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Solar Industries Ltd (SIL) has planned a capital outlay of ₹270 crore for the 2020 fiscal, as it expects the demand for its commercial explosives from the industrial and defence sectors to grow.
The Nagpur-headquartered company, which makes explosives used for commercial purposes (used in mines) as well as for defence, believes that domestic demand continues to be strong.
“...our performance in the last fiscal was driven hugely by infrastructure, particularly road,” said Nilesh Panpaliya, CFO, Solar Industries. SIL counts Coal India and Singareni Collieries Company as some of its customers.
With the Narendra Modi-led NDA government coming back to power, infrastructure is expected to see continued push. This, in turn, is expected to drive the use of explosives for construction, mining and other activities.
20% revenue growth seen
For FY20, analysts expect SIL to clock 20 per cent revenue growth. According to Edelweiss analysts Rohan Gupta and Sneha Talreja, robust demand from infrastructure sector, healthy exports, increase in over-burden removal and addition of new locations in Australia and Ghana are likely to drive revenue growth.
The company reported a strong performance in the 2019 fiscal, backed by revenue growth across all the business verticals. It has a total order- book of ₹1,100 crore, including ₹400 crore in defence. Panpaliya said that it has outlined the investments equally across domestic, overseas and defence business segments.
The revenue from defence business has grown by 207 per cent from ₹19 crore to ₹52 crore at the end of the 2019 fiscal. Revenue from the explosives business grew from ₹331 crore to ₹383 crore, a 15 per cent growth in the March-ended quarter.
New locations
An Equirus Securities report said the overseas business will be one of the major growth drivers for SIL, given the new locations coming up in Australia and Ghana.
As SIL continues its expansion drive, its borrowings have gone up too. Total borrowings in 2019 have gone up by 26 per cent from ₹514 crore to ₹650 crore.
The total working capital requirement has also gone up from ₹230 crore in FY18 to ₹360 crore in FY19. The overseas working capital has increased by ₹116 crore.
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