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Firing Up

Solar Industries started off as an explosives trader in the eighties, but is now competing in the big league of defence supply.

Krishna Gopalan

Playing with fire seems to be no big deal to the two young women in a brightly lit room. The detonating cord sifts its way through their hands as if it were a piece of paper. Observing the slightly terrified look on our faces, they break into a smile and casually say in Hindi, “Yeh to roz ka kaam hai” (this is a part of our daily routine). No more than in their mid-20s, these two are part of a workforce of 2,500 who are involved in the manufacture of slurry explosives, cartridges, cast boosters and detonating cords. There is no doubt that it is a tough job and not made any easier in the sweltering heat of central India. We are in Chakdoh, 40 km away from Nagpur and an hour by car. Across 750 acres, on which Solar Industries India’s manufacturing plant sits, the smell of chemicals (ammonium nitrate and calcium nitrate, we are told) is mildly astringent. This is one of the 25 plants that Solar owns.

The company’s 66-year-old spirited chairman, Satyanarayan Nuwal, named the company as a tribute to the star. “I have been fascinated by the sun, even as a boy,” he says. The business he founded in 1984 as an industrial explosives trader expanded into manufacturing in the ’90s; and scaled up, headed to overseas markets even setting up manufacturing units there and went public in the 2000s. Today, it is the leader in the domestic industrial explosives market with a dominant 25% share, a sizable lead over the second-largest player with 12%. Revenues have compounded at 12.74% over the past five years to 24.62 billion as of FY19.

The turning point was when the founder realised that he needed to de-risk the business, which till FY07 had over 70% of revenue coming from the state-owned Coal India (CIL). Solar deftly shifted focus to other verticals besides investing in a new one. “It was critical for us to de-risk but the strategy has paid off,” says the promoter’s son Manish Nuwal, who is also the MD. In FY19, revenue from CIL was down to 17%. Instead, exports and overseas business is now the primary earner with a revenue share of 35% (See: The foreign hand). Barring the dip in the fourth quarter of FY19, owing to short-term troubles in the customer market, exports have been doing well for the past few years.

But what’s really changing Solar’s fortunes is the business it has been engaged in over the past two years — housing & infrastructure (mostly domestic road construction) generates 27% of sales, and defence, chipping in with 7%. Nothing today excites the folks at Solar more than the potential of these two businesses.

GUNPOWDER ALL THE WAY

Sitting in his large room at Solar’s corporate office in Nagpur, the senior Nuwal recalls the company’s foray into defence in mid-2009. Attired simply and devoid of footwear, as is the norm in the office, the lanky man saw a clear potential. “We were in the business of explosives anyway. The only ammunition manufacturer in India was the ordinance factory and anything needed beyond that was imported,” he says.

At that point, the private sector in defence was barely welcome, though Satyanarayan was convinced that this would soon change. The management may have been desperate for a break. Solar had recently gone public, in 2006, and its dependence on CIL had begun to worry investors. There was the housing and infra vertical, primarily driven by highway construction, but it was struggling to achieve scale. The company began expanding its domestic operations, besides expanding into exports markets and even set up manufacturing units in Zambia, Nigeria and Turkey.

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July 19, 2019

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