Driving force behind explosives industry expansion

Solar industry: TThe global industrial explosives industry is expected to grow annually and will be valued at over $16 billion by 2028. According to Mint, the Indian explosives industry is growing rapidly with annual usage of 500,000 tonnes and is expected to reach $159.2 million by 2028.

The robust growth of the explosives industry can be attributed to the rapid surge in demand, especially in the mining, construction and infrastructure sectors. Explosives play a pivotal role in these industries and have become an integral part of various development projects.

Moreover, the sector’s expansion into defense and space missions has further accelerated its upward trajectory. The increasing reliance on explosive technologies in these important sectors significantly contributes to the overall growth of the industry. Let us zoom in on one particular company in the sector, Solar Industries India Ltd., along with its growth prospects in the explosives manufacturing sector.

Solar Industries is a leading manufacturer of Bulk Explosives, Packaged Explosives and Initiation Systems, with a total order volume of Rs. 480.2 billion won. The company’s stock has returned a stellar 200% over the past two years. Let’s learn more about Solar Industries’ business.

Solar Industries India Ltd.

business overview

Established in 1995, Solar Industries India Limited has evolved from a local manufacturer to a global player in the industrial explosives sector. They have established one of the most integrated ammunition facilities in the world. The company is the first Indian company to exceed 300,000 tonnes of explosives production annually.

In the financial year 2009-10, Solar Industries India Limited expanded its operations into the defense sector. The company has diversified its manufacturing capabilities to include high energy explosives, delivery systems, ammunition charges and pyros fuses for the defense industry. Additionally, Solar Industries India Limited has expanded its manufacturing presence to international locations including Nigeria, Zambia, Ghana, South Africa, Turkey, Tanzania and Indonesia.

The company’s customer base includes large corporations such as Coal India Limited, Vedanta Group, Tata Group, Steel Authority of India Larsen & Toubro (L&T), GMR Infrastructure, Reliance Infrastructure, Adani Group, National Highways Authority of India (NHAI), etc.
The company’s total exports stood at Rs 2,561 crore in FY23, up 114 per cent from Rs 1,197 crore in FY22. Let’s take a look at the products the company sells and its FY2 performance.

Performance by product

The company manufactures a variety of products, including industrial explosives, explosion initiators, and high-energy materials for defense applications. Let’s take a quick look at the core products.

industrial explosives

Solar Industries is one of India’s largest industrial explosives manufacturers with over 40 years of expertise in the field. Industrial explosives consist of detonators, boosters and bulk explosives used in mines and infrastructure projects.

With over six manufacturing facilities equipped with advanced automation technology, Solar is a household name among public and private mining companies in the country.

explosive device

Solar Industries specializes in explosive initiator devices used to trigger detonation sequences, such as electronic and non-electrical detonators and delay devices, which have wide application across industries.

Through a strong R&D focus, Solar has launched several patented products such as the Smart Shot PlusTM non-electric trunk delay detonator, which provides a programmable, weatherproof delay for improved detonation efficiency. The extensive range meets requirements across mining, road construction, hydropower projects and seismic exploration activities.

Defense products

As India’s defense capabilities have improved, Solar Industries has branched out into manufacturing specialized products for the defense sector, including aerial bombs, grenades, warheads, torpedoes and explosive cartridges. The company recently partnered with DRDO to produce the Pinaka multi-barrel rocket launcher.

Explosives are Solar’s largest product line, accounting for 75 to 80 percent of total sales. This segment saw a slight increase in share from 76% to 78% between FY22 and FY23. The initial system comprised of items enabling the explosion sequence decreased from a 15% revenue share in FY22 to 13% in FY23. During this period, the contribution of defense products to sales remained stable at 9%. Let’s take a look at the company’s financial condition.

Solar Industry – Finance

Solar Industries has seen robust sales growth every year for the past three years. It saw significant expansion across explosives and defense products, increasing from INR 2,237 crore in FY20 to INR 6,900 crore in FY23. Solar Industries has performed exceptionally, tripling revenue and doubling profit growth over the past four years.

Net profit also showed steady growth during the period, more than doubling from INR 279 crore in FY20 to INR 811 crore in FY23, demonstrating strong margin performance. Return on equity (ROCE) also increased significantly from 19% in FY20 to 35% in FY23, boosting profitability through efficient utilization of capital.

The company’s main growth drivers

market power

Solar Industries India Limited holds a strong market share of approximately 24% in the Explosives industry and has established itself as one of the largest Explosives manufacturers and exporters in India and is launching its systems.

powerful spell book

The company’s order book, which indicates revenue visibility, is strong at Rs. $480.2 billion as of December 2023. These include orders from Coal India Limited (CIL), Singareni Collieries Company Limited (SCCL) and the Defense Forces.

World-class manufacturing

The company’s manufacturing facility in Nagpur stands out as the world’s largest single-location cartridge plant. This state-of-the-art facility positions Solar Industries as a key player with the capacity to produce a complete product range and develop customized solutions.

Raw Material Integration

Solar Industries maintains its strategic advantage by manufacturing most of its raw materials internally, except for ammonium nitrate. This approach results in cost savings, ensures quality control and contributes to a stable operating margin in the range of 18-21% over the past five fiscal years until 2023.

Proximity to mining areas

Bulk explosives manufacturing facilities are strategically located within a 50-60 km radius of major mining areas. This proximity improves operational efficiency and allows the company to pass on changes in raw material prices to its customers through price escalation provisions in its contracts.

future prospects

Solar Industries aims to expand globally by strengthening its presence in new foreign markets that will contribute substantially to its overall international revenues. The company plans to undertake innovative projects such as high-mobility rocket systems and anti-drone technology to fuel growth. It has also made strategic investments in space and UAV startups Skyroot and ZMotion.

Solar expects a sustainable order flow from major defense companies over the next few years, leveraging recent technology transfers for specialty defense products such as Pinaka rockets and BrahMos propellants. By expanding its product portfolio, Solar has become a preferred supplier in several key categories.

Strict product approval process, timely delivery, and confidentiality along with repeated pilot testing during the development process make the company trustworthy to customers. Solar is also establishing new facilities in Australia, Thailand and Indonesia to strengthen its manufacturing capabilities. Partnerships with organizations such as the Indian Space Research Organization for space launch vehicles strengthen Solar’s long-term prospects.

The overall focus is on expanding the defense product range to increase addressable business opportunities.
In summary, Solar Industries aims to further fuel growth through increased global expansion, new-age defense partnerships, strengthening its product bouquet, and enhancing customer confidence by meeting stringent approval and delivery standards.

This concludes this article. I hope you read it and gained some insight. Let us know your thoughts in the comments section below!

Written by Akshita Malu

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