Rationale

While arriving at the rating for the commercial paper programme of Solar Industries India Limited (SIIL/the company), ICRA has taken a consolidated view of SIIL and its wholly-owned subsidiary, Solar Defence and Aerospace Limited (SDAL, rated [ICRA]A1+) together known as the Solar Group/the Group. The rating factors in the strong market position of SIIL in the commercial explosives segment and its growing presence in the defence sector. The company is a major supplier of commercial explosives to companies like Coal India Limited and its subsidiaries, Singareni Collieries company Limited (SCCL) and other consumers of commercial explosives. The company is also a major exporter of commercial explosives. SIIL has also enhanced its position in the supply of defence products, both in the domestic as well as the international markets. The GoI’s focus on reducing import dependence for defence products and increasing indigenous procurement has supported a ramp-up of SIL’s defence supplies. As on September 30, 2025, the Solar Group had a defence order book of Rs. 16,000 crore, including a Rs. 6,084-crore order for the supply of Pinaka rockets. The company is also expanding its footprint in defence exports with a sizeable orderbook to be executed over the next few years. The strong orderbook position provides revenue visibility for the near to medium term. The company has a healthy operational profile with a strong manufacturing footprint in India and backward integration to manufacture emulsifiers, detonators shells, PETN, TNT and RDX. This has improved the operating margins over the years. The company has also set up bulk explosive manufacturing near the mining regions. In the defence segment, SIIL has been developing products jointly with various government bodies and the product development continues and is expected to result in incremental orders. SIIL has established relations with reputable clients in the mining and infrastructure industries which ensure repeat orders. Additionally, in the last few years, the company has been manufacturing and supplying products to the defence sector under a technology agreement with the Ministry of Defence, GoI, and has also developed products to meet the indigenisation requirements in defence supplies. The rating favourably factors in SIIL’s healthy revenue growth with a CAGR of ~30% over the course of FY2021 to FY2025 and expectations of a similar growth in FY2026 as well, driven by a strong defence order book and visibility on the offtake by CIL and SCCL. The company’s operating profit margin (OPM) improved to around 24-26% in FY2024 and FY2025, supported by moderate ammonium nitrate prices and the rising share of defence and export orders/international revenues which have higher margins. ICRA expects the margins to remain healthy in the range of 22-25%, going forward. The credit profile remains robust with the total debt/OPBDITA being at around 0.5x in FY2025 and 0.4x in H1 FY2026. The interest coverage ratio continues to be robust at around 17.2x in FY2025 and 18.6x in H1 FY2026. Notwithstanding the sizeable capex outgo and growing working capital requirements, the expanding operating profits and cash accruals would continue to support healthy debt coverage metrics.