Brokerages Recommend ‘Subscribe’ Rating, Citing Attractive Valuation, Capacity Expansion and Long-Term Demand for Flexible Packaging

The initial public offering (IPO) of Knack Packaging Limited has received encouraging endorsements from leading brokerage houses, with analysts recommending investors subscribe to the issue for medium- to long-term wealth creation. The integrated packaging solutions provider is looking to raise ₹439.50 crore through its maiden public issue, with market experts highlighting its strong financial performance, expanding manufacturing footprint, export presence and favourable industry dynamics.

The positive response comes at a time when India's packaging industry is witnessing sustained growth, driven by increasing demand from sectors such as food processing, agriculture, chemicals, pharmaceuticals, FMCG and e-commerce.

Brokerages Maintain Positive Outlook

Several domestic brokerage firms have expressed confidence in the company's long-term business prospects.

SMIFS has recommended subscribing to the IPO, stating that Knack Packaging is strategically positioned to benefit from structural growth in India's specialised packaging industry. The brokerage highlighted the company's superior return ratios, established market position and attractive valuation compared with listed peers.

SBI Securities has also assigned a 'Subscribe' rating, pointing to the company's diversified customer base, expanding export business, integrated manufacturing capabilities and healthy financial profile. According to the brokerage, future earnings are likely to be supported by capacity expansion, increasing contribution from value-added products and improving operational efficiency.

Meanwhile, Anand Rathi Share and Stock Brokers has recommended the issue from a long-term investment perspective, citing robust demand for flexible packaging solutions and the company's scalable business model.

Riding India's Packaging Growth Story

India's packaging industry has emerged as one of the fastest-growing segments within the manufacturing sector, supported by rising consumption, organised retail, export growth and increasing demand for safe, durable and customised packaging.

The shift towards branded products, packaged food, industrial goods and e-commerce logistics has significantly increased the need for advanced packaging materials.

Knack Packaging operates in the specialised flexible packaging segment, which is expected to witness healthy demand over the coming years due to its cost efficiency, durability and ability to cater to diverse industrial applications.

Integrated Manufacturing Provides Competitive Edge

One of the company's key strengths is its integrated manufacturing model.

Knack Packaging manufactures Printed and Laminated Woven Polypropylene (PLWPP) bags, including pinch-bottom bags, offering customised packaging solutions for a wide range of industries.

Its products are used in sectors including:

• Food grains

• Flour and sugar

• Fertilisers

• Agriculture

• Pet food

• Chemicals

• Cement

• Construction materials

• Detergents

The company's integrated operations enable better quality control, cost optimisation and faster execution, strengthening its competitive position in the market.

Capacity Expansion to Fuel Future Growth

A significant portion of the IPO proceeds will be invested in establishing a new manufacturing facility at Borisana, Kadi in Mehsana district of Gujarat.

The proposed expansion is expected to substantially enhance production capacity and improve the company's ability to serve both domestic and international customers.

Management believes the new facility will help meet rising demand while expanding its product portfolio and improving operational efficiencies.

Higher production capacity is also expected to strengthen economies of scale and support margin expansion over the medium term.

Increasing Focus on Value-Added Products

Another important growth driver identified by analysts is the company's growing emphasis on value-added packaging solutions.

Specialised packaging products generally command better pricing and offer higher operating margins compared to conventional packaging materials.

By increasing the share of premium products in its portfolio, Knack Packaging aims to improve profitability while strengthening long-term customer relationships.

This strategy also reduces dependence on commoditised products where pricing competition tends to be more intense.

Export Business Adds Diversification

Knack Packaging has also established a presence in international markets, providing an additional avenue for future growth.

India's growing competitiveness in manufacturing and government initiatives promoting exports are expected to support demand for industrial packaging products globally.

The company's export operations diversify its revenue streams and reduce dependence on domestic market cycles.

As global supply chains continue to diversify, export-oriented manufacturers are likely to benefit from increasing overseas demand.

Strong Financial Performance

Analysts have highlighted the company's healthy financial metrics as one of the IPO's biggest strengths.

Knack Packaging has delivered strong profitability supported by:

• Healthy Return on Equity (ROE)

• Strong Return on Capital Employed (ROCE)

• Efficient capital utilisation

• Integrated manufacturing operations

• Consistent business growth

These financial indicators compare favourably with several listed companies operating in the packaging sector.

IPO Structure and Key Details

The public issue consists of:

• Fresh Issue: 2.24 crore equity shares worth ₹380 crore

• Offer for Sale (OFS): 35 lakh equity shares worth ₹59.50 crore

The IPO has been priced in the range of ₹161–₹170 per share.

Investors can apply for a minimum lot of 88 shares, requiring an investment of ₹14,960 at the upper price band.

The issue will remain open for subscription until July 3, 2026, while the shares are expected to be listed on the stock exchanges on July 8, 2026.

IPO Proceeds to Support Expansion

The company plans to utilise the proceeds from the fresh issue primarily for:

• Establishing a new manufacturing facility in Gujarat

• Meeting future business expansion requirements

• General corporate purposes

The proceeds from the Offer for Sale component will go directly to the existing selling shareholders and not to the company.

Positive Grey Market Sentiment

Ahead of the issue opening, Knack Packaging also witnessed encouraging activity in the unofficial grey market.

Market participants indicated that the shares were trading at a Grey Market Premium (GMP) of approximately ₹23, reflecting positive investor sentiment and expectations of healthy listing demand.

While grey market trends are unofficial and may fluctuate, they often provide an indication of prevailing market confidence before listing.

Risks to Monitor

Despite the positive outlook, analysts have advised investors to remain mindful of certain business risks.

Key risks include:

• Volatility in polypropylene and other raw material prices

• Intense competition within the packaging industry

• Timely execution of expansion projects

• Dependence on industrial demand

• Global economic conditions affecting export markets

The company's ability to maintain operating margins while successfully expanding production capacity will remain a key determinant of future performance.

Outlook

Knack Packaging enters the primary market at a time when India's packaging industry is experiencing strong structural growth supported by industrial expansion, organised retail, exports and increasing demand for specialised packaging solutions.

With healthy financial performance, integrated manufacturing capabilities, expanding production capacity and favourable industry trends, the company appears well positioned for long-term growth.

Supported by positive brokerage recommendations and encouraging market sentiment, the IPO offers investors an opportunity to participate in a business that stands to benefit from India's evolving manufacturing ecosystem and the rising global demand for high-quality packaging products.