapid expansion of the e-commerce sector, is driving the growth of the global packaging industry. However, stringent regulations around packaging materials and waste management present certain challenges. That said, the shift towards sustainable, eco-friendly, and innovative packaging solutions is anticipated to open up new and lucrative opportunities for the industry.

Key trends shaping the Indian packaging sector include increasing investment in automation for improved efficiency and consistency, growing demand for customized and branded packaging to enhance product visibility and consumer engagement, a focus on export-oriented production to tap into global markets and the adoption of smart packaging features such as QR codes and RFID for enhanced traceability and supply chain integration.

In India, the exponential growth of the e-commerce sector remains a key driver for the corrugated packaging market. As more consumers embrace online shopping, the demand for reliable, protective, and cost-effective packaging solutions continues to rise. Corrugated boxes, due to their strength, durability, and recyclability, have become essential in ensuring the safe transportation of goods across various channels.

However, the Company remains exposed to certain industry risks, including the slow pace of growth in core end-user segments such as FMCG, food and beverage, tobacco and liquor. Rural demand, in particular, has shown limited recovery. The corrugated packaging industry also continues to face persistent challenges arising from excess production capacity, high fragmentation and a fragmented and unstandardized supply chain. Furthermore, low entry barriers and intense competition put pressure on pricing and profitability across the industry.

In this environment, raw material price volatility-specially in key inputs such as kraft paper and starchalong with high energy and logistics costs, further compounds the difficulties. These cost increases are often difficult to pass on to customers, leading to pressure on operating margins and overall profitability.

3. SEGMENT-WISE PERFORMANCE

The Company currently operates in a single business segment, i.e., Packaging. Hence, segment-wise or product-wise performance has not been provided. The Company has no operations outside India. Therefore, no geographical segment is applicable.

4. OUTLOOK

The packaging industry in India is on a strong growth path, supported by rising urbanization, expanding e-commerce, increasing disposable incomes and a growing need for packaged goods across sectors like FMCG, pharmaceuticals, food & beverage, and electronics. The rapid rise of digital retail is driving demand for efficient, secure, and sustainable packaging solutions, especially corrugated boxes and flexible packaging formats. Government initiatives such as "Make in India" and infrastructure development are further accelerating industrial demand for packaging.

The Indian corrugated box industry specifically is expected to grow at a CAGR over 8%, supported by eco-conscious consumption, rising exports, and automation in manufacturing. Key trends such as consolidation among players and the adoption of green and smart packaging practices.

Growth is also supported by favorable macroeconomic conditions, continued policy support from a stable government, and Indias status as one of the fastest-growing major global economies. Rising consumer demand, manufacturing momentum, export opportunities, and regulatory shifts toward sustainability and recyclability are transforming the packaging landscape.

At the same time, environmental concerns and regulatory developments are pushing the industry toward eco-friendly innovations. Customers are shifting towards recyclable and biodegradable materials, along with advances in automation, digital printing, and smart packaging. While challenges such as raw material price volatility and global supply chain disruptions persist, companies that focus on sustainability, innovation and operational excellence are well-positioned to capture future growth opportunities.

Your Companys priorities have always revolved around service to our customers and maintaining the quality of our end product. We continue to work towards making these strategies our priority by modernizing plant and machinery and by adding balancing equipment to improve quality and production capacity of our products.

The Company believes its well-diversified operations, focus on value-added products, consistent quality, strong customer relationships, efficient supply chain and a prudent financial approach position it well for sustainable and profitable growth while effectively navigating industry challenges.

5. RISKS AND CONCERNS

Effective risk management is integral to the Companys operations and is embedded in its day-to-day business transactions and activities. The framework in place seeks to identify, prioritise, mitigate, monitor and appropriately report any significant threat to the organisations strategic objectives, its reputation, operational continuity, environment, compliance and the health & safety of its employees.

Our Vision for Risk Management is to establish and sustain enterprise-wide capabilities that enable continuous monitoring and proactive mitigation of organizational risks. The Company has implemented a robust risk management framework that provides regular oversight of business operations to identify, assess, and address both internal and external risks. This is further supported by a comprehensive internal audit program, which enables the early identification of emerging risks and facilitates timely corrective actions. Risk oversight is ensured at both the Board and senior management levels, ensuring that potential disruptions are managed proactively and systematically.

In addition to Company-specific risks, broader industry-level challenges present ongoing uncertainties. These include: -

• Raw Material Volatility: - Prices of key raw materials such as kraft paper remain unpredictable due to demand-supply mismatches.

• Fragmented Industry Structure: - The corrugated and flexible packaging sector remains highly fragmented, with a landscape dominated by small-scale converters often lacking sufficient capital. This slows down industry-wide adoption of automation, sustainable packaging technologies, and process standardization.

We have a comprehensive internal audit plan exercise which helps to identify risks at an early stage and take appropriate steps to mitigate the same.

6. INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY

Section 134(5)(e) of the Companies Act, 2013 requires a Company to lay down internal financial controls system and to ensure that these are adequate and operating effectively. Internal financial controls, here, means the policy and procedure adopted by the Company for ensuring the orderly and efficient conduct of its business including adherence to Companys policies, the safeguarding of its assets, the prevention and detection of frauds and errors, the accuracy and completeness of the accounting records and the timely preparation of reliable financial information. The Company has adequate internal control system and a defined organizational structure besides, internal rules and regulations for conducting the business. The Management reviews actual performance with reference to budgets periodically. It is ensured that all assets are safeguarded, protected against loss and all transactions are authorized, recorded, and reported correctly. The Company has Audit Committee of the Board, the composition and functions of which are furnished in the Corporate Governance Report as part of the Annual Report. The Company has Independent Statutory Auditors and Internal Auditors who submit reports periodically which are reviewed and acted upon.

7. DISCUSSION ON FINANCIAL PERFORMANCE WITH RESPECT TO OPERATING PERFORMANCE

The financial statements of the Company are prepared in accordance with the Indian Accounting Standards (referred to as ‘Ind AS) prescribed under section 133 of the Companies Act, 2013, read with the Companies (Indian Accounting Standards) Rules, as amended from time to time. There is no change in Accounting Treatment on Financials of the Company.

8. MATERIAL DEVELOPMENTS IN HUMAN RESOURCES AND INDUSTRIAL RELATIONS FRONT, INCLUDING NUMBER OF PEOPLE EMPLOYED

The Company continues to believe that its human capital is its most valuable asset. It remains committed to investing in its people by strengthening their capabilities, refining their expertise, and nurturing a culture of leadership. This commitment fosters a dynamic, engaged and innovative work environment.

The Company has cordial relations with employees and staff. There are no industrial relations problems during the year and the Company does not anticipate any material problems on this count in the current year. The total number of 111 employees are on the Companys payroll as on March 31, 2025.

9. SIGNIFICANT CHANGES IN FINANCIAL RATIOS

The mentioned below are the key financial ratios of the Company with reasons for significant changes in the financial ratios which are 25% or more as compared to the previous year: -

10. CAUTIONARY STATEMENT

The Management Discussion and Analysis Report containing your Companys objectives, projections, estimates and expectations may incorporate certain statements, which are forward looking within the meaning of applicable laws and regulations. The statements in this Management Discussion and Analysis Report could differ materially from those expressed or implied elsewhere. Important factors that could make a difference to the Companys operations include raw material availability and prices, cyclical demand and pricing in the Companys principal markets, changes in governmental regulations, tax regimes, economic developments within India which the Company conducts business besides other incidental factors.