Paper Boat, which is owned by Hector Beverages and makes soft drinks and beverages, increased its operating scale by a modest 16% year on year in the fiscal year ending March 2024. However, the A91 Partners-backed firm improved its bottom line by reducing losses by 48% during the same period.

Paper Boat's operational income climbed to Rs 585 crore in FY24 from Rs 504 crore in FY23, according to its financial statement filed with the Registrar of Companies (RoC). It increased its scale by more than 50% during the preceding fiscal year.

Paper Boat was founded by former Coca-Cola executives Neeraj Kakkar and Niraj Biyani. It provides packaged juices, coconut water, traditional Indian snacks, and dry fruits. Trade (made by third parties) of these products accounted for 52% of operational revenue, which rose by 16% to Rs 304.3 crore in FY24 from Rs 261.8 crore in FY23. The remaining 48% of operating revenue came from products created by the company itself. This income also increased 15.7% to Rs 278 crore in FY24. The 11-year-old company received an additional Rs 10 crore from interest income, bringing its total revenue to Rs 595 crore in FY 24.

Material costs dominated the expense side, accounting for 63% of the total. This cost increased by 6.4% to Rs 404 crore in the preceding fiscal year, from Rs 380 crore in FY23. Employee benefit expenses rose 22% to Rs 66.70 million in FY24. Advertising, financing, and other expenses accounted for an additional Rs 171 crore. Overall, Paper Boat's expenses increased by 7.2% to Rs 642 crore in the preceding fiscal year.

In the end, Paper Boat cut its losses by 48% to Rs 47 crore in FY24, down from Rs 90.5 crore in FY23. Its ROCE and EBITDA margins were -15.45% and -5.63 percent, respectively.  In FY24, it spent Rs 1.1 per unit to generate one rupee of operational revenue. In fiscal year 24, the Bengaluru-based company recorded cash and bank balances of Rs 168 crore and current assets of Rs 305 crore.

According to TheKredible, Paper Boat has raised Rs 1,030 crore ($143 million) in fundraising to date, with significant investors including GIC (Lathe), Peak XV, Sofina Ventures, and A91 Partners. GIC owns more than 25% of the company, with Sofina and Peak XV each controlling more than 18%.

Paper Boat, which entered the market with a new approach and services, has struggled to turn its original promise into results. Even while it has continued to develop and adapt, the search for profitability 11 years after it began operations is cause for concern, even if it has come near today. The other concerning feature of the firm is the full shift in market dynamics in the shape of rapid commerce, modern trade, e-commerce, and other developments, which should have a significant impact on Paper Boat's margins. Despite the fact that many other firms in the field suffered, folded, or were acquired, the company has managed to thrive. Could Paper Boat surprise critics yet again?

Consider the extraordinarily high clutter in the market now, as well as the far higher valuations associated with the category itself.