💰 Financial Performance

Revenue Growth by Segment

Consolidated revenue grew 24.23% to INR 7,540.26 Cr in FY25. In H1 FY26, Defense revenue surged 79% YoY to INR 900 Cr, while International business grew 21% YoY to INR 960 Cr in Q2 FY26. The revenue mix shifted significantly with Defense increasing to 22% of the basket in H1 FY26 from 15% YoY, while Coal India (CIL) share dropped to 9% from 12%.

Geographic Revenue Split

Exports and Overseas operations accounted for 40% of total revenues in FY24 and 41% in H1 FY25. International business reached record quarterly sales of INR 960 Cr in Q2 FY26, representing approximately 46% of the quarterly revenue basket. The company operates in over 75 countries, with significant presence in South Africa, Turkey, Ghana, Nigeria, and Tanzania.

Profitability Margins

Adjusted Net Profit Margin improved to 17.08% in FY25 from 14.42% in FY24. Adjusted Operating Profit Margin rose to 23.67% in FY25 from 20.20% in FY24. The improvement is driven by a higher contribution from high-margin defense and international segments and moderating raw material costs.

EBITDA Margin

The company achieved its highest-ever quarterly EBITDA of INR 582 Cr in Q2 FY26 and INR 1,146 Cr in H1 FY26. Operating margins reached 26.4% in 9MFY25, up from 24.4% in FY24, due to the ramp-up of the defense vertical which carries superior margins compared to industrial explosives.

Capital Expenditure

Annual capital expenditure is maintained at approximately INR 1,200 Cr. This investment is focused on ramping up international facilities, entering new markets like Australia and Kazakhstan, and expanding defense manufacturing capabilities for products like Pinaka rockets.

Credit Rating & Borrowing

ICRA reaffirmed [ICRA]A1+ for Commercial Paper, enhancing the rated amount to INR 250 Cr. The company maintains a strong capital structure with a gearing of 0.3 times as of September 30, 2024, and an interest coverage ratio that improved to 15.50 in FY25 from 12.50 in FY24.

⚙️ Operational Drivers

Raw Materials

Ammonium Nitrate (AN) is the primary raw material, with raw material consumption totaling INR 988 Cr in Q2 FY26 (47.4% of revenue) and INR 2,082 Cr in H1 FY26 (49.1% of revenue).

Import Sources

Not explicitly disclosed in available documents, though the company operates backward-integrated facilities in India and manufacturing units in select overseas countries to secure supply.

Capacity Expansion

The company is currently ramping up facilities in South Africa and establishing new operations in Australia, Kazakhstan, and Saudi Arabia. It is also expanding capacity for Pinaka rockets to meet a massive INR 6,084 Cr order from the Ministry of Defence.

Raw Material Costs

Raw material costs stood at INR 2,082 Cr for H1 FY26, a 21.5% increase from INR 1,713 Cr YoY. Margins are protected by price escalation clauses in key client agreements, which allow for a pass-through of Ammonium Nitrate price volatility, albeit with a lag.

Manufacturing Efficiency

Inventory turnover ratio improved significantly to 20.86 in FY25 from 15.29 in FY24, indicating enhanced operational efficiency and faster movement of goods.

Logistics & Distribution

The company maintains a well-integrated logistics network to support distribution to over 75 countries. Distribution and other expenses accounted for approximately 14% of the cost structure in FY25.

📈 Strategic Growth

Expected Growth Rate

15%

Growth Strategy

Growth will be driven by the defense sector, specifically the commercialization of Pinaka rockets starting Q3 FY26 and a defense order book of INR 15,500 Cr. Internationally, the company is targeting 15% annualized growth by operationalizing units in Australia and Kazakhstan and entering the Saudi Arabian market.

Products & Services

Industrial explosives, bulk explosives, packaged explosives, Pinaka rockets, guided Pinaka rockets, energetic materials, and ammunition for defense applications.

Brand Portfolio

Solar Industries, Solar Defence and Aerospace Limited, Economic Explosives Limited (former name of subsidiary).

New Products/Services

Commercial sales of Pinaka rockets (starting Q3 FY26) and guided Pinaka rockets (expected orders in 1-2 quarters) are key new revenue contributors. Defense revenue grew 79% in H1 FY26 due to these expansions.

Market Expansion

Targeting Australia, Kazakhstan, and Saudi Arabia for new manufacturing and sales operations to diversify beyond the current 75-country footprint.

Market Share & Ranking

The company holds a leadership position in the Indian industrial explosives industry and is a dominant player globally.

Strategic Alliances

Maintains global tie-ups for defense product development and has a 45.99% stake in Zmotion Autonomous Private Limited and 49% in Astra Resources Pty Limited.

🌍 External Factors

Industry Trends

The industry is shifting toward increased private participation in defense manufacturing in India. Solar Industries is positioned to capitalize on this through its 'Power to Propel the Future' initiative and growing defense order book.

Competitive Landscape

Key competitors include other global explosive manufacturers, but Solar's leadership is maintained through its massive scale and specialized defense portfolio (e.g., Pinaka rockets).

Competitive Moat

The moat is built on high entry barriers in the explosives and defense sectors, backward integration, and a vast global distribution network. These are sustainable due to the stringent regulatory and safety certifications (ISO 9001, 14001) required.

Macro Economic Sensitivity

Revenue is sensitive to global mining activity and infrastructure spending. A 21% growth in international business despite global headwinds shows resilience to regional macro shifts.

Consumer Behavior

Increased government focus on 'Atmanirbhar Bharat' is shifting demand from imported defense systems to domestic players like Solar Industries.

Geopolitical Risks

Operations in regions like Turkey, Nigeria, and South Africa expose the company to local geopolitical instability, though geographic diversification across 75 countries mitigates single-country risk.

⚖️ Regulatory & Governance

Industry Regulations

Operations are governed by the Companies Act 2013, SEBI Regulations 2015, and stringent safety norms for explosive manufacturing. Compliance with Section 177 of the Companies Act ensures internal financial controls are adequate.

Environmental Compliance

Solar Group adheres to ISO 14001:2004 and OHSAS 18001:2007 standards. It is committed to reducing emissions and conserving resources as part of its sustainability pillar.

Taxation Policy Impact

The company's tax expense was approximately 4% of the total cost structure in FY25, with a consolidated PAT of INR 1,011.67 Cr on a PBDT of INR 1,914.69 Cr.

Legal Contingencies

Ongoing legal proceedings in the Supreme Court regarding the vacation of office of Executive Director Mr. Kailash Chandra Nuwal. The management states this has not impacted business operations, but it remains a monitored development.

⚠️ Risk Analysis

Key Uncertainties

The primary uncertainty is the volatility of Ammonium Nitrate prices and the timing of defense order executions. The legal dispute at the board level also presents a governance uncertainty.

Geographic Concentration Risk

40-41% of revenue is concentrated in international markets, with the remaining 59-60% in India. Within India, there is a historical concentration in mining regions.

Third Party Dependencies

Dependency on Coal India Limited (CIL) for 15-18% of revenue, although this is decreasing as the defense segment grows.

Technology Obsolescence Risk

The company mitigates technology risk through ongoing R&D in weaponry, ammunition, and aerospace systems, ensuring products like Pinaka remain state-of-the-art.

Credit & Counterparty Risk

Debtors' turnover ratio of 6.67 indicates healthy collection cycles. The company deals with reputed clients like the Ministry of Defence and CIL, reducing credit risk.