Company Overview
Knack Packaging Limited is an integrated, export-led manufacturer of specialised flexible bulk packaging solutions, principally Printed and Laminated Woven Polypropylene (“PLWPP”) bags and PLWPP pinch bottom bags – customised, high-strength packaging products used across food products, pet food, agriculture, seeds, detergents, fertilizers, chemicals, cement and building materials, among other end-use sectors. The company operates a vertically integrated, B2B2C manufacturing model spanning the full production cycle from polypropylene granule processing through tape and fabric extrusion, printing, lamination and finishing, out of manufacturing facilities in Gujarat with an aggregate effective installed capacity of 43,300 MTPA. The company held approximately 10.1% of the Indian market for flexible bulk PLWPP bags (including pinch bottom bags) in Fiscal 2025, and it is the first company in India and Asia to integrate a laser-cut, easy-open feature into PLWPP pinch bottom bags. As of March 31, 2026, its products were sold in more than 71 countries, with exports contributing 56.30% of revenue from operations, and it served a customer base of over 1,950 customers across 13,379 SKUs, supported by a dedicated workforce of 1,959 employees as of May 31, 2026.
Objects of the offer
The company is undertaking a book-built issue of Equity Shares of face value of ₹10 each, comprising a Fresh Issue aggregating up to ₹380.00 crore by the Company and an Offer for Sale of up to 3,500,000 Equity Shares by the Selling Shareholders.
The proceeds of the Fresh Issue are to be utilized towards the following objects:
- Partial funding of capital expenditure towards setting up a new manufacturing facility at Borisana, Kadi, Mehsana, Gujarat, for which ₹320.00 crore of the Net Proceeds is earmarked against a total estimated project cost of ₹364.96 crore.
- General corporate purposes (not exceeding 25% of the Gross Proceeds).
Investment Rationale
- Vertically integrated manufacturing underpinning a structural margin advantage – Knack operates a fully vertically integrated production chain – from PP granule processing through tape and fabric extrusion, printing, lamination and finishing – allowing it to internalise conversion margin at each stage and control quality across the value chain. This is reinforced by a high renewable-energy share: approximately 80% of the company’s energy requirement is met from renewable sources including a 2.10 MW windmill, a 2.25 MW rooftop solar system and an 11.00 MW ground-mounted solar farm operationalised in Fiscal 2025, with a stated target of 90% by 2030, which supports lower energy cost per kilogram. Product differentiation adds a further layer – Knack is the first company in India and Asia to integrate a laser-cut, easy-open feature into PLWPP pinch bottom bags, and these higher-value pinch bottom bags contributed 20.27% of product revenue in Fiscal 2026. The combined effect is visible in profitability: EBITDA margin expanded ~504 bps over FY24 – FY26 to 20.42%, and EBITDA per kg rose from ₹33.14 to ₹45.15.
- Market leadership reinforced by cylinder-led customer switching costs – The company held approximately 10.1% of the Indian market for flexible bulk PLWPP bags, including pinch bottom bags, in Fiscal 2025, positioning it among the leading domestic players in a fragmented, high-entry-barrier segment. A key source of stickiness is Knack’s role as custodian of customer branding tooling: as of May 31, 2026 it maintained 73,000+ printing cylinders developed for 1,950+ customers across 13,379 SKUs, held in a dedicated warehouse. Because these cylinders encode each customer’s artwork, colour and structural specifications, switching suppliers requires re-developing tooling and re-validating print quality, supporting continuity of repeat orders. Notably, customer concentration has been declining rather than rising – the top-10 customers’ revenue share fell from 44.16% in FY24 to 40.87% in FY26, and the largest customer’s share from 22.33% to 16.73%, indicating a broadening, de-risking revenue base. However, the company has no long-term contractual arrangements with its top-10 customers, so this stickiness is behavioural rather than contractual.
- Export-led revenue profile levered to paper-to-PP substitution and supply-chain diversification – Exports contributed 56.30% of revenue from operations in Fiscal 2026, spread across more than 71 countries, linking performance to global demand rather than domestic conditions alone; the USA is the single largest export market at 23.66% of revenue. The structural tailwind is the substitution of multiwall paper sacks with more durable, lower-lifecycle-impact PLWPP bags, alongside the “China Plus One” sourcing shift that favours Indian suppliers. Knack is positioning to capture this through its strategic supply partnership with Cargill and its Sayem Knack joint venture serving Latin America and the USA, which commenced commercial operations on April 6, 2026.
- Near-full utilisation with a defined, capacity-led growth lever – Knack’s operational base comprises manufacturing facilities in Gujarat with an aggregate effective installed capacity of 43,300 MTPA, which ran at 81.63% utilisation in Fiscal 2026 – a high level that leaves limited headroom for organic volume growth. Total quantity sold rose from 30,590 MT in FY24 to 38,157 MT in FY26, and this near-full utilisation is precisely why the IPO is capacity-directed: the proposed Borisana facility (the sole capex object) is expected to add approximately 49,100 MTPA of gross capacity and ~32,710 MTPA net of planned decommissioning at older units – an increase of roughly 75% over the current base, targeted at the higher-margin pinch bottom format.
- Financial Performance – The company reported consolidated revenue from operations of ₹823.4 crore in FY26, up 11.81% YoY, extending a three-year revenue CAGR of ~12% (FY24–FY26). Earnings growth has materially outpaced revenue: EBITDA rose to ₹172.29 crore in FY26 (20.42% margin) from ₹101.37 crore in FY24 (15.38% margin), while PAT increased to ₹92.72 crore from ₹45.98 crore over the same period – a PAT CAGR of ~42%, with PAT margin expanding ~401 bps to 10.99%. Return ratios are strong, with RoCE of 46.71% and RoE of 35.75% in FY26, and the balance sheet has deleveraged materially, with the debt-to-equity ratio improving from 1.23 in FY24 to 0.62 in FY26.
Key Risks
- Raw-material and supplier concentration, with crude-linked input costs – Polypropylene, the key raw material, is petroleum-derived, and cost of materials consumed was 59.61% of revenue in FY26, leaving gross margin exposed to PP/crude price movements. Supplier concentration adds to this – the largest supplier accounted for 35.78% of raw-material purchases (top-5: 73.49%), with no long-term supply contracts. However, Knack states input-cost increases are generally passed on, hence the risk lies in any lags in pass-through or disruption at a key supplier, pressurizing margins and continuity of supply.
- Single-project execution risk on the capacity expansion – The entire Fresh Issue is directed at one asset – the new Borisana facility, with ₹320.00 crore of Net Proceeds funding a ₹364.96 crore balance cost. As of the RHP date the company had not placed orders for 100% of the plant and machinery, which could result in time and cost over-runs if procurement is delayed.
- Rising working-capital intensity – Net working capital rose to ₹215.06 crore in FY26 from ₹160.41 crore in FY24, and working-capital days increased to 87.05 from 74.13, with most of it tied up in receivables and inventory and funded partly through current borrowings. In effect, growth consumes cash before it converts to profit, so continued scale-up will require ongoing working-capital financing and disciplined receivable collection.
Outlook
The company’s outlook is supported by its upcoming capacity expansion at Borisana, an export-led business model spanning more than 71 countries, and structural tailwinds from the substitution of paper sacks with PLWPP bags and the “China Plus One” sourcing shift, underpinned by sector-leading margins, strong return ratios and a materially deleveraged balance sheet. With existing capacity running near full utilisation and the underlying end-market growing at only ~5%, growth will depend on the timely commissioning and absorption of the new facility, product differentiation in higher-value pinch bottom bags, and entry into new geographies. While the business carries elevated working-capital requirements and a near-term dependence on executing a single expansion project, these reflect the operating characteristics of a scaling, capital-intensive manufacturer rather than structural weaknesses, with performance contingent on disciplined working-capital management and on-time, on-budget project delivery as scale increases.
According to the RHP, the company’s listed peers are Mold-Tek Packaging Ltd, TCPL Packaging Ltd and Time Technoplast Ltd. The peer group is trading at an average P/E of 24.85x, with the highest being 31.83x, and the lowest being 17.86x. At the upper price band, the listing market capitalization of Knack will be ₹2,080 crore, and the company is demanding a P/E of ~22.43x, based on the post issue market capitalization and FY26 diluted EPS. When compared to its peers, the issue seems to be fairly valued. Based on the above views, we provide a ‘Subscribe’ rating for this IPO.
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