Pakka Ltd Management Discussions

Global economic review

Overview

Global economic growth declined marginally from 3.3% in 2023 to an estimated 3.2% in 2024. This was marked by a slowdown in global manufacturing, particularly in Europe and parts of Asia coupled with supply chain disruption and weak consumer sentiment. In contrast, the services sector performed more creditably. The growth in advanced economies remained steady at 1.7% from 2023 to 2024 as the emerging cum developing economies witnessed a growth decline at 4.2% in 2024 (4.4% in 2023). On the positive side, global inflation was expected to decline from 6.1% in 2023 to 4.5% in 2024 (projected at 3.5% and 3.2% in 2025 and 2026 respectively). This decline was attributed to the declining impact of erstwhile economic shocks, and labour supply improvements. The monetary policies announced by governments the world over helped keep inflation in check as well.

The end of the calendar year was marked by the return of Donald Trump as the new US President. The new US government threatened to impose tariffs on countries exporting to the US unless those countries lowered tariffs for the US to export to their countries. This enhanced global trade and markets uncertainty and emerged as the largest singular uncertainty in 2025.

Regional growth (%)	FY24	FY23
World output	3.2	3.3
Advanced economies	1.7	1.7
Emerging and developing economies	4.2	4.4

Outlook

The global economy has entered a period of uncertainty following the imposition of tariffs of products imported into the USA and some countries announcing reciprocal tariffs on US exports to their countries. This is likely to stagger global economic growth, the full outcome of which cannot be currently estimated. This risk is supplemented by risks related to conflicts, geopolitical tensions, trade restrictions and climate risks. In view of this, World Bank projected global economic growth at 2.7% for 2025 and 2026, factoring the various economic uncertainties.

(Source: IMF, United Nations)

Indian economic review

Overview

The Indian economy grew at 6.5% in FY24-25, compared to a revised 9.2% in FY23-24. This represented a four-year low due to a moderate slowdown within the Indian economy (marked by slower manufacturing growth and a decline in net investments). Despite the slowdown, India retained its position as the worlds fi_h-largest economy.

Indias nominal GDP (at current prices) was INR 330.68 Trillion in FY24-25 (INR 301.23 Trillion in FY23-24). The nominal GDP per capita increased from INR 2,15,936 in FY23-24 to INR 2,35 ,108 in FY24-25, reflecting the impact of an economic expansion. The Indian rupee weakened 2.12% against the US dollar in FY24-25, closing at INR 85.47 on the last trading day of FY24-25. In March 2025, the rupee recorded the highest monthly appreciation since November 2018, rising 2.39 % (arising out a weakening US dollar).

Inflationary pressures eased, with CPI inflation averaging 4.63% in FY24-25, driven by moderating food inflation and stable global commodity prices. Retail inflation at 4.6% in FY24-25, was the lowest since the pandemic, catalysing savings creation.

Indias foreign exchange reserves stood at a high of USD 676 Billion as of 4 th April, 2025. This was the fourth consecutive year when rating upgrades outpaced downgrades on account of strong domestic growth, rural consumption, increased infrastructure investments and low corporate leverage (annualised rating upgrade rate 14.5% exceeded the decade-long average of 11%; downgrade rate was 5.3%, lower than the 10-year average of 6.5%).

Gross foreign direct investment (FDI) into India rose 13.6% to USD 81 Billion during the last financial year, the fastest pace of expansion since FY19-20. The increase in the year was despite a contraction during the fourth quarter of FY24-25 when inflows on a gross basis declined 6% to USD 17.9 Billion due to the uncertainty caused by Donald Trumps election and his assertions around getting investments back into the US.

Growth of the Indian economy
	FY22	FY23	FY24	FY25
Real GDP growth (%)	8.7	7.2	9.2	6.5
(Source: MoSPI, Financial Express)

Growth of the Indian economy quarter by quarter, FY24-25

	Q1 FY25	Q2 FY25	Q3 FY25	Q4 FY25
Real GDP growth (%)	6.5	5.6	6.2	7.4
(Source: The Hindu, National Statistics Office)

The banking sector continued its improvement, with gross non-performing assets (NPA) for scheduled commercial banks (SCBs) declining to 2.6% as of September 2024, down from 2.7% in March 2024. The capital-to-risk-weighted assets ratio for SCBs stood at 16.7% as of September 2024, reflecting a strong capital position.

Indias exports of goods and services reached USD 824.9 Billion in FY24- 25, up from USD 778 Billion in the previous fiscal year. The Red Sea crisis impacted shipping costs, affecting price-sensitive exports. Merchandise exports grew 6% YoY, reaching USD 374.1 Billion.

Indias net GST collections increased 8.6%, totalling INR 19.56 Lakh Cr in FY24-25. Gross GST collections in FY24-25 stood at INR 22.08 Lakh Cr, a 9.4% increase YoY.

On the supply side, real gross value added (GVA) was estimated to expand 6.4% in FY24-25. The industrial sector grew by 6.5 %, supported by growth in construction activities, electricity, gas, water supply and other utility services. Indias services sector grew at 8.9% in FY24-25 (9.0% in FY23-24), driven by public administration, defence and other services (expanded at 8.8% as in the previous year). In the infrastructure and utilities sector, electricity, gas, water supply and other utility services grew a projected 6.0% in FY24-25, compared to 8.6% in FY23-24. Meanwhile, the construction sector expanded at 9.4% in FY24-25, slowing from 10.4% in the previous year.

Manufacturing activity was subdued in FY24-25, with growth at 4.5 %, which was lower than 12.3 % in FY23-24. Moreover, due to lower public spending in the early part of the year, government final consumption expenditure (GFCE) is anticipated to have slowed to 3.8% in FY24-25, compared to 8.1% in FY 23-24.

The agriculture sector grew at 4.6% in FY24-25 (1.4% in FY23-24). Trade, hotel, transport, communication and services related to broadcasting segment were estimated to grow at 6.4% in FY24-25 (6.3 % in FY23-24).

From a demand perspective, the private final consumption expenditure (PFCE) exhibited robust growth, achieving 7.2% in FY24-25, surpassing the previous financial years rate of 5.6%.

The Ni_y 50 and SENSEX recorded their weakest annual performances in FY24-25 in two years, rising 5.3% and 7.5 % during the year under review respectively. Gold rose 37.7% to a peak of USD 3,070 per ounce, the highest increase since FY07-08 , indicating global uncertainties.

Total assets managed by the mutual fund (MF) industry jumped 23% or INR 12.3 Lakh Cr in FY24-25 to settle at INR 65.7 Lakh Cr. At close of FY24-25, the total number of folios had jumped to nearly 23.5 Cr, an all-time peak. During last fiscal, average monthly systematic investment plan (SIP) contribution jumped 45% to INR 24,113 Cr.

Foreign portfolio investments (FPIs) in India experienced high volatility throughout 2024, with total inflows into capital markets reaching approximately USD 20 Billion by year-end. However, there was significant selling pressure in the last quarter, influenced by new tariffs announced by the new US government on most countries (including India).

Outlook

India is expected to remain the fastest-growing major economy. Initial Reserve Bank of India estimates have forecast Indias GDP growth downwards from 6.7% to 6.5% based on risks arising from US tari_ levies on India and other countries. The following are some key growth catalysts for India in FY25-26.

Tari_-based competitiveness : India identified at least 10 sectors such as apparel and clothing accessories, chemicals, plastics and rubber where the US high tariffs give New Delhi a competitive advantage in the American market over other suppliers. While India faced a 10% tari_ after the US suspended the 26% additional duties for 90 days, the levy remained at 145% on China, the biggest exporter to the US. Chinas share of apparel imports into the US was 25%, compared with Indias 3.8%, a large opportunity to address differential

(Source: Niti Aayog).

Union Budget FY24-25 : The Union Budget FY25-26 laid a strong foundation for Indias economic trajectory, emphasising agriculture, MSMEs, investment, and exports as the four primary growth engines. With a fiscal deficit target of 4.4% of GDP, the government reinforced fiscal prudence while allocating _11.21 Lakh Cr for capital expenditure (3.1% of GDP) to drive infrastructure development. The February 2025 Budget marked a shi_ in approach, with the government proposing substantial personal tax cuts. Effective 1 st April, 2025, individuals earning up to INR 12 Lakh annually will be fully exempt from income tax. Economists estimate that the resulting INR 1 Lakh Cr in tax savings could boost consumption by INR 3-3.5 Lakh Cr, potentially increasing the nominal private final consumption Expenditure (PFCE) by 1.5-2% of its current INR 200 Lakh Cr.

Free trade agreement : In a post-Balance Sheet development, India and the United Kingdom announced a free trade agreement to boost strategic and economic ties. This could lead to a significant increase in the export competitiveness of Indian shipments in the UK across the textiles, toys, leather, marine products, footwear, and gems & jewellery sectors. About 99% of Indian exports to UK will enjoy zero-duty access tari_ cuts; India will cut tariffs on 90% of tari_ lines and 85% could become fully duty-free within 10 years.

Pay Commission impact : The 8 th Pay Commissions awards could lead to a significant salary revision for nearly ten million central government employees. Historically, Pay Commissions have granted substantial pay hikes along with generous arrears. For instance, the 7 th Pay Commission more than tripled its monthly salaries, raising the range from INR 7,000 to INR 90,000 to INR 18,000 to INR 12.5 Lakh, triggering a widespread ripple effect.

Monsoons : The India Meteorological Department predicted an above normal monsoon in 2025. This augurs well for the countrys farm sector and a moderated food inflation outlook. Easing inflation : Indias consumer price index-based retail inflation in March 2025 eased to 3.34%, the lowest since August 2019, raising hopes of further repo rate cuts by the Reserve Bank of India.

Deeper rate cuts : In its February 2025 meeting, the Monetary Policy Committee (MPC) reduced policy rates by 25 basis points, reducing it to 6% in its first meeting of FY25-26. Besides, Indias CPI inflation is forecasted at 4% for FY25-26.

Lifiing credit restrictions : In November 2023, the RBI increased risk weights on bank loans to retail borrowers and NBFCs, significantly tightening credit availability. This led to a sharp slowdown in retail credit growth from 20-30 % to 9-13 % between September 2023 and 2024. However, under its new leadership, the RBI has prioritised restoring credit flow. Recent policy shi_s have removed restrictions on consumer credit, postponed higher liquidity requirements for banks, and are expected to rejuvenate retail lending.

(Source: CNBC, Press Information Bureau, Business Standard, Economic Times, World Gold Council, Indian Express, Ministry of External Affairs, Times of India, Business Today, Hindustan Times, Statistics Times)

Global packaging market overview

The global packaging market size is estimated at USD 1.17 Trillion in 2024 and is expected to reach USD 1.42 Trillion by 2028, growing at a CAGR of 3.9% during the time spanning 2023 to 2028.

On a regional basis, Asia emerged as the largest packaging market, recording sales of USD 470 Billion in 2023. North America followed with sales amounting to USD 270 Billion and Western Europe registered a market size of USD 234 Billion.

Over the last ten years, steady growth in the global packaging market has been fuelled by shi_s in substrate preferences, expansion into new markets and changes in ownership structures. Within the food sector, flexible packaging, high-barrier films and stand-up retort pouches are becoming more popular, challenging conventional packaging options such as metal tins and glass jars. Besides, with the transformation of the Internet of Things (IoT), RFID tags, QR codes and sensors, smart packaging solutions are becoming pivotal in the packaging industry.

Increasing retail sales are prompting manufacturers to develop innovative packaging to captivate consumers. Eye-catching and creatively designed packaging helps products stand out on retail shelves and attract consumer interest, thereby driving the adoption of advanced packaging solutions.

However, the growing use of non- recyclable, non-biodegradable plastic packaging is contributing to higher carbon emissions, which could hinder growth. In response, major corporations like Amazon, Google and Tetrapak are shifiing towards net-zero carbon emissions goals, shaping their future investment strategies in capital. (Source: Smithers, Mordor Intelligence)

Indian paper and packaging market overview

The Indian paper and packaging market is projected to expand from USD 15.96 Billion in 2024 to USD 38.87 Billion by 2029, at a CAGR of 19.48%. The imports of paper and paperboards into India surged by 34%, registering ~19.3 Lakh tons in FY23-24, primarily on account of increased shipments from ASEAN countries. This influx has undermined the Make in India initiative and adversely affected employment for around 500,000 farmers involved with the domestic paper industry through agro and farm forestry initiatives.

India possesses ample capacity to produce nearly all paper grades domestically, yet large imports are threatening the economic sustainability of many mills. Out of more than 900 paper mills, only 553 remain operational. The imports, largely from ASEAN under the ASEAN-India Free Trade Agreement, benefit from zero import duties. Additional import tari_ concessions to China under the Asia Pacific Trade Agreement (APTA) and to ASEAN and Korean Free Trade Agreements (FTAs) have further intensified the competition. Subsidies provided by some of these countries to their paper mills offer them a cost advantage, further challenging the viability of Indian paper mills.

In FY22-23, India exported paper and paperboard products valued at around USD 3.04 Billion, while exports of pulp and waste paper reached a minimal USD 3.59 Million. Per capita paper consumption in India stood at an approximate 15 kg in the same year. The Indian paper industry, contributing to 5% of global production, shows significant potential for growth. The flexible packaging market in India is projected to expand by USD 15.57 Billion from 2023 to 2028, with a compound annual growth rate (CAGR) of 12.69%. There is a rising demand for paper, particularly in the packaging of FMCG products and ready-to-eat foods.

Packaging-grade paper constitutes 55% of the primary types of paper produced domestically within the paper and paperboard industry. Expected growth for packaging paper volume was 6-8% in FY23-24, driven by the pharmaceutical and FMCG sectors. Meanwhile, writing and printing paper volumes increased by only 3-5%, affected by the shi_ towards digitalisation.

The expansion in the sector is fuelled by a significant increase in e-commerce, food processing, pharmaceuticals, FMCG, manufacturing and healthcare. Moreover, various government initiatives such as Make in India have positively influenced the packaging industry. Currently, the paper and packaging industry ranks as the fi_h largest sector in the Indian economy.

(Source: Mordor Intelligence, Prink week India, IBEF, Economics Times, Statista)

Global compostable packaging market overview

Compostable packaging provides an eco-friendly solution by offering sustainable materials that are easily broken down in home or industrial compost settings. This alternative to single-use plastics helps to minimise landfill waste. The key driver for the growth of the global compostable packaging market is the increasing awareness of biodegradable and compostable packaging options. The demand for visually appealing products also presents opportunities for market expansion. Innovative developments by manufacturers are helping to propel the growth of the compostable packaging market. The market is projected to grow from USD 103.39 Billion in 2024 to approximately USD 197.85 Billion by 2032, with a CAGR of 8.4% from 2023 to 2032.

On a regional basis, Europe is at the forefront of the compostable packaging industry, driven by increasing consumer awareness of the environmental impact of their purchases. Research indicates that over half of European consumers are prepared to spend more on sustainable products. Consequently, global companies are compelled to develop and adopt eco-friendly packaging solutions that help reduce waste disposal.

In the United States, only 15% of the composting facilities process certain types of biodegradable packaging.

About 55% of these facilities exclusively handle green waste, like yard debris and agricultural residues, while around 45% also accept food waste along with other biodegradable materials. Nearly 29% of the facilities are equipped to process food waste and an additional 15% can handle both packaging materials and food waste. As developing economies undergo rapid industrialisation and urbanisation, there is a rising consumer awareness and demand for sustainable packaging solutions. These markets offen see an expanding middle-class population with increased environmental awareness, fuelling the adoption of compostable packaging materials.

Governments are placing greater emphasis on environmentally sustainable practices, leading to regulations and policies that encourage or require the use of compostable packaging materials. These efforts aim to reduce the environmental impact of traditional packaging and tackle issues associated with plastic waste. With governmental support, a favourable environment is being created for businesses to adopt compostable packaging solutions, encouraging a global shi_ toward eco-friendly alternatives. As governments actively advocate for sustainability, the compostable packaging market is experiencing significant growth, supported by a collective push toward a more environmentally responsible packaging ecosystem.

(Source: Globe News Wire, Data Bridge Market Research, Fortune Business Insights)

Growth drivers

Rising disposable income : Indias gross national disposable income is expected to expand 14.5% in FY22-23 and further by 8.9% in FY23-24, reaching INR 2.14 Lakh for the current fiscal year. This rise in disposable income is further anticipated to result in growth of retail market in India, resulting in a boost for the packaging market.

Increase in population : The population in India increased by 13 Million in 2023, resulting in a 1.44 Billion strong people in the country. This ever-increasing population growth in the country is anticipated to result in an increase in retail market and a rise in the packaging market.

Urbanisation and lifestyle changes : As more people migrate to urban areas, there is an increasing demand for packaged goods due to the convenience they offer. Urban lifestyles also lead to higher consumption of fast-moving consumer goods (FMCG), which are predominantly sold in packaged forms.

Retail sector expansion : The expansion of organised retail and the emergence of e-commerce are significant growth drivers for the packaging industry. Supermarkets and hypermarkets require sophisticated packaging solutions for better shelf appeal and product differentiation. Moreover, the surge in online shopping has spurred demand for robust and secure packaging materials that can withstand the logistics involved in e-commerce distribution.

Consumer awareness and preferences : Increasing consumer awareness regarding health, hygiene and the quality of products has led to a greater demand for packaging solutions that extend shelf life and maintain product integrity. There is also a growing preference for sustainable and eco-friendly packaging among Indian consumers, which is pushing companies to innovate with biodegradable and recyclable materials.

Growth in Indian hospitality sector : In 2023, the international visitors to India increased to 7.2 Million, reflecting a growing interest and confidence in the nations hospitality offerings. Moreover, there has been a transition in consumer behaviour, with a growing emphasis on food quality and hygiene. This is anticipated to result in a rising demand for sustainable and hygienic packaging in the country.

Growth in the food packaging industry : The global food packaging industry is expected to reach USD 478 Billion by 2030, driven by rising demand for convenience, safety, and sustainability. As consumers become more health-conscious and informed, packaging is gaining importance - not just for protection, but for its environmental impact and transparency. Growing focus on food safety, traceability, minimalism, and recyclability, along with stricter regulations, is turning packaging into a strategic growth lever. Brands are embracing innovative, sustainable solutions to build trust, reduce waste, and engage consumers more meaningfully.

(Source: Economic Times, DataReportal, irecwire. com, Grand view research)

Company overview

Pakka Limited is a renowned manufacturer of bagasse-based pulp, paper, compostable tableware and compostable and recyclable flexible packaging in India. Operating from an integrated facility in Ayodhya, Uttar Pradesh, your companys products are gaining popularity due to their superior and customised quality. The production uses locally sourced sugarcane waste, which is then processed into paper, pulp and molded products. Moreover, your company has recently initiated the production of low-grammage kra_ grades. At present, Pakka Limited is focused on the development of compostable packaging solutions.

The Companys financial performance

During the year under review, your company generated a revenue of INR 406.04 Cr compared to INR 408.31 Cr in the previous year, a growth of 0.32 % increase . However, your company incurred a net profit of INR 56.70 Cr, as opposed to a net profit of INR 48.67 Cr in the previous year.

Details of significant changes in the key financial ratios

In accordance with the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, as amended, details of significant changes in key financial ratios and any changes in Return on Net worth of your company including explanations thereof are given below:

Year ended 31 st March	FY24	FY25
Current ratio	2.11	1.97
Debt-equity ratio	0.69	0.41
Return on Net worth / Equity	18.38	11.62
Net profit ratio	12.02	13.96
Return on capital employed (%)	20.13	12.44

Risk management

At Pakka, our strategy is designed to maximise opportunities while minimising potential risks. Management places a strong emphasis on risk management to ensure the enhancement of long-term value. Our Companys enterprise risk management (ERM) is integrated with both strategy and execution. The goal is to identify and address the most significant risks that could affect our company and to take appropriate steps to mitigate or capitalise on them. The ERM framework provides a uniform approach to managing risk. Below, we have outlined the principal risks faced by your company.

Talent and culture management

The Company believes that the quality of its workforce is crucial to its success and is dedicated to providing them with the necessary skills and knowledge to adapt to advancements in technology. During the year, your company maintained positive relations with its team members and focused on providing training and skill development opportunities to help them navigate the changing work environment. As of 31 st March, 2025, your company employed 511 permanent team members.

Internal control system and their adequacy

In any industry, the processes and internal control systems play a critical role in the health of your company. Pakkas well-defined Organisational structure, documented policy guidelines, defined authority matrix and internal controls ensure efficiency of operations, compliance with internal policies and applicable laws and regulations as well as protection of resources. Moreover, your company continuously upgrades these systems in line with the best available practices. The internal control system is supplemented by extensive internal audits, regular reviews by the management and standard policies and guidelines to ensure reliability of financial and all other records to prepare financial statements and other such data.

Cautionary statement

Certain statements in this Management Discussion and Analysis, describing your companys objectives, outlook and expectations, may constitute forward-looking statements within the meaning of applicable laws and regulations. Actual results may differ materially from those expressed or implied. Several factors make a significant difference to your companys operations, including climatic conditions, economic scenario affecting demand and supply, Government regulations, taxation, natural calamity and such other factors over which your company does not have any direct control.