The stock of commercial explosives maker Solar Industries India Ltd is back in focus amid the ongoing West Asia conflict, which is expected to tighten global ammunition supplies and push up defence spending.
The company’s defence business has scaled rapidly, with revenue growing at a CAGR (compound annual growth rate) of 82% between FY21 and FY25, according to an Elara Securities report dated 24 March. Its share of total sales rose from just 5% in FY21 to 18% in FY25.
“We see this segment driving the next phase of superior growth,” the report said, citing India’s ₹2.2 trillion defence capex (FY27 BE), rising geopolitical tensions and a global uptick in military spending. Elara expects the segment’s contribution to expand further to 42% by FY28E from about 24% currently. Revenues from the high-margin defence vertical, spanning both domestic and export markets, are already up 76% in 9MFY26.
Solar Industries has steadily transformed, diversifying from being an industrial explosives franchise into a vertically integrated defence manufacturer with presence in high-entry-barriers segments such as propellants, warheads, among others. Also, indigenization is expected to help sustain its growth momentum.
As per Nuvama Research, Solar Industries has comparatively lower import intensity, at about 9% of FY25 revenue, compared with peers such as Hindustan Aeronautics Ltd and Bharat Electronics Ltd, with dependence largely restricted to select specialized chemicals and energetic material inputs within its explosives and ammunition portfolio.
A robust order book of ₹18,000 crore as of Q3FY26 for the defence segment of the total ₹21,000 crore, roughly nine times trailing twelve-month segment revenue, underpins visibility. Among the big-ticket orders are supply of ammunition for Nagastra (an indigenously developed loitering munition), Bhargavastra (a counter-drone system), and additional order for Pinaka systems. The recent successful trial of the extended-range Pinaka rocket clears the path for commercial deliveries.
Improved traction in international commercial explosives, part of the non-defence segment, which has grown at 28% CAGR during FY21-25, is also comforting. It accounts for over 40% of total revenue. This segment is seeing robust demand from the mining sector, supported by firm commodity prices.
Solar Industries has manufacturing facilities in seven countries, primarily across Africa and East Asia, with three more, across the West Asia region, expected to be commissioned in the next two years.
Management remains optimistic, guiding for FY26 revenue of ₹10,000 crore, implying 33% growth. In 9MFY26, revenue and Ebitda (earnings before interest, taxes, depreciation and amortization) rose 26% each to ₹6,785 crore and ₹1,797 crore, respectively. Backward integration into emulsifiers and detonator shells has lifted Ebitda margins to about 25%, versus roughly 20% for peers.
The company plans ₹2,200 crore in FY26 capex to expand into advanced ammunition and aerospace, and has signed a memorandum of understanding with the Maharashtra government for a ₹12,700 crore investment over a decade in drones and unmanned aerial systems.
That said, the domestic non-defence segment, where the company holds about a 24% market share, remains subdued, with growth of just 1% in 9MFY26. Together with related segments accounting for roughly a third of revenue, performance has been hit by weak mining demand, exacerbated by a heavy monsoon that curtailed power consumption.
“Following the correction post the June-25 rally, we believe valuations have normalized (~43x FY28E EPS), with downside largely priced-in,” Nuvama said in its 23 March note.
Sustained momentum in defence orders and a recovery in non-defence demand remain key. Any delays in large defence contracts or an unexpected shift in global geopolitics could weigh on the outlook.