Solar Industries Eyes Defence, Global Expansion for Explosive Growth

Solar Industries, India's largest industrial explosives manufacturer, is pivoting from its core mining-centric business towards significant expansion in defence manufacturing and overseas operations. The company, trading at ₹13,071 with a market capitalization of ₹1,18,280 Crore, aims to reduce earnings volatility and improve cash-flow consistency through these strategic moves.

Explosives Backbone Holds Steady

With an estimated 25-30 percent domestic market share, Solar Industries' explosives division remains a strong cash generator. Mining, particularly coal, accounts for approximately 80 percent of explosive consumption in India. Despite short-term disruptions, underlying demand drivers from coal production and infrastructure development remain robust. This segment is expected to continue delivering steady cash flows.

Defence: A New Growth Frontier

The company's decade-long foray into defence has reached a critical scale-up phase. Solar Industries has developed capabilities across high-energy materials, propellants, and complex missile systems. A substantial defence order book of approximately ₹16,600 crore, including for the Pinaka rocket systems, provides strong revenue visibility. Management projects defence revenues to approach 30 percent of total revenue by FY26, up from just over one-fifth currently.

Global Footprint Expands

Overseas operations contribute nearly 38 percent of projected FY25 revenues, with manufacturing and distribution networks established across Africa, Southeast Asia, and Europe. Localization efforts provide cost advantages and deeper customer integration. Solar Industries is actively exploring new markets, expecting overseas business to drive significant earnings growth, building on its historical compounded annual growth exceeding 20 percent.

Capex Fuels Future Ambitions

Solar Industries has outlined an elevated capital expenditure plan of ₹2,500 crore for FY26. These investments are earmarked for expanding defence production, increasing explosives capacity, and supporting overseas ventures. This capex cycle is strategically aligned with order-book visibility, ensuring incremental investments are directed towards enhancing execution capabilities and scaling operations to meet future demand.

The stock trades at approximately 45 times its fiscal 2028 estimated earnings. Analysts view this valuation as reasonable, considering the shift in business mix towards higher-margin defence and export segments. The evolving profile positions Solar Industries as a diversified defence manufacturing entity rather than solely a cyclical explosives company.