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Change Change %
-7.55 -0.70%

Updated:17 Sep, 2019, 15:55 PM IST

Change Change %
-12.10 -1.12%

Updated:17 Sep, 2019, 16:01 PM IST

Dear Shareholders,

It gives me pleasure to communicate to you at a time when your Company delivered a commendable performance in a challenging external environment.

When the Indian economy reported its slowest GDP growth in a decade, your Company reported a 17.79% growth in its topline and 14.91% growth in its bottomline over 2011–12.

This typically contrarian performance vindicates the effectiveness of our business model, showcasing our ability to grow even in the most challenging business cycles.

In accordance with the Board's policy of progressive dividends, a final dividend of Rs.6 per share was declared. This brings the full year dividend to 110% i.e Rs.11 per share.

At Solar, we are excited to remain India's largest manufacturer and exporter of explosives and initiating systems and possess the confidence in the strategies we are executing in each operating segment in order to maintained our leadership position. Our strength is reflected in that we employ more than 2500 people, with operations in over three countries and customers in more than 20 countries.

Whilst India is our largest single and most important market, many opportunities for growth are located elsewhere.

Solar's capacity to service these growth markets represents a unique opportunity for the Company. Talking of our overseas subsidiares, I am happy to inform you that the manufacturing of ANFO in Turkey commenced from 20th June 2013 and the construction of our cartridge and detonators plant is underway. Our operations are running smoothly in our Nigerian and Zambian subsidiaries. However, in our Zambian subsidiary, sales were hit due to a drop in Copper prices that impacted the mining activities of our biggest customer. This trend is expected to continue till the first half of FY14. In order to improve our product offering, we are setting up cartridge manufacturing and detonator assembly plants, which are expected to commence in the first half of FY14.

The year 201 3 seems to be difficult, as we can not do much about the economy. The global economy is going through an upheaval and there are uncertainties ahead. The global economic recession and crisis have, quite expectedly, impacted India as well. But it is a moot point whether the Indian economy is affected more by the global economic ups and downs or by India's own problems at the economical and political levels.

Another major concern is the depreciating rupee. Since the start of this financial year, the rupee has depreciated 9.89% against the dollar in just the last three months, emerging as the worst performer among major Asian currencies.

The weakening of the rupee against the dollar has also caused a rise in the prices of raw material used in making our finished goods.

The Company was a net importer till date and according to its forex policy, the Company covered the excess of imports over exports. However, due to sudden unpredictable rupee movements, the Company's profitability was impacted. To counter the currency fluctuation, we have been increasing the domestic purchase of raw materials without compromising quality and are focused on widening our global presence, creating a natural hedge.

Despite the immediate challenges, we are confident about our medium–term prospects, due to the following realities:

Regulatory: The Chief Controller of Explosives had issued a circular under instructions from Ministry of Home Affairs, GOI that w.e.f 30.04.2013 all dispatches of explosives would need to be accompanied by police escort and to be coordinated by the respective district police administration. Following the inability of various district authorities to provide armed escort, the governmental regulation was modified and replaced with a requirement that the government only be intimated of any movement of explosives. In 2012, another Government notification amended the Explosives Act, 1884, categorising Ammonium Nitrate as an explosive. These amendments will progressively obliterate the ~Rs 300 cr unorganised explosives space and the consequent vacuum is expected to create opportunities for organised players.

Mining sector: Mining represents the bedrock of India's industrial growth, enabling India to emerge as an industrial power–house. It would be interesting to note that despite being rich in mineral resources (India features among the top five globally (in terms of reserves) for a number of commodities, the country's mining sector contributes only 1.2% to the country's GDP. With regulatory policies setting in motion the implementation of stringent governance and compliance measures, we are confident that the sector will report exponential growth over the coming years. Coal India expects to raise its output from 452 million tonnes in 201213 to 482 million tonnes in 2013–14; the cement and steel industries (whose progress are critically linked to mining) are expected to grow by 8–10% in the current year.

This year, Coal India Limited floated a three–year tender and I am delighted to inform you that Solar bagged 26.43% of the order; the Company continues to be the largest supplier to Coal India. For us, this means our order book for three years is secured for an amount of Rs. 1,112.25 cr.

Infrastructure: The Government expects the private sector to invest US$ 350–400 billion in strengthening India's infrastructure (roads, ports, railways and airports) during the Twelfth Five Year Plan through the PPP route, which should revive the fortunes of the sector. Consider this: India's target for road construction is estimated to rise to 8,500 kms in 2013–14 from 2,800 kms in 2012–13.

Defence project: Upcoming opportunity

A new defence procurement policy (DPP 2013) aims at enhancing transparency and probity in military purchases with the first right of refusal to Indian vendors, the objective being to promote the indigenous industry. While laying a strong emphasis on promoting indigenisation, the new policy also aims at creating a level playing field for the Indian industry. This progressive step is aimed at giving impetus to indigenisation, creating a level playing field and expediting the procurement process as a whole.

In the new policy, the Defence Ministry accorded a "higher preference explicitly to the Buy (Indian), Buy and Make (Indian) and Make categorisation, besides bringing further clarity in the definition of the 'Indigenous Content' and simplifying the Buy and Make (Indian) process."

This newly designed procedure is synchronised with your Company's plan to fulfill the nation's requirement for propellants, HMX and related compounds. The construction of facilities for propellants has started and R&D facilities for propellants are expected to be finished by the third quarter of FY14. Products are likely to be offered on a trial basis by the fourth quarter of FY14. The Company also invested in setting up R&D facilities for HMX and related compounds; the products are likely to be offered on a trial basis in the second quarter of FY14.


As you are aware, running safe and injury–free operations is of paramount importance at Solar.

Despite our best efforts, it is with sadness that I report that in March 2013, two of our employees lost their lives in an accident at our detonator plant.

This is obviously unacceptable, and we thoroughly investigate all such incidents to learn and improve. Every effort, including the advancement of technology, is being made to strengthen our safety commitment. There have been no further such incidents in the business since.

We continue to lay an emphasis on training and refresher courses for safe practices to all our employees.

Moving ahead

This year will be a year of significant change for Solar as we have initiated a lot of changes in operations. At the present group level, the management implemented changes to simplify the business and lower costs. The Company made significant investments to re–engineer production processes to improve operational efficiency and, in particular, minimise operational risks. I believe significant progress has already been made in all these areas.

I remain optimistic that our track record of enhancing shareholder returns can be maintained in the years ahead. Solar's long–term strategy has been clear, focused and successful and is constantly being reviewed.

I am confident that the energy and focus directed at unleashing the full potential of our Company will drive Solar for years to come.


On behalf of the Company, I convey my sincere gratitude to all our business partners, employees, customers, channel partners, shareholders, bankers and suppliers for their invaluable contribution leading to our sustained growth. I am confident that with their unstinted support, Solar will climb into a new orbit.


Satyanarayan Nuwal,