Solar Industries (I) Q4 FY25 earnings call

Where management's figures differ from the filing

• Q4 FY25 PAT: said ₹371 cr (MD); ₹346 cr (CFO); filed ₹322.23 cr net profit to owners. MD's ₹371 cr ~15% above filed; CFO's ₹346 cr ~7% above filed; gap likely consolidated vs attributable-to-owners basis.

What moved the numbers, as management explained it

• Defense revenue grew 162% to ₹1,355 cr from a ₹517 cr base, driven by Nagastra supplies, Pinaka order conversion, and post-Operation Sindoor demand.
• International business grew 18% YoY in FY25, with all overseas subsidiaries turning profitable after years of stabilization losses.
• Other expenses held nearly flat at ₹1,073 cr (vs ₹1,071 cr prior) despite ~24% revenue growth, providing significant operating leverage.
• EBITDA margin expanded to ~27% in FY25, above 23% guidance, supported by higher-margin defense and international mix.
• Employee cost rose to ₹600 cr from ₹433 cr YoY as headcount and scale grew to support defense and international expansion.

The numbers management led with

• Defense order book: INR15,000 crores (including INR6,084-crore Pinaka order and ~INR8,500 crores international)
• FY26 capex plan: INR2,500 crores (vs INR1,200 crores in FY25)
• Maharashtra MoU: INR12,700 crores over 10 years for defense & aerospace
• FY26 defense revenue target: INR3,000 crores (~30% of mix)
• Long-term total revenue target: INR20,000 crores in ~4 years (doubling from INR10,000 crores)

Guidance on this call

Filed figures are summed from the company's own quarterly results for the whole period (EBITDA excludes other income); where one sits against what was guided is arithmetic, not a judgement.

By business

Balance sheet, capex and funding

• FY25 capex around ₹1,200 cr; FY26 capex plan ₹2,500 cr for land, new technologies, automation, and new products.
• FY26 capex to be funded via internal accruals and a little bit of debt from bankers; no equity raise planned.
• Working capital cycle improved in FY25 despite defense share rising from 9% to 18% of revenue.
• Interest and finance charges ₹116 cr in FY25 vs ₹109 cr prior; finance charges ₹29 cr in Q4 vs ₹32 cr.
• Proposed dividend ₹10 per share for FY25, up from ₹8.5 per share in FY24.
• MoU signed with Maharashtra Government for ₹12,700 cr investment in defense and aerospace over 10 years.

The industry, as management sees it

Management views the broader defense sector as entering a multi-year upcycle driven by heightened geopolitical tensions (Russia-Ukraine, Israel, India-Pakistan) and likely fast-tracking of emergency procurement. India defense budgets are expected to rise (potentially toward 5% of GDP per analyst speculation). Domestic explosives demand is correlated with cement/steel and is expected to improve from a subdued base. International markets (Turkey, Australia, Indonesia, South Africa) are expected to keep delivering 15-20% growth for Solar.

Risks management named

• Domestic explosives demand soft in line with cement/steel value chain — Q4 volumes improved vs Q3
• Defense products geopolitically sensitive — limited product-level disclosure possible
• Turkey exposure ~10% of revenue and 5-6% of profits
• Working-capital and receivable cycles across domestic vs international defense mix

Not answered directly

• Defense vs explosives margin bifurcation
• Capex breakup between defense and explosives
• Employee count
• India vs out-of-India revenue split
• Capacity utilization and asset-turno
• Peak revenue post-capex
• Bonus issue policy
• Specific missile program details (geopolitical sensitivity)
• Initiating systems revenue specifics
• Receivable cycle comparison vs peers

Asked for a number, answered without one

• Capex split between defense and explosives: Stated ₹2,500 cr allocated to different opportunities, with no segment-wise bifurcation provided.
• R&D as percentage of sales: Stated expenses not bifurcated between R&D and other items; all in regular P&L expenses.
• PAT margin split between coal and defense: Stated they treat business as one unit and give guidance based on the business as a whole.
• Total employee count: Stated employee cost shared in financials; count to be discussed later.
• Asset turnover / capacity utilization: Stated industry has thousands of SKUs with different units of measurement; not meaningful to give a number.
• Peak revenue post capex: Difficult to answer.
• India vs out-of-India revenue split: Stated they don't share those breakups.

Every question, with its answer

1. 1. Capex funding; margin bifurcation

   Ravi Naredi, Naredi Investment

   Question. How will you fund the INR2,500-crore capex for FY26 — internal accruals or debt? Also, what net profit expectation do you have for FY26, and can you bifurcate net profit margin between coal and defense separately?

   Answer, Manish Nuwal, Managing Director and CEO. INR2,500-crore capex will be arranged via internal accruals plus a small bit of debt from bankers. On margins: last year's guidance was 23% plus EBITDA; Solar achieved ~27%. International and defense are gaining momentum, so management expects to maintain or improve these margins. Management treats the business as one unit and does not give margin bifurcation between coal/explosives and defense.

   Not answered directly.

2. 2. Margin trajectory; capex allocation

   Ashish Kumar, Ampersand Capital Investment Advisors

   Question. With defense mix improving, do we expect significant margin improvement from 27%? Second, breakup of the INR2,500-crore capex — how much is for defense and how much for explosives?

   Answer, Manish Nuwal, Managing Director and CEO. Management is confident of delivering similar margins in the future based on defense and international momentum. On the capex breakup, INR2,500 crores is allocated across multiple opportunities without a defense vs explosives split being disclosed.

   Not answered directly.

3. 3. Maharashtra MoU; R&D; emergency procurement

   Umesh Raut, Nomura India

   Question. Could you share insight into the INR12,700-crore Maharashtra MoU — which areas will be targeted beyond loitering ammunitions and what is the addressable opportunity? Second, how is R&D spending evolving — percentage of sales and reliance on DRDO vs in-house? Last, on the recent news of fast-tracking INR24,000-25,000 crore of defense orders, are we expecting fast-track orders for Nagastra or Bhargavastra?

   Answer, Manish Nuwal, Managing Director and CEO. Maharashtra MoU of INR12,700 crores is over 10 years; Solar expects to invest the amount much earlier given current positioning. Product portfolio covers energetic materials, rockets, missiles, mines and loitering ammunitions, with capacity being scaled to multiple levels. R&D spend is not bifurcated — it sits within regular P&L expenses and is done in association with DRDO and in-house. On fast-tracking of defense programs, management reads the same media reports and believes defense programs will be on a fast track now.

4. 4. Order book delivery timelines

   Jyoti Gupta, Nirmal Bang

   Question. Are repeat orders expected for the defense devices used in the recent India-Pakistan conflict? Also, please bifurcate the average delivery timeline for domestic vs international orders — Pinaka is 85% in 10 years. What is the current order book and what do you expect for FY26?

   Answer, Manish Nuwal, Managing Director and CEO. Government is buying items on emergency procurement route; Solar will attempt for those it can cater. Pinaka order of INR6,084 crores is to be delivered largely over 10 years, implying INR500-600 crores annualized revenue. Energetic materials orders have 4-5 year timelines. Current order book: INR15,000 crores from defense and INR2,000 crores from non-defense — total INR17,000 crores.

5. 5. Geographic split; product pipeline; employee count

   Dipen Vakil, PhillipCapital

   Question. Can you share the split between India revenue and out-of-India revenue including defense and explosives? Second, timeline for development of Bhargavastra, Nagastra 2 and approvals? Last, what is the total employee count?

   Answer, Manish Nuwal, Managing Director and CEO. Out of INR17,000 crores order book, INR15,000 crores is defense, of which INR8,000 crores is from India and balance from international. Nagastra 1 has repeat orders expected; Nagastra 2 and 3 should receive orders in the coming year. Bhargavastra has passed two successful trials and is expected to be ready in CY2025. Employee count was deferred — management said it would discuss later.

   Not answered directly.

6. 6. Defense budget; equity raise; BrahMos

   Raj Rishi, Development Consultants Private Limited

   Question. If defense spending rises from 2% to 5% of GDP, how will it benefit? Do you have any equity raising plans? How entrenched are you with the BrahMos program?

   Answer, Manish Nuwal, Managing Director and CEO. Out of INR15,000 crores defense order book, INR8,500 crores is domestic and INR6,500 crores is international. Any increase in defense budget offers a big opportunity to expand both in India and outside India. INR2,500-crore capex can be met with current cash position plus internal accruals — no equity raise. On BrahMos, Solar is supplying intermediate products and is part of the program but cannot share more.

   Partly answered.

7. 7. Geopolitical opportunity; BrahMos export

   Het Choksey, Deven Choksey

   Question. Given the success of products in Operation Sindoor and several countries showing interest in acquiring BrahMos, what is your outlook on the BrahMos program and how can your new ammunitions contribute?

   Answer, Manish Nuwal, Managing Director and CEO. Solar has been investing in defense products and facilities for over a decade and is part of the global supply chain. Given escalating geopolitical conflicts (Russia-Ukraine, Israel, India-Pakistan), defense investment is set to grow. Solar expects to participate in many opportunities and become part of security solutions going forward.

8. 8. Bonus issue

   Amit Vijay Saoji, A1 Investments

   Question. Is there any policy for a bonus issue?

   Answer, Manish Nuwal, Managing Director and CEO. Management acknowledged investors are expecting a bonus and said it will address this wish at an appropriate time. No commitment made.

   Not answered directly.

9. 9. Order book execution; working capital intensity

   Hardik Rawat, IIFL Capital

   Question. In how many years can the INR15,000-crore defense order book be executed? Also, how do you see net working capital intensity trending as defense mix rises to 30%+?

   Answer, Manish Nuwal, Managing Director and CEO. Out of INR15,000 crores, INR8,500 crores is international (to be delivered in 4-5 years); domestic INR6,500 crores apart from Pinaka (INR6,084 crores over ~10 years). INR3,000-crore defense revenue in FY26 is not a stretch. On working capital, despite defense mix rising from 9% to 18%, the cycle improved. Management is not concerned and does not want to compare itself to peers.

   Not answered directly.

10. 10. Explosives outlook; international subsidiaries; initiating systems

    Chirag Muchhala, Centrum Broking

    Question. What is the outlook for FY26 in the explosive business (domestic and overseas), and how are key geographies like Australia, Indonesia, South Africa progressing along with the Problast acquisition? Last, what is the revenue from initiating systems?

    Answer, Manish Nuwal, Managing Director and CEO. Domestic explosives demand was subdued earlier in line with cement/steel; Q4 showed 14% growth and FY26 should be good. International grew 18% in FY25; combined explosive + international growth guided at 15-20% for FY26. All overseas subsidiaries have been turned around — now profitable across geographies. Initiating systems contribute <5% of total revenue; management declined to share specifics.

    Not answered directly.

11. 11. Emergency procurement; new geographies

    Mohit, ICICI Securities

    Question. Does your INR3,000-crore defense revenue guidance for FY26 include the benefit of emergency procurement orders, or is that over and above? Also, how are Kazakhstan and Saudi performing, and any new geographies?

    Answer, Manish Nuwal, Managing Director and CEO. Management factors all such developments into planning and gives a prudent/conservative view. INR3,000 crores should be considered the ballpark for FY26 defense. Saudi is being set up; Kazakhstan plant almost finished, operations in 3-4 months. Thailand and Indonesia operational; Tanzania and Zimbabwe commissioning/expanding; Ghana and Nigeria expanding.

12. 12. Turkey exposure

    Kunal Tokas, Fair Value Capital

    Question. What is the exposure to Turkey — business done in Turkey or through Turkey — and the outlook?

    Answer, Manish Nuwal, Managing Director and CEO. Out of total FY25 revenue of ~INR7,500 crores, Turkey contributes less than 10% and profits around 5-6% of total profitability. No further commentary offered.

13. 13. Capacity utilization; capex payback; peak revenue

    Anirudh Singhi, Dalal & Broacha Portfolio Managers

    Question. What is the current capacity utilization? When will the INR2,500-crore capex come into production, and what will be the asset turnover? What could be the peak revenue post-capex?

    Answer, Manish Nuwal, Managing Director and CEO. INR2,500 crores is across multiple initiatives — land, new technology, automation, new products — each with varying payback (1-5 years). Asset turnover cannot be meaningfully given because Solar has thousands of SKUs with different units. Peak revenue post-capex was marked as 'difficult to answer.'

    Not answered directly.

14. 14. Long-term defense revenue target; missile programs

    Rakesh Roy, Boring AMC

    Question. What is the FY28/29 defense revenue target? Apart from BrahMos/Pinaka/Akash, are you targeting or expecting any other missile program?

    Answer, Manish Nuwal, Managing Director and CEO. FY26 defense target INR3,000 crores; share rising to 30% of total revenue. Targeting ~INR8,000 crores from defense in the next 4-5 years. Solar wants to be part of various ATGMs and air defense missile systems; specific product-level commentary is limited due to geopolitical sensitivity. Big commercial orders will be shared as received.

    Not answered directly.

15. 15. Long-term doubling target

    Bharat Shah, ASK Investment Managers Limited

    Question. Is it reasonable to assume the INR10,000-crore turnover will double in 3 years to INR20,000 crores by FY29, given the opportunity and capacity?

    Answer, Manish Nuwal, Managing Director and CEO. Yes — over the past 20 years revenue grew 50x, EBITDA 55x and PAT 58x; over 5 years revenue 3x+ and PAT 4.5x. Management is confident of doubling revenue from INR10,000 crores to INR20,000 crores in ~4 years unless there is an economic shock. They are aiming for that target.

16. 16. M&A pipeline; raw material outlook

    Pratik Mukasdar, RNL Wealth Private Limited

    Question. Any update on the acquisition opportunity disclosed earlier? Also, raw material prices have been low — are you stocking up or is the price trend expected to stay stable?

    Answer, Manish Nuwal, Managing Director and CEO. Solar has a dedicated M&A team looking at global options for mergers/amalgamations that fit business and deliver decent return on capital employed — updates to be shared when material. On raw materials, some prices are on the lower side, but there is typically a lag in pass-through. Over 20 years EBITDA margins have stayed healthy and management knows how to navigate cycles.

Topic by topic, in the order it was spoken

In their words