Solar Industries (I) Q1 FY26 earnings call

Where management's figures differ from the filing

• EBITDA: said ₹564 cr, +19% YoY (~26.2% margin on revenue of ₹2,154 cr); filed ₹534.91 cr ex-other income, margin 24.8%. Management's stated EBITDA includes other income of ₹29.26 cr; filed EBITDA excludes other income per definition.
• Net profit (PAT): said ₹353 cr, +17% YoY; filed ₹338.70 cr to owners, +18.2% YoY. Stated figure is total consolidated PAT; filed figure is profit attributable to owners; gap reflects minority interest (~4.2%).

What moved the numbers, as management explained it

• Defense revenue grew 115% YoY to ₹418 cr, becoming a material growth driver alongside international +43% YoY to ₹826 cr.
• Early monsoon and lower heatwave reduced domestic coal mining volumes, weighing on Coal India (-3% YoY) and H&I (-12% YoY) revenues.
• Employee cost rose to 8.53% of sales from 7.78% and other expenses climbed to 15.85% from 13.90%, partly due to expansion and FX/hyperinflation impact.
• Hyperinflation accounting in Turkey added ~₹18 cr loss to P&L; combined FX/hyperinflation drag of ~1.5% on EBITDA margin. (accounting)
• Raw material cost improved to 50.8% of sales from 51.65%, partially offsetting other headwinds.

The numbers management led with

• Defense order book: INR15,000 crores+ total; international ex-Pinaka ~INR8,000 crores
• Defense revenue (Q1 FY26): INR418 crores vs INR194 crores, +115% YoY
• FY26 capex commitment: INR2,500 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.

What changed since the Wed 21 May 2025 call

Guided on earlier calls, and what was filed

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

• Net cash position of ~₹50 cr as of the call, down from ₹100+ cr as of 31 March 2025; modest debt levels.
• FY26 capex planned at ₹2,500 cr vs ₹1,200 cr in FY25; funded via internal accruals plus modest debt.
• Depreciation rose to 2.6% of sales from 2.37% YoY on capacity additions; no fresh equity dilution planned.

The industry, as management sees it

Mining and infrastructure demand expected to recover post-monsoon as water availability supports uninterrupted thermal power generation. Defense and ammunition export demand described as 'red hot' with India pursuing a global supply chain partner role; multiple high-category drone tenders (including a recent AON) point to sustained pipeline.

Risks management named

• Domestic mining volumes hurt by early monsoon and below-normal heatwaves impacting thermal power demand
• Other expenses and depreciation rising as product portfolio and capital base scale up
• FX volatility and Turkey hyperinflation accounting drag (combined ~1.5% on Q1 EBITDA margin)
• Staff cost rising ~70 bps YoY as workforce expands for new product lines

Not answered directly

• Drone opportunity sizing and long-range UAV pipeline
• Internal R&D timelines for higher-category drones and in-house engine development
• Defense order book seasonality
• Sustainability of emergency-procurement-driven demand
• Inclusion of 155mm shell in 4-5 year defense revenue target
• Pricing competitiveness vs foreign drone OEMs

Asked for a number, answered without one

• Drone/UAV opportunity size beyond Nagastra: Management said it is difficult to quantify and that they have to wait for the real opportunity or potential of this segment to unlock.
• Higher-range drone value and commercial pricing: Management said they have not yet reached the stage to comment on the commercial part; details to be shared at an appropriate time.
• Sustained drone demand post emergency procurement: Management declined to comment, saying it is difficult to comment on this question.
• UAV/drone order opportunity size for Solar: Management said it is a big opportunity with plenty of participants, and Solar is one of those interested to participate, but did not quantify.

Every question, with its answer

1. 1. Medium-term guidance, Europe EAM

   Vikash Singh, ICICI Securities

   Question. Medium-term outlook of INR200 bn revenue and INR80 bn defense — does this include the Europe EAM opportunity, and how big is it for you?

   Answer, Manish Nuwal, Managing Director and CEO. Stands by the 4-5 year plans shared in the last annual results call and asked analyst to refer to those numbers; did not quantify the Europe EAM opportunity.

   Follow-up. What is the opportunity size for INR200 cr UAV mail drone orders and where is Solar placed?

   Answer. Described as a big opportunity; plenty of companies will participate and Solar is also interested.

   Not answered directly.

2. 2. 155mm shell production

   Vikash Singh, ICICI Securities

   Question. What is your standing on 155mm shell production?

   Answer, Manish Nuwal, Managing Director and CEO. Facilities exist, work has begun, and commercial production will start very soon.

   Follow-up. Is the 155mm shell included in the INR80 bn defense revenue target over 4-5 years?

   Answer. Reiterated that the 4-5 year numbers should be referenced from the previous quarterly con call; did not give a direct yes/no.

   Not answered directly.

3. 3. Defense commercialization, exports

   Amit Dixit, Goldman Sachs

   Question. Bhargavastra and Rudrastra have been tested — what is the commercialization timeline? And how is ammunition export demand trending given how 'red hot' the market is?

   Answer, Manish Nuwal, Managing Director and CEO. Qualification is a couple of quarters away; commercialization follows qualification. Order book is INR15,000 cr total with ~INR8,000 cr international ex-Pinaka; commercialization has begun but ramp-up will take a couple of months. Improved defense numbers expected from Q2 or Q3, in line with annual guidance.

   Follow-up. Which international markets are doing well — Australia, Indonesia? Status on Saudi Arabia and Kazakhstan?

   Answer. Subsidiary-wise detail is in the annual report. The above-normal international momentum is mainly from South Africa, where all subsidiaries are doing well.

   Partly answered.

4. 4. Capex pacing

   Nitin Arora, Axis Mutual Fund

   Question. Exports have been strong — is there a chance of upgrading the INR2,500 cr FY26 capex given strong demand from both domestic and exports?

   Answer, Manish Nuwal, Managing Director and CEO. INR2,500 cr FY26 capex reiterated; said 'we just finished the annual call 1.5 months back. In just 5 days, nothing changed' — implicitly rebuffed the upgrade suggestion.

   Not answered directly.

5. 5. Drone portfolio expansion

   Rahil Dasani, MAPL

   Question. Why the move from smaller Nagastra into higher range/payload drones via ZAL? Are we seeing demand for 500-1,000 km range drones and can you quantify?

   Answer, Manish Nuwal, Managing Director and CEO. Nagastra 2 and 3 have started for special applications; entry into higher-altitude, longer-endurance drones is a natural progression. Outcomes will be known over the next couple of years.

   Follow-up. Can you quantify the drone opportunity given close government connect?

   Answer. 'It will be very difficult for us to quantify this opportunity. We have to wait for the real potential of this segment to unlock.'

   Not answered directly.

6. 6. Defense demand sustainability

   Rahil Dasani, MAPL

   Question. How worried should we be about demand sustainability post emergency procurement, which historically fades in 1-2 years?

   Answer, Manish Nuwal, Managing Director and CEO. 'Difficult for me to comment on this question.'

   Not answered directly.

7. 7. Domestic explosive volumes

   Ankur, HDFC Life

   Question. Volumes for the domestic explosives business in Q1 and full-year volume growth outlook given unseasonal rains?

   Answer, Shalinee Mandhana, Joint Chief Financial Officer. Company has discontinued sharing domestic volume data as a policy, since domestic contributes only ~40% of revenue. Manish Nuwal added that 15% volume growth is being targeted for the year but acknowledged early monsoon and lower heatwaves hit coal mining demand; expects strong post-monsoon recovery.

   Follow-up. Full-year FY26 revenue guidance — is INR10,000 cr total with INR3,000 cr defense still the right number? Which defense products will drive growth?

   Answer. Reiterated INR10,000+ cr FY26 with INR3,000 cr defense and INR7,000 cr non-defense. Pinaka rockets to drive the defense growth, beginning Q2 end or Q3 start.

8. 8. Drone competition and pricing

   Yogansh Jeswani, Mittal Analytics Private Limited

   Question. Bigger players like New Space and Tata are entering drones — how are you thinking about competition and pricing for longer-range drones?

   Answer, Manish Nuwal, Managing Director and CEO. Higher-category drones are still in development; once qualified, commercial positioning will follow. Declined to comment on competitors' challenges. On pricing, declined to give specifics but noted Solar was the lowest bidder on Nagastra.

   Follow-up. Will Solar be cheaper than existing foreign drones? And what are internal R&D timelines, including in-house engine development?

   Answer. Has not reached the stage for commenting on commercial pricing. On timelines and engine readiness: 'we will share all the details at an appropriate time. So you need to wait for that.'

   Not answered directly.

9. 9. Defense order book seasonality

   Abhishek Mehra, DAM Capital Advisors Limited

   Question. Historically Q1 defense inflows have been lower with bigger order book jumps later — is that read correct?

   Answer, Manish Nuwal, Managing Director and CEO. Called the question irrelevant; said order inflow trajectory has no predictable quarterly pattern and is shared with investors as and when received.

   Follow-up. In tenders, is there sharing of orders between L1 and L2 bidders?

   Answer. Each tender has its own terms — sometimes 60-40, sometimes 70-30, sometimes single winner; varies from tender to tender.

   Partly answered.

10. 10. Overseas markets expansion

    Chirag, Centrum Broking

    Question. Overseas markets revenue outlook after the strong Q1, and will the Kazakhstan and Saudi Arabia plants start commercial production this year?

    Answer, Manish Nuwal, Managing Director and CEO. Kazakhstan plant targeted to start by October this year. International currently 37-38% of revenue; guiding INR3,500-4,000 cr from international in FY26 against INR10,000 cr total. Did not address Saudi Arabia specifically.

    Partly answered.

11. 11. Hyperinflation accounting

    Bharat Shah, ASK Investment Managers Limited

    Question. Hyperinflation accounting in Turkey — INR17.5 cr P&L loss and INR9-odd cr reserve transfer; will this be a recurring feature?

    Answer, Shalinee Mandhana, Joint Chief Financial Officer. Turkey hyperinflation loss of ~INR18 cr hit P&L and ~INR9 cr went to reserves in Q1; per accounting standard, noncash. Also flagged global forex volatility impacted EBITDA by ~1.5% in Q1 vs ~0.35% in the prior year.

    Follow-up. Given 25% revenue growth, higher defense and international mix, is FY26 margin expected to be higher than last year? And what is the net cash/gross debt position?

    Answer. Manish Nuwal said ~27% EBITDA margin is a 'reasonable expectation' despite higher staff cost, other expenses, and depreciation from scaling up. Shalinee Mandhana confirmed net cash position of INR50 cr as of Q1 FY26 vs INR100+ cr at 31 March 2025.

12. 12. None

    Pratik Mukasdar, RNL Wealth

    Question. No substantive question — congratulated on results and indicated prior questions covered his queries.

    Answer, Moderator, Moderator. Moderator noted no further questions and handed over to management for closing.

Topic by topic, in the order it was spoken

In their words