Solar Industries India Limited - CRISIL Ratings Reaffirmed

CRISIL Ratings has reaffirmed its 'CRISIL AA+ / Stable / CRISIL A1+' ratings on the bank facilities and commercial paper of Solar Industries India Limited (SIIL; a part of the Solar group).

The ratings continue to reflect the Solar group's robust market position in the domestic, export & overseas markets in the explosives and detonators industry, strong operating efficiency, and strong financial risk profile. These strengths are partially offset by susceptibility to regulatory risks and to volatility in foreign exchange (forex) rates.

Revenues of Solar group are expected to grow by over 50% in fiscal 2022, supported by volume growth and higher realizations while the operating margin will moderate to over 19% on account of higher raw material prices. The growth is driven by healthy orders from coal mining, growing demand for other segments. As on December 31, 2021, the group had order book of Rs 2,733 crore, including order book of Rs 537 crore for defense products.

In the first 9 months of fiscal 2022, the group reported revenue of Rs 2,631 crore and EBITDA of Rs 484 crore, against Rs 1,724 crore and Rs 350 crore, respectively, for the same period previous fiscal.

In fiscal 2021, the group reported revenue of Rs 2,521 crore with EBITDA of Rs 515 crore, against Rs 2,240 crore and Rs 434 crore, respectively, in fiscal 2020. The growth in revenues was largely supported by exports and overseas business.

The financial risk profile of the group remains strong driven by adequate accruals of over Rs 400 crore per annum against annual capex requirements of Rs 250-300 crore over the medium term. Further, the net gearing is expected to remain below 0.5 time over medium term driven by prudent funding of capex through mix of debt and internal accruals.

The rating also takes a note of the ongoing legal proceedings regarding vacation of Mr K C Nuwal's office of executive director of the company. The company had filed an appeal earlier with National Company Law Appellate Tribunal (NCLAT) against impugned order passed by National Company Law Tribunal (NCLT) on February 22, 2021. The matter is currently on hold and will be resumed after 6 months starting March 7, 2022. As per discussion with management, business operations of Solar Group have not been impacted due to this matter. CRISIL will continue to monitor the proceedings and any impact on business operations will remain a key monitorable.

Shares of Solar Industries India Limited was last trading in BSE at Rs. 2311.80 as compared to the previous close of Rs. 2341.25. The total number of shares traded during the day was 1044 in over 371 trades.

The stock hit an intraday high of Rs. 2345.00 and intraday low of 2250.00. The net turnover during the day was Rs. 2425742.00.

Source : Equity Bulls

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SolarIndustriesIndia INE343H01029 RatingUpdate