Solar Industries India Limited (SOLARINDS) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Q3 FY '22 Earnings Conference Call of Solar Industries India Limited, hosted by Nirmal Bang Equities Private Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Mayank Bhandari, research analyst from Nirmal Bang Equities. Thank you, and over to you, sir.

Yes. Thank you, Rutuja. On behalf of Nirmal Bang Institutional Equities, I would like to welcome all participants on the call of Solar Industries. From the management, we have Mr. Manish Nuwal, CEO and Managing Director; Mr. Suresh Menon, Executive Director; Mr. Moneesh Agrawal, Joint CFO; and Ms. Shalinee Mandhana, Joint CFO. I would like to hand over the call to [ Aanchal ] for opening comments, post which we will open the floor for questions and answers. Thank you, and over to you, [ Aanchal ].

Hello, everyone, and wish you a very happy New Year. I am [ Aanchal ], and I welcome you to earnings call of Solar Industries India Limited to discuss quarter 3 FY '22 earnings. Joining us today on this call is MD and CEO, Mr. Manish Nuwal; Executive Director, Mr. Suresh Menon; Joint CFO, Mrs. Shalinee Mandhana and Mr. Moneesh Agrawal. Please note that certain statements concerning our future growth prospects are forward-looking statements regarding our future business expectations intended to qualify for safe harbor, which involves a number of risks and uncertainties that could cause actual results to differ materially from those in such forward-looking statements. Now I request Mr. Manish Nuwal to give opening remarks on the stellar performance of the company. Over to you, sir.

Thank you, [ Aanchal ]. Once again, a very good morning to all the valued investors. The strong growth and meticulous execution in all the sectors has helped us to exceed quarterly revenue of INR 1,000 crores, which is up by 58% year-on-year, and achieve highest ever quarterly profit of INR 105 crores, up by 30% year-on-year. The current results gives us confidence to revise our revenue growth guidance to 50% for the financial year '21/'22, surpassing our earlier guidance of 40%. We have been able to achieve good EBITDA and PAT during the quarter despite of [ steam ] and unprecedented hike in commodity prices across our business verticals and currency volatility in our overseas subsidiaries. The defense sector have started contributing to the top line, along with other sectors like mining, housing and infra, exports and overseas. And we expect this momentum to remain strong due to government [ advances ] on Atmanirbhar Bharat, making India the [indiscernible], Pradhan Mantri Awas Yojana and housing for all, which augurs well for our industry. With our continuous focus and strategic investments in products for defense applications and new geographies, we are well placed to continue the growth momentum and maximizing the value for our stakeholders. I now hand over to Aanchal to take you through the summary of financials. Thank you.

Thank you so much, sir. I'm extremely happy in presenting the numbers of another record-breaking quarter where we have crossed the revenue of INR 1,000 crores for the first time in the quarter. We grew at the fastest pace in quarter 3, registering revenues of INR 1,018 crores, up by 58% year-on-year. EBITDA stands at INR 185 crores, up by 28%, whereas PAT stands at INR 105 crores, up by 30% year-on-year, demonstrating the strength of our business. Now let's quickly review the quarter in detail. Explosives. The domestic volumes in the quarter are increased by 21%. That is 104,717 metric tonnes compared to 86,265 metric tonnes. And our realization of explosives is up by 52%. That is 49,000 per tonne compared to 32,304 per tonne. As such, explosives revenue was up by 84% from INR 279 crores to INR 513 crores. Revenue from initiating systems was also up by 10%. That is from INR 92 crores to INR 101 crores. Now coming to our customer breakup. Revenue from CIL was up by 96% year-on-year from INR 98 crores to INR 192 crores. Revenue from non-CIL and institutional was up by 102% year-on-year from INR 73 crores to INR 147 crores. Revenue from housing and infra was up by 29% from INR 166 crores to INR 215 crores. Exports and overseas revenue grew by 35% year-on-year from INR 280 crores to INR 377 crores. Defense revenue was up by a stellar 218% year-on-year from INR 23 crores to INR 73 crores. Coming to our cost breakup. Raw materials, the consumption year-on-year has increased by 4.47% from 54.45% to 58.92% as a percentage of sales. In absolute terms, the cost is INR 600 crores against INR 352 crores. Employee cost has decreased by 2.59% from 9.21% to 6.62% as a percentage of sales. In absolute terms, the employee cost is INR 67.39 crores against INR 59.48 crores. Other expenses has increased by 1.10% from 15.87% to 16.97% as a percentage of sales. In absolute terms, other expense cost is around INR 173 crores against INR 103 crores. Interest. The interest cost has decreased by 0.37% from 1.69% to 1.32% as a percentage of sales. In absolute terms, the interest cost is INR 13.41 crores against INR 11 crores of cost. Coming to highlights for 9 months. We registered a revenue of INR 2,631 crores, which is up by 53% year-on-year. EBITDA stands at INR 503 crores, which is up by 36%. PAT is at INR 281 crores, which is up by 46%. Now we would be very happy to take any questions, comments and suggestions that you may have. Over to you, Miles.

[Operator Instructions] The first question is from the line of Abhishek Ghosh from DSP Mutual Funds.

Am I audible?

Yes, please.

Yes. So just a couple of things. So just starting out with the whole capacity expansion program for the other parts of the country as well. Has there been any finalization on that up until now? Or would you come back in the subsequent quarters? Any thoughts around that, if you can just start off with that, sir?

Yes. Our expansion within the country is still in progress and will be communicated once things are materialized. It is getting -- it is still in progress, and it got a little delayed because of COVID, and it did affect us.

Okay. The other thing is just coming to margins. And please help us understand because your earlier guidance of that margin was much higher, but while the revenue growth has been much strong led by better volumes and realization increase, overall margins has been lower. So how should one look at it given that raw material prices have increased so much and subsequently the realization? Should margins optically look lower and that's why one should estimate lower margins going forward and it is more on a per tonne basis? How should one look at it? If you can just help us understand on this aspect, it will be helpful, sir.

When we started with the year, we never mean that the rise in commodity price has been so steep, and it's an anticipated rise. It's been rising quarter-on-quarter. So we always have been saying that there is always a lag because with the customers, we do have the fall rise and fall lows, but the lag is always there. So even in the current quarter, the lag has been seen. So -- and coming to the year margin, we feel the margin should be around 19% to 20%. And another effect, another factor which affected our margin was the currency fluctuations. As we know, in Turkey, during the quarter, there was 47% depreciation in the currency. So during the quarter, we were hit by ForEx to the tune of INR 37 crores. These 2 factors had affected our margin, and we see the year, margin should be around 19% to 20%.

Sorry, ma'am. Which year are you referring when it comes to margin guidance?

Current year, current financial year. FY '21, '22.

You expect margins to be 19%.

19% to 20%.

And going forward, how should one look at the margin profile?

As this quarter progresses and as we see how the raw material prices stabilize, so we'll be able to comment in the next quarter. There should be improvement going forward.

Okay. But sorry, this INR 47 crores of ForEx impact, is it sitting in the INR 173 crores of other expenses?

INR 37 crores, yes, correct.

So that other expense is inflated to the extent of INR 37 crores because of the Turkey currency impact.

Correct. Correct.

But overall, you believe even with these raw material prices, 20% base case margins on a sustainable basis is possible. There is not much change there. Is that a fair statement to you?

Yes. It is...

Hello, am I audible? Hello?

Yes, yes, you're audible.

Okay. Okay. You think -- sorry, I couldn't hear you, ma'am. So you think 20% margins on a sustainable basis with these raw material prices is fair to assume?

Yes. It is fair at this current level.

Okay. Okay. Great. And just one more thing in terms of the raw material price increase that we have seen. How much is -- has been passed on? And what's the current trend on the raw material prices? Any color there would be very helpful.

As and when the price rise, we try to pass on, but we have contract different types of contracts with our customers. For example, Coal India, we have 3-month contracts, and some customers, we have monthly contracts. So it takes generally 2 to 3 months to pass on the prices.

Okay. For other raw material prices have now stabilized? Or are they still on our continuous rise?

It's on rise, not yet stabilized. But next quarter, maybe 3, 4 months, that should stabilize.

In the overall currency, depreciation and other things would be now loss-making for you?

Yes. Currently, in this quarter, we have faced the losses.

Okay. Other thing around is that the -- if you look at the 9-month basis, your broad CapEx is about INR 200 crores or so. Your debt has increased by almost about INR 200-odd crores despite generating an operating cash flow of almost in excess of INR 300-odd crores. So is it that the working capital requirement because the raw material prices moved up sharply? If you can just give some color there because the balance sheet is not available on a 9-month basis, that will be helpful.

Yes. The major reason in increase in working capital is with the rising commodity prices. The sales also have grown up by 58% during the quarter and 9 months 53%. So -- but if you see on the debt-to-EBITDA level, we are maintained at 0.53.

Okay. Is it fair to assume that the -- and if the CapEx is at that run rate of INR 200 crores, INR 250-odd crores and if raw material stabilizes, there will not be any further deterioration? And I think will there be free cash generation which will happen in the company going forward? Some around that would be helpful.

Yes. The CapEx should be around INR 250 crores, INR 300 crores, and we had been seeing INR 300 crores year-on-year for next 2, 3 months also. And the prices of the raw materials since all the commodity have risen, so prices have -- so obviously, CapEx will remain at that level. And as we have been saying, the company -- the policy of the company is to maintain the debt to equity around 0.5 bps. So that shouldn't increase going forward.

Questions. One is [ orderly ] outlay, this INR 250 crores, INR 300 crores CapEx into -- where will it exactly kind of go, into domestic and...

So like Shalinee was explaining that our CapEx outlay will be in the range of INR 250 crores to INR 300 crores, this is mainly because all the items which is going for the CapEx, the prices has gone up, and it is being reflecting everywhere. That's why it will be in the range of INR 300 crores plus. And looking at our future expansion plans in India and overseas and expanding the product portfolio of defense, definitely, it will remain in this rate. And we have been spending amount mainly for expanding the geographical expansions in the Indian market, defense products and expanding footprint outside India.

Okay. Maybe just one thing. In terms of the -- if you can just help us understand your thought process, how are you looking at the overseas market in terms of adding more countries to the overall bouquet and how should one think about it, how are you looking. Are there still many such countries where the addressable market size of explosives is higher and are you looking at it? So if you can just give us broad strategy for next 2, 3 years, it will be very helpful, sir.

As you are aware that our presence outside India mainly is in Turkey, Nigeria, Zambia and South Africa. And in the last 1 year, we have added the countries like Ghana, and now Tanzania plant is also operationalized. So our focus is to expand the -- expand our presence in nearby markets wherever we are present. Our interest is not to go outside those territories. Our expansion in Australia also in the finishing stage and probably in the next 3 months, we should start the operations. So as far as our strategy is concerned, it has always been part of our strategy to expand our presence so that we are least impacted due to presence in one geography and one product portfolio. That is what we have been following.

So you will follow the cluster-based approach that you typically follow one by one, that's the way.

Absolutely. Absolutely.

Questions. One is while you have guided for the '22 to be a strong year of that 50% growth, any thoughts on subsequent years given the overall capacity addition of new countries and also the domestic market, any thoughts -- so you -- I know the raw material prices, but in terms volume front, would you be able to guide what should be the volume growth that one should expect over maybe next 2 to 3 years from Solar?

In our previous quarter call, we have said that in this year, we are expecting a growth of 40%, which has been revised to 53%. And we have said that volume should increase around 15% to 20%. But good results are because of good demand and our focused approach in those markets where we are present, our volume has already increased on a 9-month basis by 27%. So definitely, we have crossed what we were targeting, actually. And in coming years, we believe that the volume growth should be around 15%. And in value terms, it should not be less than 20%. But we don't know how the market will unfold. So conservatively, we can expect that our revenue growth should be around 15% to 20%, and we maintain that despite of strong growth in this financial year.

Great. That's good to hear. Sir, just lastly, on thoughts on your defense, how are you looking at it? How are the opportunities? And the most important thing is getting conversion into order book and execution. Just your thoughts there.

Yes. If you see this quarter result also, in this quarter, we have already crossed the sales of INR 70 crores. And in 9 months, our revenue from defense is already INR 176 crores. And in the last quarterly call also, we said that we are expecting the sales from defense products should be around INR 250 crores to INR 260 crores. And based on these numbers, we are confident that in this financial year, we will cross INR 270 crores. And for the next financial year, we will definitely give a guidance in Q4. But like we have already said in previous calls that we are targeting INR 350 crores to INR 400 crores in the next financial year, and we believe that it is a possible number based on current order book and the speed of conversion which has started.

[Operator Instructions] The next question is from the line of Shivang Joshi from Centrum PMS.

Congratulations on both the numbers in the revenue there. First, I'll just start with the overseas subsidiaries. So as you said that Australia, you are saying that it will be operational in the next 3 months. Sir, on South Africa, when -- I mean, are you now expecting the operations to break even?

Yes. We are expecting that in the next 3 months, we should reach to the breakeven level, at EBITDA level first. And in next financial year, we are expecting that we should be out of the losses. And this [ book ], as we have explained, due to various factors. And things are getting in control now. We are in a better position now.

Okay. Now just thinking yet ahead, actually, when I try to look at the subsidiary or the geography-level growth in the last 3, 4 years from FY '18 to '21, you see that you've seen quite a strong growth in geographies like Nigeria, South Africa. But Zambia and some other subsidiary has not grown that way as far as revenues and PAT are concerned. So what is your outlook? If you could just give an idea about the existing geographies.

Yes. We expect that in all the geographies, wherever we have strengthened ourselves, should grow at 10% to 15% because we have fairly large market share in countries like Turkey and Nigeria. And in countries like Ghana, South Africa, Zambia, there is a potential to increase our market share, and we are trying to do that. But since we are well aware or we are aware that business dynamics are -- keep changing, so looking at all the parameters, we believe that the growth from overseas will also be around 20%. And on a group level, we expect that revenue should be around 15% to 20%.

Okay. Slightly deep diving on the new geographies, specifically Australia and Tanzania. So Australia, when you say that -- so what is the target market in Australia? I mean, what levels do you see your revenues going up in the medium term, the next 3, 4 years?

Our first target was to set up a greenfield project in Australia. And despite of various challenges in last 2 years, we will be able to start that operation. And once we stabilize in next 1 or 2 years, then we will be able to give more clarity on business or countries like Australia. So it will take some time.

Okay. So only reason is do we expect them to be INR 100 crores to INR 150 crores kind of market like Nigeria, Zambia, South Africa? Or do we expect that market to be as high as Turkey? I mean that was the sole purpose of these questions. Because Turkey, I believe, is roughly INR 350 crores, INR 400 crores market, while the others are less than INR 200 crores at the moment.

We will be able to give more clarity on this market within next 2 to 3 quarters. So we will have to wait for that much time.

Okay. That's fair. Next, sir, on the domestic, so on the defense, would you give us the number of the defense order book, sir?

Yes. The current order book from the -- for defense products is INR 537 crores. INR 537 crores, right.

Okay. And see, currently, if I'm not -- going back to export because you are seeing similar growth levels for exports and domestic of 20% levels, currently, exports, if I'm not wrong, is contributing to how much of your total revenues, 40% or higher?

In this quarter, the share of export and overseas is 37% of our sales, and we believe that it should be around 40% going forward.

Okay. Okay, sir. And that answers my question, I'll get back in the queue.

You can always connect us. No issue.

[Operator Instructions] The next question is from the line of Bhavin Vithlani from SBI Mutual Fund.

Congratulations for a great set of numbers. So my question is on the initiating systems. When I look at this product category, the growth has been below the growth of the others. So if you could just walk me through on this segment. And is there a correlation between the growth in the initiating systems and other explosive business?

There is no specific reason for less growth in accessory section. But because of some delays in shipments to various parts of the globe is one of the major factors. And we were also trying to rationalize the inventory levels into the system. So that is one of the key reasons for this. Otherwise, from -- I think from this quarter onwards, we will see better numbers from initiating systems, right, accessories and initiating systems.

Sure. Sir, is there a rule of thumb, let's say, if we sell 1 kilogram of explosives then x grams of explosives, the accessories goes up maybe in the rupee value? Is there a rule of thumb?

I said there is no thumb rule because everybody use different level of initiating system based on their requirement. So it is difficult.

I understand. Could you give us some color on the international -- performance of the international subsidiaries, how it has been in the 9 months?

For the quarter, the sales from exports and overseas is around 37%. So as Manish-ji has recently said, that should be around 40%. And year-on-year growth in international subsidiaries should be around 15% to 20%.

Sir, my question was individually on a 9-month performance, if you could share what has been the growth for the individual subsidiaries, not deferred numbers but on a guidance basis, just to help us cater how they are performing on 9 months if we look at -- that is on an individual subsidiary basis for the -- especially for the international operations.

As a matter of our company's policy, we do not give detailed bifurcation. We consider export and overseas under one basket. And the trend of this one basket of export and overseas has been already indicated.

And the details will be there in the annual results.

Fair enough. No problem. Just last question from my side. Indonesia, if you could give us where are we, we were looking to expand within Indonesia. And if you could give us some color like -- because we were already exporting to Indonesia, so what's -- will there be some substitution? And what's the level of substitution of the current revenue is?

We have started setting up a small facility in Indonesia. Work is already in process. And we believe that in next 6 months, some operations will start. Our objective will be to stabilize that operation and then expand gradually.

So is there a current exports to the Indonesia that will get substituted by local facility?

There will be -- we are already exporting a lot of products to Indonesia. And with that facility, some of the products will shift from India to Indonesia, and some another series of products will start exporting to Indonesia. So overall, it will be in the interest of our company to start those operations.

Sir, just last question from my side. As you highlighted that the capital expenditure could be in the region of INR 250 crores to INR 300 crores and we are expecting a growth of 15%, 20% on the revenue, so CapEx as a percentage to sales will keep dropping and consequently, we'll see free cash flow going up. So if you could help us share on the capital allocation. Can we expect an increased dividend payout? I think you thought of keeping some debt is always good for return on equity, but is there a thought of increasing the payout ratios?

Looking at our CapEx plans, we are still in a growing stage, and there are various opportunities available in defense and Indian markets and even international markets. So as of now, we have no such plan to increase the dividend payout. We would like to conserve the cash flow for our expansions. And we have seen that strategy of conserving the cash, utilizing it for our strategic expansion program is giving better results to us.

The next question is from the line of [ Lakshmi Narayanan ] from ICICI Prudential Asset Management.

Yes. A couple of questions. First is that from a Q1, Q2, Q3, Q4 basis, right, usually, how -- on a steady-state basis, how seasonal is the business?

We have not understood your question, please repeat again.

My question is that, I mean, across the 4 quarters, is it that Q4, the numbers are, in general, lumped up? So for example, if you do INR 100 crores of turnover in a year, is that -- what is the proportion of Q1, Q2, Q3, Q4 in general and whether that is going through some change now?

Normally, as such, the Q4 is always the best. And looking at the past and even in this financial year also, whatever results we have achieved, we believe that Q4 should be better than the Q3.

Got it. Got it. And if I just -- your business over the next 3 years or even 5 years, right, what percentage of business would come from current customers? And what percentage of revenues you think would come from a new business from new customers? I mean, how the buildup is going to be over the next 3 to 5 years from where we are now? Where is the growth? How will the existing customer base would -- requirements will grow? And how will the new products will grow? And how will the new business from new customers would actually grow? Just a sense of the business.

Yes. If you look at our strategic investments in last 5 to 10 years, we have invested a lot in defense and international business and expanding the product portfolio in our current facilities at Nagpur. So if you look at those investments and the future prospects, definitely, we see that the product -- we see that the customer segments like exports and overseas will be one of our key components of our business and defense is picking up. And we believe that it should reach to around 15%, 20% in next 3 to 4 years' time. And overseas will always remain around 38%, 40%, maybe 1% or 2% here or there. And the balance will come from the Indian market. And to strengthen our market presence in India, we are expanding the geographical footprint and increasing the production facilities or capacities of initiating systems and other products. We are continuously developing various products, which are of high-end technology, and companies never face any problem due to these things. So our strategy is very clear and simple, and we are following that.

And in terms of the bottlenecks for your growth, right, is it the competition in India, [ material ] availability or people availability, right, people who can go and sell the products, et cetera, where do you think the challenges are in that order?

Business challenges are always common for most of the businesses, like getting a customer, getting raw material from right vendor at the right price and managing the team to sustain the current businesses and expand the businesses across the globe. These are the basic challenges, and we believe that we are very much comfortable to handle all these things.

Got it. Because a couple of years back, there are challenges in raw material availability also to an extent, I remember. So I just want to check whether that all -- those things have been addressed, that's the reason of asking you, sir.

Yes. You have raised a very fair question. It is not like that. It is not a challenge. Getting the raw material continuously to our campuses and delivering the product on time to our customer is always a challenge. But if you look at our last 10 years of track record, we have fairly managed it very well. And in this year and even in the previous year, when most of the companies were struggling because of COVID and supply disruption like ocean freight has gone up, you are not getting the vessels, we have fairly managed our businesses and there is no -- any specific disruption in our system. And that's why we are able to grow in this year also. Our volume has increased by 27% and top line has increased by almost plus 53%. So this reflects that we are -- there are challenges, and we are managing them well.

Okay. And the last question from my side is that you've been subject to currency fluctuation, which has resulted in a ForEx loss absorption this quarter, right? And what are the steps you have taken from a corporate finance/treasury point of view to ensure that the currency fluctuations or losses are minimal? Because as you expand, this is going to be an issue for you or a challenge to handle. So how have you [ worked ] your hedges? What is your -- I mean, have you changed your hedging policy? I just want to hear from you on that.

We have taken some measures like invoicing the customers in U.S. dollar, reducing the dollar exposure in these subsidiaries and increasing capital in those places. So we have playing all these things, and we believe that we should be in a better position in next financial year.

The next question is from the line of Abhishek Ghosh from DSP Mutual Funds.

Just some few follow-ups. Just in terms of the competitive intensity scenario, how are you seeing in the marketplace? Some comments there would be helpful.

Explosive market in India is always a very competitive market. And nothing major has happened which gives us to indicate any specific thing. So competition is there, and we are managing our businesses by maintaining the profitability at a healthy level. That is the achievement of our company. And we believe that going forward with our geographical expansions in different parts, we will be in a better position, which will help us to increase the market share as well.

And sir, your presence in the overseas market in those 6, 7 locations, are you like having dominant market shares like in some of the geographies which you have? The newer geographies that you're adding, are you a dominant player with like market shares of 20%, 25%? Or are you a marginal player in those new regions?

Like in Turkey, we are plus 20%. It should be around 22%, 23% market share. And in Nigeria, we are in more than 40%. In rest of the countries, we are in the range of 8% to 10%, and we believe that these market shares will keep going up.

Sir, just one more thing, continuing from the previous participant's question in terms of the sourcing of the raw material. Now during this [ unprecedented ] high and price increase [indiscernible], have you seen the unorganized price, the sourcing has been an issue? Have you seen anything of that kind of a thing in the marketplace? Because you have the capital balance sheet and your MOUs are very different, so for you to source is much easier than probably [ gross ] marginal price. So any thoughts around this, sir?

I believe that in last 2 years, what we have seen that one was the COVID. And because of COVID, there was supply disruption in a second phase. And now in this phase, we are seeing that commodity prices has gone beyond imagination. So these 3 factors have definitely weakened the smaller players, which is mainly unorganized players. And this is what we have been seeing that the weaker players will definitely be more weaker. But our aim is to increase market share by maintaining the healthy margins. So we are following that strategy, and we have been successful in that.

Sir, just 2 more questions. In terms of the housing and the infra segment part of it, now what we understand is there are 2 elements. One is the road part of it. Second is explosive going into the housing element. Now we hear a lot of demand for real estate and other things coming up. Is that something that you are already seeing here? Because you were at the early cycle, right, because at the initial stages -- so are you seeing that kind of thing happening for your explosive demand aspect?

Based on our observation from the market, it is very clear that due to increased working capital requirement, many of the contractors have slowed down their work. And as a result, demand from infrastructure is not as bullish as it was in the last year. But in housing space, definitely, it has increased, which has balanced -- so these 2 factors are quite visible. But we believe that everything is balancing out and there is a decent demand, but prices has gone up a lot, which is impacting the demand in short term. But I believe that in a couple of months, it should be again on a growth side.

Okay. And sir, just one last question. In terms of defense, the current gross block that you have, what is the peak revenues that you can do out of that?

So gross block and all those will be part of our balance sheet items. So I will be able to give more insight in next quarterly call.

Okay. But I think can you do INR 1,000 crores of revenue of defense given the current asset base in defense? Or...

Absolutely. Absolutely. We can definitely do very comfortably.

The next question is from the line of Bhavin Vithlani from SBI Mutual Fund.

The question is on the Pinaka media reports suggesting that the Army has conducted the second trial in Pokhran. So if you could give us an update where are we on the Pinaka and when can we expect materialization of orders?

A few things. First is that our Pinaka [ marketing ] was already qualified, and our enhanced -- Pinaka enhanced has been successfully -- the trial has been conducted successfully at Pokhran in recent past. And we believe that RFP should come out soon after the [ Tier 1 ] was cleared by the defense acquisition council. Our Pinaka guided rockets are also going to be fired soon. And we believe that in a couple of months, they should get tried out. And once those things happen, we believe that RFPs will come in place, and we will be able to start the production as we are a production agency for most of the Pinaka series products. As and when RFP will be floated out, we will definitely share with all our valued investors.

So we can expect the RFP for the enhanced version in the next 3 to 6 months. Is that a fair assumption?

I will not comment on that. But definitely, we are expecting it to come out soon.

I understand. Defense is an uncertain sector. That was the only follow-up I have.

The next question is from the line of Bharat Shah from ASK Investment Managers.

No, no pressure, really. Manish, I just wanted to convey congratulations to you and the entire Solar team. This is -- this year, there has been like a departure from the past and in a positive way, and I hope the tempo and the strength grows from your future. So I just wanted to convey my good wishes.

Thank you, Bharat. Thank you very much.

And just one thing, domestic market, what will be our share?

So it's around 24% to 25%, sir.

The next question is from the line of Abhijit Mitra from ICICI Securities.

So the first question is on the EBITDA guidance that you gave of around 19% to 20% for the full financial year with a 50% top line growth. I mean that implies almost a 22% EBITDA for the last quarter. So just curious, is there some visibility on the overseas locations because 22% margin was last seen in Q3 FY '18? And with this kind of a raw material environment, is anything changing at the margin to sort of have that visibility of extremely strong Q4?

As of -- if you look at 9-month results, it is already plus 19%. And in the Q3, there was a big impact of currency fluctuation, which Shalinee has already shared. If you factor in that into the results, definitely, we will also see that the target of 19% to 20% should not be a problem. So we are trying for that to reach to that level. And we are also confident that whatever measures we have taken, we should be reaching to that numbers -- those numbers.

Okay. Okay. My second question is on the ForEx loss. I think we mentioned INR 37 crores. There is an other comprehensive income loss of around INR 26 crores, which has been reported for the quarter. So is the ForEx loss also included there, plus other expense line items? If you can just clarify on that.

Yes, we will definitely clarify.

Yes. Some amount is there also, some amount of ForEx loss is included in OCI also.

Okay. So total ForEx plus is INR 37 crores? Or -- so one that is included in other expenses, INR 37 crores?

Total -- INR 37 crores is in the profit and loss, that is including other expenses. And some part in OCI.

Okay. Okay. Great. The third question is on the defense EBITDA. Now we have done a run rate of INR 72 crores or around INR 70 crores in the coming quarter. So have we sort of broken even on that business for the quarter? Because I think the previous run rate was INR 65 crores, INR 70 crores, around this run rate only. So I just wanted to check.

It is difficult to give the breakeven level for defense at this stage. So once we definitely reach to around INR 350 crores, INR 400 crores, we will be in a better position. As of now, definitely, our first target was to reach INR 200 crores number. So fortunately, we have -- after all the challenges, we have already crossed INR 70 crores. In next quarter, we are expecting that we should cross INR 100 crores. So this thing will definitely help -- these numbers will help us to reach to breakeven level numbers. And that's why we have said that the EBITDA margin should be around 19%, 20% because of all these factors.

Got, got it. That's clear. Second -- actually fourth -- sorry to ask so many questions. If you can just highlight briefly on Skyroot Aerospace. I think in May '21, you have taken part in Series-A funding round of $11 million, which they raise and they have been doing pretty good works. I mean we keep on reading. So if you can sort of highlight the developments that you are seeing there and the valuation that those entity is drawing and the business potential that you see from there.

Definitely, we have invested in that company with the strategic intent that we should be part of the products which will go into the space. And with that intention, we have invested, and we are an exclusive supplier of professional system to them. So with this strategy, we have invested in them and they are doing pretty good. And once their rocket is launched and successfully, definitely, valuations goes up for those kinds of companies. And that will also help us a lot from 2 factors: first, from investment angle; second, from continuous supply of our finished products to them. So let's see how they progress and start the -- launch the vehicles first. If they do it successfully, then they will definitely be the first private sector company to launch the space vehicle successfully from private side.

Right. And we'll see following that. And last, so there is a situation, I think this overseas business is becoming a really big chunk of your overall revenue now. So please, if possible, start disclosing the volume, the tonnage data like you do for domestic segment, that's really helpful. That's all for me.

The next question is from the line of Rohan Gupta from Edelweiss.

Congratulations on a strong set of numbers despite current volatile environment. Sir, a couple of questions, sir. First is on this -- the customer acceptance of these higher prices. Now we see that explosive prices has almost gone up from almost INR 30,000 to INR 50,000 per tonne in the current quarter. As you mentioned that the prices are still on rise, mainly driven by the price -- input cost increase. How has been the customer acceptance? Are you seeing that there can be probability of downgrade in the input prices or they can move to some other material like FGAN and all as far as the mining materials are concerned?

Definitely, there is a bit reluctance within the customer facility to accept these higher numbers. But we have been able to convince them that these prices are because of various international factors, and those are impacting the demand from those customers. But if you look at the supply-related concerns, then definitely, the availability of raw material is not pretty good at this stage. So demand is there, but prices are dampening the demand, but we are able to maintain our market presence across the geographies.

Sir, do you see that you have been able to maintain the market share? Or it has grown up because despite the input cost increase and sharp rises in pricing, you have still managed almost 27% kind of volume growth in last 9 months? That's pretty decent, and I'm sure that the industry would not have grown at that pace. So doesn't we have gained market share? And also on the contrary, that despite such a sharp price increase, the volume growth has been pretty solid. So what has been the contributing factor for this volume growth? Then my second question was the contradiction to my first question that despite such a price increase, we have been able to probably gain market share with a 27% volume growth, which even exceed your earlier expectation of 15% to 20% volume growth guidance. So are we gaining market share? And is this gain of market share is coming on the cost of that lower imports? Or other suppliers, local suppliers are not able to meet the demand from the customers? From where this market share gain is coming? How the industry itself is growing at such a [indiscernible] phase?

So like we have already shared that the COVID was there, then supply disruption was there. And now because of very high commodity prices, a lot of people are facing the financial challenges because of from working capital side. So these factors are definitely eroding the competitiveness of the smaller players, and as a result of which our supply is not definitely a little more than what we have expected. And definitely, with this 27% volume rise, one factor was that in the last year, there was a COVID, and that has also reduced the last year's demand. If we eliminate that factor, then growth should be around 20%, and which is more than 15% of our target. So we have increased our little bit of market share, and as a result of which we believe that the 27% growth is there in the numbers.

Okay. Sir, do you also see that, that has set a high base for current year and probably for next year, there should be some tapering off in a volume growth number? Like are you still think that 15% to 20% growth on 27% to -- 27% kind of growth base in the current year is possible?

Rohan, like we have said that we are increasing the geographical footprints in India. And based on that, plus based on our aggressive marketing strategies, we believe that 15% volume growth should be a reality.

And then just last question for myself. Sir, on accessories market that we have seen roughly 9 months close to 30% growth, I understand it is all -- it will be a function of both volume as well as pricing. Has the price increase in explosive has not been [ line ] or has not been pretty aggressive that what has been in basically explosive market because it's only 30% increase, which should be the function of both price and volume. So there is not any significant price increase in there in accessories market.

It is very clear that in explosives, the raw material percentage is always very high. And in initiating systems, the raw material percentage is always very low. And if we factor in the commodity price rise in both the sides, it is practically similar in both the sections, but the impact is always less. And that's why you will -- you must be saying that in 9 months, explosive value has increased by 70% and initiating system has increased by 30%. So the rise is practically [ benign ], and we don't believe that -- any other factor in that.

So this 30%, if I look at that, it's primarily -- like I believe the explosives and accessories goes hand in hand. So probably 27% volume growth in explosive would have led to a similar kind of growth in accessories or even generally, we have seen accessories growing higher than explosive. So it's all the 30% growth in 9 months is all driven by volume or an absolute no price increase?

I have already this question to Mr. Bhavin of SBI. And the reason was that there was a rationalization of inventory in our overseas subsidiaries and Indian market to our various channel partners. And that's why we have reduced the quantity sales, and it will get normalized in next quarter.

Ladies and gentlemen, this was the last question for today. I would now like to hand the conference over to Mr. Mayank Bhandari for closing comments.

Thank you, Rutuja. On behalf of Nirmal Bang Institutional Equities, I would like to thank the team from Solar Industries for providing us an opportunity to host the call. If there is any closing comment from the management, we will take it up.

Thank you so much for everyone to participate in Solar's conference call, and we expect to bring you more such stellar quarter performances in the next quarter. Thank you so much.

Thank you. On behalf of Nirmal Bang Equities, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.