How Manish Satyanarayan Nuwal is turning Solar Industries to a serious player in defence market

Manish Satyanarayan Nuwal laughs when you ask if playing with fire is fun. His Nagpur-headquartered Solar Industries has been in the business of making explosives for more than two decades.

But that was not how it all started. From humble origins in a small town in Rajasthan to dabbling in various ventures, including ink manufacturing, his father, Satyanarayan Nuwal zeroed in on explosives in the early 1980s, first as a trader. In 1996, he moved into manufacturing bulk and packaged explosives, detonators, detonating chords and initiating systems. The company catered to a host of industries, including mining, infrastructure and construction, through plants housed in India and overseas. Manish joined the company in the mid-nineties.

In 2010, Solar Industries moved into the defence sector for its next phase of growth. Initially, though, growth in defence was hard to come by, and there were a host of apprehensions. During the testing phase, money in the form of capex had already been put in and the manufacturing capacity was in place. However, orders were elusive. “We did the right things and participated in many development programmes. There was always a focus on developing the right product, but it was taking time,” says Nuwal. At that point, a few key decision makers looked at the factory and liked what they saw. “Continue to do good work,” they advised, perhaps an indication that good news was not too far away. That gave him confidence. The effort has paid off as Solar Industries embarks on the next phase of growth.

“We started work on defence in 2010-11, and till the end of 2020, it was a very small share of our revenue. Three years ago, it was about 5%; that has grown to 20% now,” says Nuwal. More importantly, all the pieces of the defence business are in place to pave the way for further growth.

Seizing The Opportunity

The memory of Uri and Pathankot terrorist attacks are still fresh in our minds. It was also a turning point in the company’s defence foray in terms of landing an important order. “India needed a supply base for ammunition, and it was our growth opportunity,” says Nuwal. “We were getting good feedback on our products from Europe and the US. We needed a break in India,” he says. The first was multi-mode hand grenades for which Solar worked closely with the Defence Research and Development Organisation (DRDO) for nearly three years.

In many ways, this was the watershed moment for Solar and perhaps for the private sector defence industry as well. Prior to this, says Manish, there was always demand but the government preferred imports. “There was not a high level of confidence in the quality of output in the domestic market. As a company, the lack of clarity on policy was a challenge, and though our work was appreciated, it did not always lead to order conversion,” he says.

The good part was that the company was on a good wicket. “Our core business of explosives was generating profits and that allowed us to invest in defence. That was the comforting factor even though defence was not really delivering results,” says Nuwal. For a long time, the explosives business was hugely dependent on Coal India (over 90% revenues at one point). “It is down to 38% today. From being an India-centric player, we are more global now.” The success in defence and its growing contribution to revenues has excited those tracking the company.

“In the defence value pyramid, in India, there are hardly any companies across different verticals. Furthermore, the level of indigenisation is usually lower at the top end of the pyramid, leading to thinner margins. In the case of Solar Industries, the products are expected to cover the value chain and products/solutions are co-developed or ToT (transfer of technology) is sourced from the DRDO,” says a recent ICICI Securities report on the company. The defence business is housed in wholly-owned subsidiary Economic Explosives Ltd.

SOLAR’S DEFENCE PORTFOLIO

1. Platforms, rockets and missiles, counter drone systems, loitering munitions
2. Subsystems Ammunition, air bombs, warheads, space applications
3. Components: Multi-mode hand grenade, pyros and fuses
4. Materials: High energy materials, propellants

Spreading Its Wings

The hunger for growth continues and not just organically. Nuwal outlines a couple of important purchases in the last two-three years-Rajasthan Explosives & Chemicals (in April 2023) and South Africa’s Problast BS (a blasting solutions company for mining that has enhanced Solar’s presence in Africa). The company’s two-decades-old presence in the international market helped it manage the South African acquisition better. “We could easily adapt to the local culture. A good understanding of the market was a great help,” says Nuwal. This strengthened the core business at a time when defence was beginning to yield results.
 

“Solar invested way ahead of time in defence. Today, it seems like a smart move, but the important thing is that they stayed the course through multiple challenges,” says Vinit Bolinjkar, Head of Research at brokerage Ventura Securities. He points out the ability of the company to deliver high return on equity and grow well on a very large base as two big differentiators. Often, entry barriers in a business like this are not easily grasped. “In defence, approvals can take 5-10 years; they have gained substantially by being there for a long time,” says Bolinjkar.

The share of defence has steadily gone up. Nuwal anticipates the number will hit 30-35% over the next four-five years. “The rest (about two-thirds) will be equally split between our international and domestic businesses,” he says. Quite clearly, he outlines defence as “a strategic investment.” As countries across the world start to spend more on defence, it augurs well for growth. “Just Europe will spend $800 billion (on defence) and that is a potentially very large market for Solar. Armaments is a huge opportunity, and they are well-positioned to get the best out of this,” says Bolinjkar. He breaks down the growth opportunity into three buckets—India mining, Africa mining and global defence.

Cut to the Moment

In January, the Cabinet Committee on Security cleared a `10,000 crore procurement deal for the Pinaka rocket launcher system, a sophisticated long-range artillery weapon, with Solar Industries being one of the manufacturers. This is part of the government’s initiative to promote self-reliance in defence manufacturing and reduce dependence on imports. According to ICICI Securities, Pinaka is only the beginning of bigger things for Solar. “The company has recently executed an MoU with the government of Maharashtra for setting up an Anchor Mega Defence and Aerospace project in Nagpur at an investment of Rs 12,700 crore. We believe the revenue potential of such a project could be `25,000 crore, placing Solar Industries as one of the top players in India’s defence ecosystem,” it says.

Nuwal says the company is going through its most exciting phase. One is tempted to ask Nuwal whether Solar is a technology company. Nuwal gives himself a moment before saying, “I think we understand technology a lot better today and that puts us in a strong position."

@krishnagopalan