Solar Industries (I) Q2 FY26 earnings call

Where management's figures differ from the filing

• EBITDA: said ₹582 cr (Q2 FY26); filed ₹551.85 cr excl other income. Company-reported EBITDA includes other income (~₹29 cr); filed definition excludes it, hence the gap.
• Net profit (PAT): said ₹361 cr (Q2 FY26); filed ₹344.97 cr (to owners). Filed PAT is attributable to owners; company's ₹361 cr PAT includes minority interest (~₹16 cr).

What moved the numbers, as management explained it

• Domestic mining and infra volumes hit by heaviest monsoon in years; CIL basket share fell to 8% from 10%, HNI to 8% from 11%.
• Defense revenue jumped 57% YoY to ₹500 cr in Q2; growth came from existing order execution as Pinaka commercial sales yet to start.
• International business grew 21% YoY to record ₹960 cr, led by turnaround in South Africa and ramp-up in Ghana, Nigeria and Tanzania.
• EBITDA of ₹582 cr includes other income (~₹29 cr), pushing reported margin to ~28%; excluding other income, margin was 26.5%. (accounting)
• Employee cost rose to ₹195 cr from ₹145 cr YoY; depreciation up to ₹61 cr from ₹44 cr on higher capex run-rate; raw material at ₹988 cr vs ₹843 cr.

The numbers management led with

• Defense order book: INR15,500 crores
• Pinaka rocket order book component: INR6,000 crores
• International defense order book component: INR8,000 crores
• Defense revenue H1 FY26: INR900 crores (+79% YoY)
• International business Q2 FY26: INR960 crores (highest ever quarterly, +21% YoY)

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 Fri 8 Aug 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

• Capex H1 FY26 ₹760 cr vs FY26 guidance of ₹2,500 cr; management flagged likely deferment due to monsoon-related delays.
• Depreciation ₹61 cr in Q2 vs ₹44 cr YoY on increased capex base; H1 depreciation ₹117 cr vs ₹84 cr.
• Working capital stretched; H1 FY26 operating cash flow ₹95 cr vs ₹545 cr in H1 FY25 due to inventory build and slower collections.
• Working capital days targeted to normalise to ~90 days by March 2026.
• Defense order book ₹15,500 cr (~₹8,000 cr from international markets) provides multi-year revenue visibility.
• Raw material consumption ₹988 cr in Q2 (vs ₹843 cr); H1 ₹2,082 cr vs ₹1,713 cr; no debt or cash update was given on the call.

The industry, as management sees it

Management expects the India explosives market and overseas market to each grow around 15%, with quarterly fluctuations between regions; global ammunition market is in shortage with structural demand for high-energy materials. Government remains highly committed to border security with strong policy support for domestic defense suppliers, providing multi-year tailwinds for indigenisation.

Risks management named

• Domestic explosives demand impacted by heavy monsoon affecting coal mining and OB removal in Q1 and Q2
• H1 operating cash flow weak at ~INR95 cr due to working capital build from production ramp-up
• Currency availability constraints in African markets
• Entry restrictions in new geographies
• Initial ramp-up challenges in Pinaka due to product complexity

Not answered directly

• FY27 defense revenue guidance (deferred to annual call)
• Loitering munition and counter-drone market size
• Rudrastra and Male UAV program progress
• Specific quantum of defense opportunities and emergency procurement pool
• Maharashtra INR12,700 cr MOU capex phasing
• 155mm shell in-house rationale
• India explosives market share
• Housing and infra segment-specific guidance for FY26

Asked for a number, answered without one

• Loitering munition market size: Management said it is hard to give any firm number or indicative target due to security sensitivity around defence procurement plans.
• India explosive market share: Management said it does not have any specific number to share on this front.
• Defense emergency procurement order quantum: Management declined, saying whatever orders are received are shared with shareholders; no quantum provided.
• FY27 defense revenue guidance: Referred analyst to the annual con call for guidance on the next financial year.
• Final FY26 capex number: Management said it will share the final capex number at the end of the financial year.
• Counter-drone systems (Bhargavastra/Nagastra/Rudrastra) market potential: Management said total potential is yet to be confirmed by end users and it does not have a specific answer at this stage.
• Australia market potential: Management said it does not give market potential or guidance country-wise; reiterated 15% annualized growth for international.

Every question, with its answer

1. 1. Defense ramp-up and international expansion

   Amit Dixit, Goldman Sachs

   Question. First question on defense: you said Q3 would herald the new growth phase. What new developments can we expect, and what is the state of the global ammunition industry as you see it? Second, on international business, which new geographies might you penetrate in the next 6-9 months and which specific geographies drove the stellar performance this quarter?

   Answer, Manish Nuwal, Managing Director and CEO. On international markets, we have been ramping up facilities in countries where we are present, including turning around South Africa from losses to profits; South Africa, Turkey, Ghana, Nigeria, Tanzania all doing well. Efforts on to operationalise Australia, Kazakhstan and Saudi Arabia in 6-12 months. On defense, we crossed INR500 cr this quarter which was an annualised number a year ago; order book of ~INR15,000 cr from defense with Pinaka ramp-up happening. Commercial sales of Pinaka will start from Q3, other products also ramping up from Q3. We should cross the 4-figure mark from defense quite soon.

   Follow-up. Global ammunition market seems in shortage; what is the flavor on the high-energy materials opportunity?

   Answer. Out of INR15,500 cr (defense order book), ~INR8,000 cr is from international markets and we are likely to receive more orders. There is a big shortage of these products in global ammunition markets; we have qualified many products as raw material intermediates or finished products; we are well placed to serve India and global markets.

2. 2. Defense product pipeline and order book execution

   Vikash Singh, ICICI Securities

   Question. Key upcoming projects in India where focus is being put. Have we heard of any tie-ups with global partners for these technically difficult projects? Second, the asking rate for FY26 defense revenue is almost double H1 — what else besides Pinaka drives it, and any update on the 155mm shell project? Have we received all approvals?

   Answer, Manish Nuwal, Managing Director and CEO. Solar has historically had very few international tie-ups; we develop products on our own or with DRDO. We are comfortable with this model. On focus products: Pinaka (including guided Pinaka where commercial orders expected in 1-2 quarters), energetic materials (plenty of orders received), medium caliber 23/30/40 mm (participated in RFPs, awaiting orders), loitering munitions, counter drone systems and missile programs including Kusha (trial orders received). On 155mm shells: trial production started, supplies for technical qualification underway, commercial production from Q4. Order book of INR15,500 cr with INR6,000 cr from Pinaka; the balance INR8,000 cr to be materialised over 3-4 years. Should cross INR1,000 cr in next two quarters and reach the annual guidance of INR3,000 cr from defense.

   Follow-up. On 155mm shells, have we completed and received orders?

   Answer. Trial production has started and we will start supplying for technical qualification. Updates will be shared as time progresses.

3. 3. Loitering munitions and counter-drone opportunity

   Garvit Goyal, Nvest Analytics Advisory LLP

   Question. On loitering munitions — a recent trial had a Hyderabad-based company participate and demonstrate capabilities; they reportedly won the trial. Can you explain dynamics in this space, the demand outlook and competitive intensity given new entrants outperforming? Also, what is the size of opportunity from loitering munitions over the next 2-3 years?

   Answer, Manish Nuwal, Managing Director and CEO. We have successfully supplied loitering ammunition products last year (used in recent conflicts), with repeat orders received. On counter drones, specifically Bhargavastra, we are developing and initial trials have been successful; more trials likely in coming months and field trials expected by March '26. Confident these products are game changers for border security. Cannot comment on what other companies are doing. On market size, since these are sensitive defense products, no one shares procurement numbers; we cannot give any firm or indicative number.

   Follow-up. This year target is INR3,000 cr from defense; what is next year's tentative number?

   Answer. You can refer to my annual quarterly call; that will give you guidance on that side.

   Not answered directly.

4. 4. Maharashtra MOU capex and FY26 top line potential

   Ravi Naredi, Naredi Investments

   Question. For the space plan work, have we hired the right person to complete the project? Have we started the project? Second, INR12,700 cr with Maharashtra government — have we started any capex on this? In this 6 months, how much capex was done out of the INR12,700 cr? And given the FY26 defense target of INR3,000 cr, can FY26 top line cross INR10,000 cr?

   Answer, Manish Nuwal, Managing Director and CEO. Hiring: we try to hire right people always; over 27 years we have delivered on performance, though sometimes we have to take wrong people away. The INR12,700 cr MOU with Maharashtra government is not a 1-year program — it is for a 10-year program; capex for defense is part of that. Cannot break up specific quantum for 6 months; please refer to annual con call numbers. We still believe the company should reach the INR10,000 cr revenue number.

   Not answered directly.

5. 5. Defense new product development pipeline

   Dipen Vakil, Phillip Capital

   Question. First, any expected orders in near term and status on new product development? Bhargavastra field trials expected March '26 but any other new products under development? Any quantum of opportunities being looked at? Also updates on Rudrastra and the Male UAV platform — what kind of progress are we seeing?

   Answer, Manish Nuwal, Managing Director and CEO. Bhargavastra field trials by FY26 as captured in media; 155mm shell commercial production in next 2 quarters after technical qualification. Many other programs participated in; will share as orders come. Fresh orders expected in coming weeks/months. Cannot provide any specific quantum for opportunities being looked at. On Rudrastra and Male UAV, exact progress is shared with MOD directly; cannot share on these strategic platforms.

   Not answered directly.

6. 6. International business resilience and government defense stance

   Pratik, RNL Wealth Private Limited

   Question. International business is a large share of revenue. Given the tariff noise and global context, what is the real business environment for the international business across verticals? And how is the government stance on defense expenditure — has it changed or become more positive?

   Answer, Manish Nuwal, Managing Director and CEO. Plenty of noise around tariffs in international business but all countries are not impacted at once; impacts come in one country at one quarter, another at another quarter. We have diversified products, customers and countries; this is why we could deliver despite mining growth being negative in India in Q2 and currency availability constraints in African markets. Aiming ~15% growth on annualised basis and still believe it is doable. On government: government is quite serious on border security, putting lots of thrust under Nirbhay program with plenty of policy support. Defense revenue rose from INR250 cr (annualised 3 years back) to INR500 cr in a quarter now, targeting INR3,000 cr annualised — all due to government support and high priority initiatives.

7. 7. Anti-drone development, emergency procurement, country expansion cycle

   Harshit Kapadia, Elara Capital

   Question. On the anti-drone system you have developed, is it soft kill or hard kill — which has been approved and which has had trials? By what timelines — FY27? Second, update on emergency procurement — have we received all orders or are more pending? Any total quantum of the pool that could come based on product usage? Third, when entering a new country for mining operations, how does the scale-up happen? What is the cycle? And India's market share on the explosive side?

   Answer, Manish Nuwal, Managing Director and CEO. Anti-drone: developing hard kill solution currently, and very soon a mix of hard kill and soft kill solution. Timelines: defense products take their own time; need to be patient. On emergency procurement: cannot answer specifics; orders being shared with shareholders already; cannot share quantum of the pool. On country entry: no firm timeline because every market has different dynamics; normally 3-4 years. On India market share: we don't have a specific number on this.

   Not answered directly.

8. 8. Domestic growth outlook and working capital

   Chirag Muchhala, Central Broking

   Question. First, on domestic market — H1 impacted by heavy rains. Can we still expect double-digit growth for industrial explosives in domestic market in second half? Second, H1 operating cash flow is relatively lower (~INR95 cr vs INR545 cr last year H1) — key reasons and outlook? Will double-digit domestic growth hold up, and if not can annual guidance be offset by overseas? And going forward with defense scaling up, is 90 day working capital cycle still sustainable?

   Answer, Manish Nuwal, Managing Director and CEO. Coal India mining and OB removal impacted heavily by monsoon, hitting explosives demand. Ramping up production of various products, working capital got impacted; will fall in line of ~90 days by March '26. Don't see it as much of an issue — part of business cycle. Q3 and Q4 collections improve. On coal demand: Q1 and Q2 both hit (mild summer, early rains in May; strong rains in Q2); expect more demand from power sector in second half. On growth: India explosives market and overseas India market should grow around 15%; sometimes India 10% / overseas 20%, sometimes reverse. India should grow at double-digit comfortably based on H2 demand projections. On 90 day working capital: defense grew from INR250 cr annualised to INR3,000 cr target yet we are confident on maintaining ~90 days.

9. 9. FY26 capex pacing and housing/infra outlook

   Varun Jain, Dolat Capital

   Question. In H1 you have done capex of INR760 cr vs guided INR2,500 cr for FY26. Will you do INR2,500 cr in FY26 and in H2? Where all will it go? Is FY26 capex around INR2,000 cr? In H1, housing and infra was hit more than Coal India — indication for H2? Any housing and infra specific guidance for FY26?

   Answer, Manish Nuwal, Managing Director and CEO. We faced challenges due to heavy monsoon; things not happening at pace wanted, so some deferment of capex for this year. Will share final capex number at end of financial year. On housing/infra: dullness in H1 but from Q3 and Q4 we will see a surge in demand and good growth from that sector. Sector-specific guidance not provided — questioned why interest in per-sector guidance.

   Partly answered.

10. 10. Counter-drone system pipeline and Australia market

    Vishal Biraia, Bandhan AMC

    Question. Looking at counter drone systems — Bhargavastra, Nagastra, Rudrastra — can you give the potential market size for each or combined? Do we have approvals already? How big would be the market in Australia that we could cater in a couple of years once we establish?

    Answer, Manish Nuwal, Managing Director and CEO. Nagastra: developed, commercial order received, successfully supplied, repeat orders in place. Bhargavastra and Rudrastra: in development phase. Will share updates after qualification and commercial orders. Total potential market for these systems: yet to be confirmed by end users on final requirement; no specific answer at this stage. On Australia: don't give market potential or country-wise guidance. International growth target ~15% annualised.

    Not answered directly.

11. 11. Loitering munition market and competition

    Siddharth Maymuri, Caprize

    Question. Given advancements in loitering munitions, share perspective on current market scenario, especially low-range LMs like Nagastra. Also throw light on domestic competitors and market size in near to medium term.

    Answer, Manish Nuwal, Managing Director and CEO. The same question has already been asked by another participant. Once this con call ends, please refer to the conference call transcript where this question has already been answered.

    Not answered directly.

12. 12. International competition dynamics and 155mm shell vertical integration

    Aditya Tambi, Habrok Capital

    Question. On Australia, there is a player already operating there internationally. Do we offer the same product to customers or different products — is that company competition or are we offering other products? What is the thought process when entering a new country — compete on price, on new capacity? Also on 155mm shells, why decide to make it in-house rather than just supplying energetic materials to other players making shells?

    Answer, Manish Nuwal, Managing Director and CEO. Product offering depends on customer requirement; sometimes specific customisation for mining application, sometimes generic — combination of both. On competition: when customer floats RFP, multiple players participate and customer decides on techno-commercial basis covering all points. Sometimes overall value proposition matters (e.g., Coal India and Singareni work on L1 basis). On 155mm shells rationale for in-house: cannot comment on this question.

    Not answered directly.

13. 13. EBITDA margin trajectory and 155mm vertical integration

    Sanjaya Satapathy, Ampersand Capital

    Question. With revenue mix shifting towards defense, is there upside to the 27-28% EBITDA margin levels seen earlier? And on 155mm, will it be mostly explosive side or full value chain manufacturing? Is the strategy of moving beyond assembly and explosives into mechanical/electronics being followed across new products?

    Answer, Shalinee Mandhana, Joint CFO. EBITDA margin for the quarter stands at around 28%. Happy to announce we performed as guided at the beginning of the year. On margins, quarter-to-quarter we operate in many sectors and geographies; average margin and potential covered for the year is around 27%. On 155mm: intention is to make complete round of 155mm and we are moving towards that. On vertical integration strategy: it's a combination — sometimes hardware, sometimes aligning with critical stakeholders or supply chain partners. Cannot answer in a generalised fashion.

Topic by topic, in the order it was spoken

In their words