Solar Industries India Ltd Q2 2025 Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Bharat Shah - ASK Investment Managers Ltd - Analyst : Hi, Manisha, good morning and to the Solar team. Remarkable results, congratulations to the team. Just one question. I was looking at last three to four years of the results quarter-by-quarter. And it's evident that what is the volume sold and trying to relate to the profits made or profitability in terms of the margin is easy or very directly correlated exercise. So therefore, I presume amount of -- or the quantity of the volume sold relatively has low correlation with the profits made. Profits will be the function, I suppose, of the mix. So clearly, defence has gone up as a percentage. And that has a deep impact on the margins also, the highest ever margins in a quarter. Is that a correct way to judge? Because quantitative volumes sold have varied even in a high volume sold, REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. NOVEMBER 14, 2024 / 5:30AM, SLIN.NS - Q2 2025 Solar Industries India Ltd Earnings Call profits have been lower in some quarters and low volume sold also the profits have been much higher. Therefore, I think the profits are more coordinated to the mix and the maybe the raw material situation at a particular point of time as well. So I just wanted to (technical difficulty)

Question: Bharat Shah - ASK Investment Managers Ltd - Analyst : Right, which means, essentially, given the fact that defence is a rich margin or richer margin business in the international business also, I presume, is a richer profitability business. How they shape up, coupled with the volumes will really determine the amount of profits we make rather than looking at volumes in isolation. And volumes, as you correctly explained, is purely domestic and doesn't have impact from the other two activities.

Question: Bharat Shah - ASK Investment Managers Ltd - Analyst : Okay. And again, remarkable performance in a quarter which is seasonally otherwise not the best quarter, domestically speaking.

Question: Bharat Shah - ASK Investment Managers Ltd - Analyst : Thank you, Manish.

Question: Amit Dixit - ICICI Securities Limited - Analyst : Yeah, hi. Good morning everyone, and thanks for the opportunity. Congratulations for great performance, sir, and particularly the momentum on defence is very heartening. I have two questions on defence side only. So the first one is on that we have recently developed three new explosives, which were approved by Navy. So just wanted to get an update that what is happening on Air or Army? Where are we on that? And if there is any development on commercialization of these exposes as well as if you could highlight the further development in case of chaffs and -- chaff factory that whether we have sent any product for approval, the status over there?

Question: Amit Dixit - ICICI Securities Limited - Analyst : Okay. Sir, the second one is on Pinaka. While in the prepared remarks, you mentioned that we are expecting the order soon, but we have also certain media reports suggest that France is also showing interest in Pinaka. So once we get the domestic order, do we see significant export opportunities? Previously, I think they were kind of limited to, as we understand, to basically other friendly countries, but now with France coming and showing its interest, I think it becomes even more widespread. So just wanted to get your comments on that.

Question: Amit Dixit - ICICI Securities Limited - Analyst : Sir, one more, if I can squeeze in again on defence. The DRDO has reached -- recently, we read certain articles that DRDO is kind of developing long-range rockets with guided rockets with an Indian company. So there could be a production order also for the same. So are we involved in this in some way or it is, I mean, too early to comment anything on this? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. NOVEMBER 14, 2024 / 5:30AM, SLIN.NS - Q2 2025 Solar Industries India Ltd Earnings Call

Question: Amit Dixit - ICICI Securities Limited - Analyst : Okay. Great, sir. Thank you and all the best.

Question: Dipen Vakil - PhillipCapital (India) Pvt Ltd - Analyst : Thank you for the opportunity, and congratulations on a great execution quarter. Sir, my first question is in the line of -- in the order book, is it possible to give us a split between defence and nondefense?

Question: Dipen Vakil - PhillipCapital (India) Pvt Ltd - Analyst : Noted. And next question is, how has raw material prices mainly ammonium nitrate prices moved in last, say one year -- either year-on-year basis

Question: Dipen Vakil - PhillipCapital (India) Pvt Ltd - Analyst : Got it. So one last question. So we have some new product development in the form of Bhargavastra. So -- and what stage would that be in right now? And are there trials or when will be the orders expected for that? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. NOVEMBER 14, 2024 / 5:30AM, SLIN.NS - Q2 2025 Solar Industries India Ltd Earnings Call

Question: Dipen Vakil - PhillipCapital (India) Pvt Ltd - Analyst : Got it, sir. Sir, the export orders that we have received in last month or so, most of them are explosive orders or a lot of them are equipment or production orders?

Question: Dipen Vakil - PhillipCapital (India) Pvt Ltd - Analyst : Okay. So defence orders, so that's also export orders in defence-based application, are those from like product or explosives?

Question: Dipen Vakil - PhillipCapital (India) Pvt Ltd - Analyst : No worries. I'll fall back on the queue and come back again.

Question: Pratik Mukasdar - RNL Investment Partners - Analyst : Hello. Hi, Manish-ji. Congratulations for a great set of numbers. And it is even heartening to see the guidance which you have given. I just want to ask, since you are dealing closely with the government every time and government spending in the last six, eight months due to election and all, and various other reasons is very slow. So as per your experience, what do you think about the government CapEx picking up? And secondly, is our EBITDA and PAT margin sustainable? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. NOVEMBER 14, 2024 / 5:30AM, SLIN.NS - Q2 2025 Solar Industries India Ltd Earnings Call

Question: Pratik Mukasdar - RNL Investment Partners - Analyst : Okay. Thank you so much.

Question: Chirag Muchhala - Centrum Broking Limited - Analyst : Yeah. Thank you. Sir, the question is on international markets. So in Q2, we have consolidated the South African entity, Problast. So sir, is it possible to share how much it is contributing sales?

Question: Chirag Muchhala - Centrum Broking Limited - Analyst : Correct. But would Problast be very large as in kind of -- (multiple speakers) REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. NOVEMBER 14, 2024 / 5:30AM, SLIN.NS - Q2 2025 Solar Industries India Ltd Earnings Call

Question: Chirag Muchhala - Centrum Broking Limited - Analyst : Okay, sir. And directionally speaking, so a couple of large countries for us, which is Nigeria and Turkey. So how are their outlook for FY25 considering that both of them have gone through individual country-specific problems last year? So in the H1, how was the demand? And how is the outlook for this year?

Question: Chirag Muchhala - Centrum Broking Limited - Analyst : Okay. And sir, for the Southeast Asian region, like Australia and Indonesia. So are both these countries' operations PAT positive now? And I mean what is our progress in terms of getting client approvals and revenue booking, et cetera?

Question: Chirag Muchhala - Centrum Broking Limited - Analyst : Okay. And sir, lastly, in terms of CapEx, as we have announced the CapEx from INR800 crores to INR1,200 crores. So two questions regarding that. Firstly, is it possible to give a breakup in terms of domestic market, overseas and defense for this INR1,200 crores?

Question: Chirag Muchhala - Centrum Broking Limited - Analyst : Okay, sir. And a related question is that even in the next one to two years, will CapEx remain elevated like INR1,000 crore plus kind of a figure will continue in FY26, FY27 as well?

Question: Chirag Muchhala - Centrum Broking Limited - Analyst : Okay, sir. Those are my questions. Thank you.

Question: Ravi Naredi - Naredi Investment Pvt Ltd - Analyst : Mr. Manish, you and your team deserve good accolades for nice result in H1 and since you took MD responsibility, sir, you have planned to increase CapEx and higher defence order, need high working capital. So how you plan fund for this?

Question: Ravi Naredi - Naredi Investment Pvt Ltd - Analyst : So nice, sir. Because so many companies make QIB. So if you are not making, it is a very wonderful thing for shareholders. Sir, INR5,700 crores, we supply in how many years?

Question: Ravi Naredi - Naredi Investment Pvt Ltd - Analyst : Sir, can we have the bifurcation of INR5,700 crores order?

Question: Ravi Naredi - Naredi Investment Pvt Ltd - Analyst : Okay. Thank you vey much. All the best.

Question: Bharat Shah - ASK Investment Managers Ltd - Analyst : Yeah. Manish, our exports and international plus the defence in this quarter is almost about two-third of the total turnover, almost 66%. Would you say over, say, three year time frame, this percentage probably will move more like 75-25 or 80-20 because those seem to be the areas where greater trust overall also appears to be the -- resonate the faster growth.

Question: Ravi Naredi - Naredi Investment Pvt Ltd - Analyst : All right. Thank you, Manish.

Question: Jenish Karia - Antique Stockbroking Ltd - Analyst : Yeah. Thank you forthe opportunity. So the question is on working capital side. There is a significant increase in the inventory and debtor days during the half year and reduction of the payable deals. So could you please help us understand where the working capital is getting blocked and is this permanent or just a one-off scenario because of muted domestic demand? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. NOVEMBER 14, 2024 / 5:30AM, SLIN.NS - Q2 2025 Solar Industries India Ltd Earnings Call

Question: Jenish Karia - Antique Stockbroking Ltd - Analyst : And did Manish sir says that we will be net debt free by end of this year?

Question: Jenish Karia - Antique Stockbroking Ltd - Analyst : Okay. So currently, the net debt stand at around INR8 billion. Okay, you are including the current investments also. Okay, sure. Thank you.

Question: Amit Dixit - ICICI Securities Limited - Analyst : Yeah, hi. Thank for taking mt question again. I have actually three bookkeeping questions. The first one is on -- if I look at purchase of trading goods in the P&L statement that has gone up significantly high in this quarter. So just wanted to understand the nature of this and the trend, I mean, of this particular expense going ahead?

Question: Amit Dixit - ICICI Securities Limited - Analyst : Okay. Got it. So once this order is executed, this will return back to the original even provided we don't get further orders. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. NOVEMBER 14, 2024 / 5:30AM, SLIN.NS - Q2 2025 Solar Industries India Ltd Earnings Call

Question: Amit Dixit - ICICI Securities Limited - Analyst : Okay. Got this. The second one is on, if I look at receivables, they have also gone up while you have explained inventory increase in one of the earlier questions, why have receivables gone up? Is it due to increasing defence proportion and international operations? Or what is the reason for that? And whether this receivables also would be unlocked as we go ahead in H2?

Question: Amit Dixit - ICICI Securities Limited - Analyst : Yeah. And this is expected to be unlocked as we receive --

Question: Amit Dixit - ICICI Securities Limited - Analyst : Okay. But as the defence proportion and international business proportion increases, do you expect it to remain at elevated level or it will normalize at a certain point in time?

Question: Amit Dixit - ICICI Securities Limited - Analyst : Okay. The last one is that we actually recorded an expense. Of course, it's a noncash expense on the account of hyperinflationary accounting. So can you just explain a bit, it is around INR18 crores-odd for this quarter, INR26 crores for H1, if I'm not mistaken. So I mean where do we see the hyperinflation in which -- about all countries and how is the situation in Q3 evolving?

Question: Amit Dixit - ICICI Securities Limited - Analyst : Okay. Fair enough. And the last one is with South Africa, I mean, are we PAT positive over there?

Question: Amit Dixit - ICICI Securities Limited - Analyst : Great. That's it from side. Thank you and all the best.

Question: Natasha Jain - Nirmal Bang Equities Pvt Ltd - Analyst : Thank you, once again, Manav, I would now request the management to give closing comments, if any.

Question: Natasha Jain - Nirmal Bang Equities Pvt Ltd - Analyst : Thank you, Aanchal. Now this concludes the conference. Participants can disconnect their lines. Thank you.