Monday, August 10, 2026, 1:00 PM IST
Event Participants
Executives
2
Ajay Kumar Dubey, Alpesh Tulsibhai Patel
Analysts
7
Ashish Soni, Dhananjai Bagrodia, Lakshminarayanan G, Nihal Shah, Nirav Jimudia, Nitin Babulal Gandhi, Raman KV
Financials & KPIs
| Metric | Reported | Commentary |
|---|---|---|
| Revenue | ₹2,647.71 million | +40.5% YoY vs ₹1,871.71 million in Q1 FY26; driven by higher sales volume, improved capacity utilization, and ramp-up of recently commissioned capacity |
| Sales Volume | 10,940 metric tons | +20.9% YoY vs 9,047 MT in Q1 FY26; broad-based demand across foods, grains, pulses, pet food, fertilizers, agrochemicals |
| EBITDA | ₹591.73 million | +53.1% YoY vs ₹386.41 million in Q1 FY26; operating leverage and cost management discipline drove growth |
| EBITDA Margin | 22.35% | Improved from 20.65% YoY (+170 bps); driven by operating leverage and cost optimization including solar power savings |
| PAT | ₹305.28 million | +48.0% YoY vs ₹206.33 million in Q1 FY26; margin improvement reflects operating efficiency |
| PAT Margin | 11.53% | Improved from 11.03% in Q1 FY26 (+50 bps) |
| ROE | 37.45% | vs 37.04% in Q1 FY26; stable with slight improvement |
| ROCE | 57.73% | Improved significantly from 46.05% in Q1 FY26 (+1,168 bps) |
| Gross Block | ₹416 crores | vs ₹273 crores in Q1 FY26; Q1 FY27 addition of ₹30.75 crores |
| Capacity Utilization | ~91% | On total capacity of 48,000+ MTPA including rented facilities |
| Countries Served | 74 | Expanded from 71 countries in FY26 |
| Foreign Exchange Gain | ₹1.6 crores | In Q1 FY27 |
Geographic & Segment Commentary
PLWPP Bags (Printed Laminated Woven Polypropylene): Core product line serving rice, dal, lentils, flour, spices, sugar, salt, animal feed, fertilizer, and chemical sectors. Approximately 70% of the industry has transitioned to PLWPP bags. The company operates with a 90% customer retention ratio across 2,000+ customers and 13,000+ SKUs. Holds ~10% market share of the total addressable packaging market per Technotech industry report.
Pinch Bottom Bags: Premium, high-value-added product with superior branding capabilities. Contributed ~22-23% of sales currently (up from 19-20% in FY25 and 16% in FY24). Two new machines installed in Q4 FY26 at ~₹20 crores per machine; Q1 FY27 is the first quarter benefiting from these additions. Management's strategic focus is increasing this mix further given superior margins.
Export vs. Domestic: Export business constitutes ~55% of sales with domestic at ~45%. Export margins are 5-6% higher than domestic. Key markets include USA, Europe, Africa, Gulf countries, North and South America. India offers the lowest production cost globally for this product category compared to Thailand, Vietnam, and China competitors.
Cargill Relationship: Cargill represents ~12% of total business (₹150 crores annual, up from ₹40 crores in 2020). Relationship expanded from 1 country to 8+ countries, from 40 SKUs to 600+ SKUs. Contract-based pricing (polymer cost + conversion) with 2-year contracts plus 1-year extension. Cargill declined alternate sourcing options including proposed Oman facility, preferring Knack's India plant.
Company-Specific & Strategic Commentary
IPO & Capacity Expansion: Successfully listed on NSE/BSE; IPO proceeds of ₹320 crores allocated for new manufacturing facility. Total installed capacity of 43,300 MTPA at listing will expand to ~70,000 MTPA once new plant is commissioned (on track for October 2027).
Asset-Light Interim Strategy: Leased rented facilities (approximately 4,000-5,000 MT capacity added recently) for semi-finished goods production while value-added processing remains at existing plants. Operations managed by trained workforce that will transition to the new plant, ensuring seamless ramp-up.
Integrated Manufacturing Model: Full value chain capabilities from tape extrusion to weaving, gravure printing, lamination, and final bag conversion, providing quality control, turnaround efficiency, and customization advantages.
Innovation Leadership: First company in India to introduce branded printed bags for 50kg bulk packs (2004), creating first-mover advantage. Proprietary color formulations and SOPs create high switching costs—packaging is only 1-2% of customer's end product price but critical for brand perception.
Cost Optimization: 11 MW solar farm at Kutch (Bhrahma) plus rooftop solar and windmill installations saving ~1.1% on electricity costs. Bulk purchasing with cash payments earns supplier discounts. SAP HANA implementation providing transparent forecasting.
Digital Platform: "NAC Galaxy" customer portal provides product information, order updates, and transparency, supporting customer retention and seamless communication.
Guidance & Outlook
| Metric | Guidance / Outlook | Commentary |
|---|---|---|
| Capacity | ~70,000 MTPA by October 2027 | New IPO-funded plant on track; rented facilities bridge interim capacity needs |
| Pinch Bottom Mix | Continue increasing | From 22-23% current toward higher levels; 2 new machines ramping up in FY27 |
| EBITDA/kg | Maintain/improve current levels | Currently ~₹54/kg; value-added product mix shift and solar savings support further improvement |
| Capacity Utilization | ~91% current, target high utilization of new plant | Strong order book; management aims for early full utilization of new capacity |
| Export Growth | Continue country expansion | From 74 countries currently; focus on high-value geographies with labor costs $500+ |
Risks & Constraints
| Risk | Context |
|---|---|
| Raw Material Price Volatility | Polypropylene prices linked to crude; 100% volatility currently. Management mitigates through SAP HANA forecasting, 30 years of refinery relationships, bulk buying with cash discounts, and contract-based pricing (polymer + conversion) with ~45-50% of customers. |
| Customer Concentration | Cargill represents ~12% of revenue. However, relationship is long-term (since 2020), contract-based, and Cargill has explicitly preferred Knack over alternative suppliers. 600+ SKUs and 8-country engagement reduces single-point risk. |
| Capacity Execution Risk | New plant commissioning (Oct 2027) and ₹320 crores capital deployment. Asset-light interim strategy with rented facilities mitigates growth slowdown risk. Management has track record of executing capacity additions. |
| Competitive Pressure | No direct listed competitors in India; international competitors (Thailand, Cambodia) face higher labor/electricity costs. US competitor Polytech pricing significantly higher. India's cost advantage is structural. |
| Asset Turnover Maintenance | High ROCE (57.73%) and asset turns (2.53x gross block, 4.12x net block) may normalize with increased gross block from new plant. Management committed to maintaining/improving returns through value-added product mix. |
Q&A Highlights
ROCE & Asset Turn Superiority
- Question (Raman KV, Sequent Investments): Why is ROCE so high (~57.7%) and asset turnover (4-5x) compared to industry average of 1.5-2x?
- Answer (Ajay Kumar Dubey, CFO): Two specialized machinery types—tape/weaving (technical textile) and finishing (European machines for pinch bottom bags). Pinch bottom premium products generate higher profitability per asset. Gross block asset turn at 2.53x, net block at 4.12x.
- Answer (Alpesh Patel, CMD): Specialized packaging focus (PLWPP/pinch bottom) requires different machinery than general packaging peers; gross block to gross block comparison is 2.53x vs. industry 2.1-2.5x.
Raw Material Price Management
- Question (Raman KV): Polypropylene prices have risen significantly; how is pricing passed through?
- Answer (Alpesh Patel): SAP HANA forecasting, 30-year refinery relationships (Indian refineries supportive), cash purchases for discounts, bulk buying advantages. Price pass-through is transparent—customers understand polymer + conversion pricing. Branded customers prioritize packaging quality over minor cost changes.
Margin Sustainability & Pricing Power
- Question (Dhananjai Bagrodia, Alchemy Capital): How are margins maintained with rising input costs?
- Answer (Alpesh Patel): Long-term contractual customers (Cargill, others) work on conversion cost model—raw material plus fixed conversion. ~45-50% of customers on conversion basis; small customers (25,000-50,000 bags/month) accept pricing transparency. Pinch bottom bags carry premium margins. If input prices fall, company retains 50%+ of benefit.
Volume Mix & Pinch Bottom Strategy
- Question (Nirav Jimudia, Anvil Research): Realization per kg flat but EBITDA/kg up from ₹33 (FY24) to ₹45 (FY26) to ₹54 (Q1 FY27); what's the pinch bottom contribution?
- Answer (Alpesh Patel): Pinch bottom was 19-20% of sales in FY25, ~20% in FY26, 22-23% currently. Two new machines installed in Q4 FY26 contributed to Q1 FY27. Solar (11 MW farm) and wind additional margin drivers.
- Answer (Ajay Kumar Dubey): Electricity cost savings of ~1.1% from solar versus Q1 FY26.
Cargill Relationship & US Customer Dynamics
- Question (Lakshminarayanan G, Tunga Investments): Largest customer is US-based; contract structure, relationship length, finished vs. semi-finished supply?
- Answer (Alpesh Patel): Cargill ~12% of revenue; engagement since 2020 after 2 years of communication. Grew from ₹40 crores/1 country/40 SKUs to ₹150 crores/8+ countries/600+ SKUs. Contract pricing (polymer + conversion), 2+1 year terms. Supply finished bags. Cargill refused Oman facility option, insisting on Knack India plant. Packaging cost <1% of their product value creates extreme switching costs.
Market Position & Competition
- Question (Lakshminarayanan G): Competitive landscape and market share?
- Answer (Alpesh Patel):
10% market share per Technotech report. 55% export vs. 45% domestic. Thailand/Cambodia (international competitors) have higher labor/electricity costs; India is lowest cost globally. US competitor Polytech sells similar dog food bags at significantly higher prices ($0.70-0.75 vs. Knack's pricing advantage of 35-40%+).
EBITDA/kg Guidance & Export vs. Domestic
- Question (Nihal Shah, Prudent Corporate Advisory): EBITDA/kg at ₹54—future guidance?
- Answer (Alpesh Patel): Focus on pinch bottom mix, export growth (74 countries now), new premium machines. Past performance trajectory indicates continued improvement.
- Answer (Alpesh Patel) on export vs. domestic margins: Export margins 5-6% higher than domestic.
Growth Drivers & Geography Strategy
- Question (Ashish Soni, Family Office): Growth over next 2-3 years—product and geography split?
- Answer (Alpesh Patel): Geographic additions across Europe, Africa, Gulf, Americas. Countries with $500+ labor costs are target customers. Product focus on pinch bottom (from 10% in FY24 to 16% in FY24, 20% in FY25, 23% currently). Ongoing innovation pipeline.
Gross Block & Expansion Timing
- Question (Nitin Babulal Gandhi, Inoquest): Gross block addition in Q1 FY27 and impact on asset turns with ₹380-416 crores block?
- Answer (Alpesh Patel): Gross block ₹416 crores as of June 30, 2026 (vs. ₹273 crores Q1 FY26) with ₹141 crores added over the year and ₹30.75 crores in Q1 FY27. Management committed to maintaining/improving turnover and returns through value-added products.
Key Takeaway
Knack Packaging delivered a strong Q1 FY27 with revenue up 40.5% YoY to ₹2,647.71 million and EBITDA up 53.1% to ₹591.73 million (22.35% margin, +170 bps YoY), driven by 20.9% volume growth and operating leverage. PAT grew 48% to ₹305.28 million with ROCE at 57.73%. The strategy centers on premium pinch bottom bag mix (now 22-23% of sales, up from 20% in FY26) with two new machines ramping, 55% export share across 74 countries, and India's lowest-cost production advantage. IPO proceeds of ₹320 crores fund new capacity taking total capacity from 43,300 to 70,000 MTPA by October 2027, with interim rented facilities maintaining ~91% utilization. Key watch points are Cargill concentration (12% of revenue), polymer price volatility management through conversion-based contracts, and maintaining industry-leading returns as the larger asset base comes online.