SOLARINDS — earnings call

The transcript as filed. Every paragraph is addressable: its link names the page and the position it sits at in the call.

Prepared remarks

Moderator · Conference Operator

MR. DIPEN VAKIL – PHILLIPCAPITAL Solar Industries India Limited August 08, 2025

Ladies and gentlemen, good day, and welcome to Solar Industries India Limited Q1 FY '26

Questions and answers

Moderator · Conference Operator

Thank you very much.

We will now begin the question-and-answer session.

The first question is on the line of Vikash Singh from ICICI Securities.

Vikash Singh

Sir, my first question is regarding our medium-term outlook of 200 billion revenues and 80 billion revenue, as we basically intrastate that beyond in Europe segment into that?

And how big this opportunity could be us?

Manish Nuwal

Can you repeat your questions again because...

Vikash Singh

Am I audible properly?

Manish Nuwal

Yes, yes, you're audible.

Vikash Singh

Yes.

So sir, regarding our medium-term 4 to 5 year outlook of 200 billion revenue and a different revenue of 80 billion, is this also includes the opportunities which we are having in the Europe regarding the EAM Europe by 2030?

Have we have built anything on that account as well?

And is that how much?

Manish Nuwal

So in the last annual results call, we have shared our plans at what we are going to achieve in this financial year.

And we are -- what we are likely to achieve in the next 4 to 5 years.

So we stand by that, and you can refer to those numbers.

Vikash Singh

Sir, regarding the news regarding 2,000 crores UAV mail drone orders, I just wanted to understand where are we placed in that segment now?

Opportunity size for us could be?

Manish Nuwal

This can be a big opportunity for the defense market.

And as far as this program is concerned, plenty of companies will be participating.

And we are also one of those companies who are interested to participate in this program.

Vikash Singh

And sir, lastly, on 175 mm shell, if you could give us our standing on there and...

Manish Nuwal

So this is regarding, I think, 155 mm shell.

So as far as this product is concerned, we have the facilities to make these products.

We have already started working on that.

And very soon, we will start the commercial production of this product.

Solar Industries India Limited August 08, 2025

Vikash Singh

Sir, just a clarification on the defense-targeted revenue of 80 billion over the next 4 to 5 years, we have added this 155 mm shell in that segment, right?

Manish Nuwal

So what I said that next 4, 5 years numbers which you are trying to ask, you can refer to my last quarterly con call numbers, and that is good for the guidance as far as the long-term trajectory of our company is concerned.

Moderator · Conference Operator

Next question is from the line of Amit Dixit from Goldman Sachs.

Amit Dixit

Yes.

At the outset, congratulations for a good set of numbers, sir.

A pretty good and solid start to the year.

A couple of questions from my side.

The first one is regarding Bhargavastra and Rudrastra, while you had mentioned in the prepared SLE that there have been tested over there.

So just wanted to understand the commerciality part of it, when can we expect orders from these 2 platforms.

And the big part of the question is officially on the ammunition side that the export orders, we received quite a bit of export orders last year.

So what kind of traction we are seeing in this market because this market is quite red hot at the moment?

Manish Nuwal

Yes.

Like I said that we have did some successful trials of Bhargavastra and Nagastra, Nagastra and new series as well as Rudrastra.

So as far as trials are concerned, we are going ahead on the qualification part quite well.

It will take some more time, more time means in difference is a couple of quarters where we will reach to the final qualification.

And once we are through with that, we can expect the commercialization of these products.

So as you are already aware that in defense market commercialization, after the qualification also takes some time.

So we are quite optimistic that these products are very much in demand.

And once these are tested and successful trials being completed, we expect commercialization to happen at a much faster pace.

As far as the order book from international markets are concerned, like we have already shared that we have a total order book of around INR15,000 crores.

And after leaving the Pinaka portion, the order book from international is around INR8,000 crores.

So we have received the orders and now commercialization has also started, but ramping up definitely takes a couple of more months.

And once it starts, it will reflect in the numbers.

So we will see the improved numbers from defense market, which will be in line with our annual guidance quite soon, or you can see from quarter 2 or quarter 3.

Amit Dixit

Nice to know that.

The second one is on the international business performance, which has been, by far, the best, if I look at past history.

Is it possible for you to mention just qualitative details will do what -- which markets are doing well for you at the moment?

How is Australia, Indonesia faring?

And also, we had our plans to go in Saudi and Kazakhstan.

So where we are on that because this segment appears to be very, very promising on non-defense side at least.

Solar Industries India Limited August 08, 2025

Manish Nuwal

So as far as overseas markets are concerned, the industrial subsidiary-wise detail we normally share annual the annual report, so you can refer to that.

But as far as the momentum, which is above the normal momentum in the numbers is mainly on account of a very good business from South Africa because all subsidiaries are doing quite well, but South Africa is doing much better now compared to the couple of years back.

And the performance is we were eagerly waiting for this kind of performance from last couple of years.

We were trying a lot to improve those things.

And finally, we can see these good sets of number from South Africa.

Moderator · Conference Operator

Next question is from the line of Nitin Arora from Axis Mutual fund.

Nitin Arora

Just on the -- as exports continuously to do good even in this quarter last year and you said pipeline looks pretty decent, so how are you thinking about the capex now?

Because we also keep hearing and reading articles that government wants their own.

Requirement is very high at this point in time.

So how you're thinking about increasing capacity over the next 2, 3 years if demand is so strong?

Just one comment on that?

Manish Nuwal

Like we are sharing on all our previous calls that solar is one of the most integrated ammunition player in the private market.

And have established plenty of facilities materials, energetic materials, fuses, rockets integration, missile integration, drone facility.

We have done a lot on these parts, but -- and we have received INR1,000 crores orders.

So as we have shared in our annual call that we are going to invest INR2,500 crores in this financial year.

And in the coming years also, we have a strong strategic program to expand our facilities.

So we are moving ahead on that part.

And we will see that the capacities of solar as a company will be one of the best in its class and of a global scale.

Nitin Arora

I got your point, sir.

I was just asking more from that because demand is so strong, both domestic and exports have been highlighting.

Do you see a chance of upgrading your capex is that what the question was more about?

Manish Nuwal

So I think we have just finished the annual call.

Just 1.5 months back.

So in just 5 days, nothing changed in this part.

Moderator · Conference Operator

The next question is from the line of Rahil Dasani from MAPL.

Rahil Dasani

I just wanted to get a better idea on our drone segment.

Previously, we were into the smaller range and payload drone the Nagastra.

And now we have tied up with NAL for a higher range and payload model.

So first of all, why this change because we have been getting very decent orders in Nagastra.

Are we seeing a larger demand come in the 500 to 1,000 kilometer range drone?

And if you can quantify how large a demand or opportunity are you seeing for this particular model?

Manish Nuwal

So I think we have shared a couple of times that the company is very well positioned in this market, especially on drone-based ammunition programs, which we say loitering ammunitions.

Solar Industries India Limited August 08, 2025 So after a successful on the Nagastra 1, we have started making Nagastra 2 and Nagastra 3 also for some of the special applications.

And as we are moving forward, definitely, it's a natural growth for us or it will be a natural growth for us to expand in the higher category of growth.

So looking at those kind of opportunities, we are entering into the higher altitude and longer endurance levels of drones category.

So we will see how we will establish our products for those applications.

So we will come to know in the next couple of years.

Rahil Dasani

Okay.

And being in service with our Maharashtra 1 since so long and since we have been in close connect with the government for all our orders, what sort of visibility or opportunity are we seeing for this particular, if you can quantify that?

Manish Nuwal

It will be very difficult for us to quantify this opportunity.

We have to wait for the real opportunity or the real potential of this segment to unlock.

Rahil Dasani

Okay.

And sir, we have been seeing a lot of drone demand, especially post operations.

There has been an emergency procurement ongoing.

How worried should we be about this demand sustained?

As we have seen in the past that during emergency procurement, lots of demand comes in the short term, but then the demand dies in the next 1 to 2 years?

Manish Nuwal

Difficult for me to comment on this question.

Rahil Dasani

Okay.

Moderator · Conference Operator

The next question is from the line of Ankur from HDFC Life.

Ankur

First question was on the domestic explosives business.

If you could just help us with the volumes for the current quarter, that is Q1. I'm sorry, I missed that.

And also, how are you seeing volumes?

What will be the volume growth for the full year, obviously, given the unseasonal rain and there's been some slowdown there on the mining side.

So yes, just to start off, if you could help us there?

Shalinee Mandhana

Thank you, Ankur, for the question.

Since as a policy matter, we do not share the international market volume.

So we have discontinued for the domestic market also because if you see on the number front, domestic market hardly contributes around 40% of our total revenue.

Ankur

Okay.

So on the volume side overall, what kind of growth will you be looking at on the domestic explosive side?

Any guidance there?

Manish Nuwal

So like we said that we are targeting around 15% volume growth in this year.

But if you look at our clarification that because of early monsoon and lower-than-expected heatwave resulted into lower demand for the power.

And as a result, it has impacted the coal mining as well.

So if you leave this part aside, then definitely, there is no dearth of growth for us in this market.

So once this thing settles, which is a little abnormal to see that last year also there was an above- normal monsoon.

And then in this summer, the heatwaves were lower than the normal ranges.

And then again, the early monsoon in this monsoon period.

Solar Industries India Limited August 08, 2025 So that is impacting the demand.

But otherwise, it is good for the long-term requirement angle because more availability of water will help to generate power uninterruptedly for -- especially for thermal power side.

So we think that after the post monsoon, the demand should be very, very good.

We have also done a lot of capex program for the company we acquired a couple of years back, which is in Pakistan.

And we also started our facility at July.

So if you take these expansion into the consideration, the market penetration and the volume growth should start very soon.

Ankur

Okay.

Fair.

And just a second question.

So then overall, for the full year, I know since you're not giving a volume guidance anymore, any revenue guidance for the full year?

I think the number was close to INR10,000 crores for FY '26.

And within that, I think defense was around INR3,000 crores.

So if you just want to talk about how do you see the full year FY '26 top line within that difference?

And also, in defense, which would be the products which would drive that growth for you this year?

Some color there?

Yes.

Manish Nuwal

Yes, I can show some colors on this aspect.

If you look at our annual guidance of INR10,000 crores, so we are still believing that we will definitely cross INR10,000 crores in this financial year.

And out of that, INR3,000 crores should be some defense and nondefense should add to around INR7,000 crores.

And as far as the products, which will give the momentum will be one of the key products is Pinaka series of rockets, should start from end of Q2 or start of the Q3.

Moderator · Conference Operator

Next question is from the line of Yogansh Jeswani from Mittal Analytics Private Limited.

Yogansh Jeswani

Sir, just a couple of questions on your drone.

So like you were telling about the initial provision that you'll be doing in Nagastra 2 and 3 and rightfully so.

So -- but sir, we are also seeing a couple of bigger players coming in this market like new space is there anise Tata also, though some of them are facing challenges in terms of their technical viability and all, but still there is a lot of serious competition coming in.

So one, how are we thinking about this?

And secondly, sir, we did some work, and we realize that you have got good score in terms of your technical capabilities in this.

So if you could just help us understand how much is this value versus the commercial?

And how will the pricing part work for these longer-range drones?

Manish Nuwal

So as far as the potential of these products are concerned, like I said, we are still in the development stage.

We are looking at this higher category of rooms as a part of our strategy.

So once our products are developed or qualified, definitely, we will see how to place our commercial part to take the orders of the total opportunity.

As far as other players' challenges are concerned, I cannot comment on that.

So we have to wait for those -- the AON, which has been considered in the last week that the country wants so much of higher category of drones.

So we will see how it unfolds.

But our company is definitely trying to enter into this league of higher category of loans.

Solar Industries India Limited August 08, 2025 And we are confident that we will -- definitely, we will have certain challenges to reach to that level.

But as we have demonstrated in the past that, we are one of a company which definitely achieve what we try to promise.

So we need to wait for a certain period to give more light on these programs.

Yogansh Jeswani

And sir, on the cost side, will we be relatively cheaper compared to the existing foreign drones, the [inaudible 0:28:30].

Manish Nuwal

So I think we have not still reached to that stage where I can comment on the commercial part.

But like you have seen that in Nagastra also, there were a couple of people participated, but we will how products were qualified and from technical side.

And then we were the lowest bidder as well.

So I think we have a fairly strong chances to enter in this and take orders, but we need to wait.

Yogansh Jeswani

Got it, sir.

And sir, one more question from my end.

So if you could broadly help us understand what are your internal time lines in terms of the design and development of this entire project, and especially given the fact that compared to our peers, we are even trying to make the engine in-house.

So what is the readiness of the team?

At what stage are we in?

How confident are we?

If you could just broadly help us understand all of those aspects, it will be really helpful?

Manish Nuwal

That's a fair question, but we will share all the details at an appropriate time.

So you need to wait for that.

Moderator · Conference Operator

The next question is from the line of Abhishek Mehra from DAM Capital Advisors Limited.

Abhishek Mehra

So I had a question on the order book position.

Like in terms of if I only see the historical quarterly defense order book position, it usually increases post Q1. So Q1 inflows historically remain lower.

So is that reading correct?

Shalinee Mandhana

Can you repeat your question?

Manish Nuwal

I think this question is very irrelevant for us to answer because as and when we receive orders, we share it with all the investors.

There's no trend of defense market in the history of share.

If you take 2 years back, there were no orders, not much orders.

In the last year, we have collected so many of orders.

You could expect the particular trajectory of getting orders on every quarter basis.

Abhishek Mehra

Right.

And sir, secondly, just wanted to have an understanding of the different tendering part.

So are there any sharing of orders between L1 and the other bidders, let's say, L2 where they would be matching the price of L1 and the orders are getting shared there.

Does that happen generally?

Manish Nuwal

I think every tender have its own terms based on the requirement of the end users.

And normally, it is sometimes it is 60-40, sometimes it is 70-30.

Sometimes it is only one gets the whole order.

So it varies from each tender to tender.

Moderator · Conference Operator

Next question is from the line of Chirag from Centrum Broking.

Solar Industries India Limited August 08, 2025

Chirag

Sir, question is on the overseas markets.

So what kind of revenue outlook we have in overseas market since Q1 has seen a very strong scale up?

And whether Kazakhstan and Saudi Arabia plants will start commercial production this year?

Manish Nuwal

Yes, we are trying to start our Kazakhstan plant in this financial year.

Hopefully, by October, we should start the plant.

And as far as revenue potential from this international business is concerned, we are doing at around 37%, 38% of our total revenue of the company.

So in this year, if we have given a guidance of around INR10,000 crores, so we are expecting around INR4,000 crores from international market, INR3,500 crores to INR4,000 crores.

Moderator · Conference Operator

Next question is from the line of Bharat Shah from ASK Investment Managers Limited.

Bharat Shah

Yes.

Manish, yet again very creditable performance.

Just one thing.

I noticed on the new -- I mean, the application of hyperinflationary accounting standard, there is a loss recognized in the first quarter of INR17.5 crores, and there is an income recognized for the last year transferred to the reserve of INR9-odd crores.

So either Shalinee or Aanchal, just wanted to understand, is this going to be a ticketing feature?

Reported this will be stated in taken into account, isn't it?

Shalinee Mandhana

Yes, sir.

Shalinee here.

So we have hyperinflationary account in Turkey.

So currently, the figures are around INR18 crores, which affected our P&L for this quarter, and INR9 crores in reserves.

So this is as per the accounting standard and noncash items, which will be accounted.

Bharat Shah

So if you can -- this will be done, right?

Wherever it rate applies, whichever geography it applies?

Shalinee Mandhana

Yes, yes.

And this quarter, you see we had -- due to the uncertain economic uncertainties across the globe, we -- the operating various currencies.

So as a result, even currency forex fluctuations were also there in the books as a result, which affected the EBITDA margin to some extent.

Around 1.5% was on that behalf.

Bharat Shah

On account of the currency fluctuation?

Shalinee Mandhana

Currency fluctuations and hyperinflation.

As a result, other expenses went up.

Bharat Shah

So hyperinflation plus currency fluctuation together had an adverse 1.5% impact in the current quarter?

Shalinee Mandhana

Yes, sir.

Bharat Shah

Last year, I think it was a positive when it was taken to results?

Shalinee Mandhana

It was -- yes, last year, hardly around 0.35%.

Bharat Shah

Manish, given the fact that we'll be growing at a robust 25-odd percent on revenue terms compared to last year and assuming no other elements like currency and other effect, would it be fair to assume, given also the fact that defense will become a larger percentage, international will become a larger percentage of the total turnover, both higher-margin activity.

Overall, margins in the current year should be higher than last year.

Is that a fair assumption?

Solar Industries India Limited August 08, 2025

Manish Nuwal

Sir, like we have been saying that we normally expect or as a reason -- as a prudent practice, we feel that achieving around 27% is also a big achievement as far as the overall positioning is concerned.

So in this year, like you said -- or we have said in the last call also that we are targeting INR10,000 crores in this financial year.

And out of that, INR3,000 crores will be -- about INR3,000 will be from defense, which means that definitely, there is a big jump in the defense, which is a high value-added product.

But at the same time, we should also understand that as we are entering into the more and more products, so definitely, we need to spend more on the staff cost side and we have to expand the capital base.

So during a certain period, you will see that staff cost has gone up, some other expenses has gone up, depreciation gone up.

So these factors, if you take into the account the achieving margin of around 27% is a reasonable expectation from our side.

Bharat Shah

Got it.

And one last question, Shalinee.

What is the gross debt in net cash position is of the day?

Manish Nuwal

Before answering on that part, you have asked on the translation and Shalinee explained on the products loss also.

So since we are operating in many countries and many currencies are there, so foreign exchange loss is now part of our business.

But in this quarter, it was a little above that normal bandwidth.

So around 0.8% to 1% we lost additional loss because of that.

And if you look at the staff cost also, there was increase of around 0.7% in the [inaudible 0:37:56] If you take both and add into the current EBITDA, so we are still at a higher trajectory of EBITDA margin side.

And now she will explain on the debt part.

Bharat Shah

I did see that, and that's entirely correct.

Manpower cost has gone up.

Obviously, investment in asset sales resulted in depreciation going up.

And these hyperinflation accounting impact also came in. forex impact, I didn't know.

So that is an additional factor.

So that's completely understood.

Shalinee Mandhana

Yes.

Sir, the cash position.

So as on 31st March 2025, we were INR100 crores plus net of cash position, and currently, we are at INR50 crores cash position positive.

Bharat Shah

Net cash position?

Shalinee Mandhana

Net cash position.

Correct.

Moderator · Conference Operator

Next question is from the line of Pratik Mukasdar from RNL Wealth.

Pratik Mukasdar

Congratulations on a solid set.

My questions got answered in the previous questions.

Moderator · Conference Operator

As there are no further questions from the participants, I now hand the conference over to management for closing comments.

Aanchal Kewlani

I extend heartfelt gratitude to all the participants for their time.

Thank you so much.

Solar Industries India Limited August 08, 2025

Moderator · Conference Operator

Thank you, ma'am.

On behalf of PhillipCapital, that concludes this conference call.

Thank you for joining us, and you may now disconnect your lines