Leader in explosives industry… Meeting - Manish Nuwal, Executive Director of Solar Industries India :: ICICI Securities, link

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Leader in explosives industry…
We recently met Manish Nuwal, Executive Director of Solar Industries
India (SII), to understand the business model of the company. SII,
founded by Satyanarayan Nuwal, is the largest manufacturer of industrial
explosives & initiating systems in India. The company, which commenced
business as a trader in explosives, today has a licensed capacity of
2,16,107 metric tonne (MT) of bulk explosives and 74,665 MT of cartridge
explosives, making SII the leader in the sector (30% market share in
domestic market and 57% market share in exports of industrial
explosives). Playing on the economies of scope, SII has established itself
as a major player across the product value chain where its product basket
includes bulk explosives, cartridge explosives, detonators, detonating
cord, cast boosters, PETN (raw material for detonators) and HMX
(warhead in missiles). Major revenues of SII come from the mining sector,
with Coal India contributing 29% of FY14 sales. The company enjoys an
important advantage in location, as all its 15 facilities of bulk explosives
are located in a 50-60 km radius from major mining regions. SII expanded
its base to other geographies by setting up manufacturing facilities in
partnership with local trading companies in countries like Zambia, Nigeria
and Turkey. Consolidated revenues for FY14 stood at | 1,126 crore, with
the domestic, overseas and export segments contributing ~70%, ~20%
and ~10%, respectively. Demand shift from unorganised markets,
enhanced demand from mining sector, diversification across products &
geographies and foray into the defence sector will accumulatively lead to
higher growth in the coming years.
Growth story is far from over
SII has gone from strength to strength with its revenues registering a
CAGR of 18% over FY09-14, without any contraction in margins. In the
same period, the company’s market share has increased from 16.7% to
30% while volumes have grown at a CAGR of 12.4%. SII also commands
higher margins compared to its peers as it has backward integration of
most of its raw materials (except ammonium nitrate-70% of raw material
consumed). The company expects revenues to almost double in the next
three years on the back of aggressive expansion plans, increase in market
share and expansion of its global reach.
Defence - high margins, next wave of growth
A huge demand-supply gap along with a set of progressive policies has
driven SII to enter the defence sector. The company has incurred a capex
of | 220 crore in the defence segment to set up an HMX capacity of 50
MT and 2500 units of propellant. SII expects to garner robust margins of
25-30% in both the defence and propellant segments.
LINK
http://content.icicidirect.com/mailimages/IDirect_SolarInds_MgmtNote.pdf