Knack Packaging IPO Review: Profitable Business, Moderate Valuation, What's the Catch?

Every day, we buy rice, flour, pet food, and fertilizers packed in strong, colourful bags without thinking about who makes those bags. Knack Packaging Limited is one of the companies behind this packaging. It manufactures premium woven plastic bags that help businesses safely pack, transport, and market their products across India and around the world.

Knack Packaging's IPO of ₹439.5 crore IPO comprises a fresh issue of ₹380 crore and an Offer for Sale (OFS) of ₹59.5 crore. Most of the fresh issue proceeds will fund a new manufacturing plant in Gujarat, while the IPO values the company at around ₹2,080 crore.

The company has delivered strong profit growth, industry-leading profitability, and built a leading position in its niche. But do these strengths justify the valuation investors are being asked to pay? Let’s find out.

Knack Packaging IPO Snapshot

Disclaimer: GMP numbers are unofficial market indicators and should not be considered guaranteed listing performance signals.

What Does Knack Packaging Do?

Knack Packaging Limited manufactures the strong woven plastic bags used to pack products such as rice, flour, sugar, pet food, seeds, fertilizers, and other bulk goods weighing between 5 and 50 kilograms. If the product inside is valuable, the packaging also needs to be strong enough to protect it during storage and transportation. That's where Knack's products come in.

The company buys plastic granules, converts them into woven fabric, laminates it for extra protection, prints customer branding, and stitches the final bags. Because it controls almost every step of the manufacturing process itself, it can maintain quality, reduce costs, and develop new products faster.

More than 98% of its revenue comes from these packaging bags. Its customers include well-known companies such as Cargill, KRBL, Drools Pet Food, and Baba Agro Food.

Knack operates four manufacturing plants in Gujarat with a production capacity of 43,300 metric tonnes annually and exports to 71 countries. More than half of its revenue comes from overseas markets, showing that the company is not dependent only on Indian demand. It is now building another plant and expanding into products like zipper bags to support future growth.

Can Knack Benefit from the Growing Demand for Premium Packaging?

The market that Knack operates in is growing steadily because packaging has become much more than just a way to carry products. Today, companies want packaging that protects products, looks attractive on shelves, and strengthens their brand image.

Globally, the flexible bulk packaging market was valued at about $90.7 billion in 2025 and is expected to reach $109.3 billion by 2029. In India, the market for printed and laminated woven polypropylene (PLWPP) bags is expected to grow even faster, from around ₹2,860 crore to ₹5,000 crore over the same period, driven by rising demand from food, agriculture, and industrial sectors.

Government initiatives such as Make in India and production-linked incentive (PLI) schemes are also encouraging domestic manufacturing, which indirectly increases demand for industrial packaging.

Knack appears well positioned to benefit from these trends. It already holds around 10.1% of India's PLWPP bag market, has a vertically integrated manufacturing process, and is expanding capacity through a new plant before existing facilities become fully utilised.

However, industry growth alone does not guarantee success. Companies still need to innovate, manage costs, and adapt to changing environmental regulations. Knack's ability to execute its expansion while maintaining profitability will determine how much of this growing opportunity it can capture.

What Makes Knack Packaging Strong?

One of Knack Packaging's biggest strengths is the quality of its business economics. In FY26, it generated a Return on Capital Employed (ROCE) of 46.71%, meaning it earned nearly ₹47 in operating profit for every ₹100 invested in the business. It also reported a net profit margin of 10.99%, indicating that it retained almost ₹11 as profit from every ₹100 of sales. These are strong numbers for a manufacturing company and suggest that the business is being run efficiently.

The second strength is its leadership in a specialised market. Rather than manufacturing every type of packaging, Knack focuses on premium printed and laminated woven bags, where it holds around a 10.1% domestic market share. Its laser-cut, easy-open pinch bottom bags also differentiate it from competitors and show that the company is investing in product innovation rather than competing only on price.

The third strength is its international presence. More than 56% of FY26 revenue came from exports across 71 countries, reducing dependence on any single market. This broad customer base gives the company access to larger demand pools and allows it to benefit from global growth in industrial packaging. Combined with its ongoing capacity expansion, Knack appears well positioned to serve increasing domestic and overseas demand over the coming years.

What Are The Real Risks?

Despite its strong business, Knack Packaging is not without risks.

The first is supplier concentration. In FY26, nearly 73.5% of its raw material purchases came from just five suppliers, and the company does not have long-term supply agreements with them. If any of these suppliers face production issues or change pricing significantly, Knack could experience higher costs or disruptions in manufacturing.

The second risk is customer concentration. Around 41% of FY26 revenue came from its top 10 customers. Large customers often have greater bargaining power and may switch suppliers if they receive better pricing or service elsewhere. Losing even a few key customers could have a noticeable impact on revenue and capacity utilisation.

The third risk comes from raw material prices. Plastic granules, the company's primary raw material, are derived from crude oil. Since Knack spent almost ₹491 crore on raw materials in FY26, sharp increases in crude oil prices can quickly raise production costs. Although the company has improved margins through operational efficiencies and renewable energy, it may not always be able to pass higher costs on to customers immediately.

Investors should also remember that over half of the company's revenue comes from exports. Changes in trade policies, tariffs, or global demand could affect future growth and profitability.

Is Knack Packaging Fairly Valued?

At the upper price band of ₹170, Knack Packaging is valued at around ₹2,080 crore and is offered at a Price-to-Earnings (P/E) ratio of 18.34. In simple terms, investors are paying about ₹18 for every ₹1 of annual earnings the company generates.

On valuation alone, the IPO appears reasonably priced. The average P/E of listed peers is around 25.96, while companies such as Mold-Tek Packaging and TCPL Packaging trade at much higher multiples of 31.83 and 28.19, respectively. Only Time Technoplast trades at a slightly lower multiple of 17.86, although it operates a much larger and more diversified packaging business.

Looking beyond valuation, Knack compares favourably on business quality. It reported the highest EBITDA margin among its peers at 20.42%, suggesting it converts a larger share of revenue into operating profit. Even more impressive is its Return on Equity (RoE) of 35.75%, significantly higher than Mold-Tek Packaging (9.85%), TCPL Packaging (14.82%), and Time Technoplast (13.77%). This indicates that the company has been highly efficient in generating profits from shareholders' capital.

Its revenue base is much smaller than that of larger listed players because it focuses on a specialised packaging segment rather than a diversified product portfolio. However, its profitability suggests that this focused strategy has worked well.

Overall, the IPO does not appear to demand an aggressive premium despite the company's strong margins, high capital efficiency, and leadership in its niche. Investors are paying a lower valuation than most peers while getting exposure to a business that has consistently delivered strong operational performance.

Author's Take: Should You Consider This IPO?

Knack Packaging operates in a niche segment that benefits from long-term growth in food, agriculture, and industrial packaging. It has built a leading market position, consistently improved profitability, and maintained high returns on capital. The planned manufacturing expansion also suggests management is preparing for future demand rather than reacting after capacity becomes constrained.

The IPO valuation appears reasonable when compared with listed peers, particularly considering the company's superior margins and return on equity. This gives investors exposure to a profitable manufacturing business without paying the highest sector valuations.

At the same time, investors should not ignore the risks. The business depends heavily on exports, a relatively small group of customers and suppliers, and raw material prices that are influenced by crude oil. These factors could affect earnings if market conditions become unfavourable.

Overall, Knack Packaging presents a business with strong operating fundamentals, healthy profitability, and visible growth opportunities. While the risks deserve close attention, the combination of business quality and relatively moderate IPO pricing makes the overall picture appear balanced but positive.

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