Solar Industries rallies 7% on signing new contract worth of Rs 409 crore

The company has signed a contract worth of Rs 409 crore to supply 1 million pieces of multimode hand grenade to the Ministry of Defence

Shares of Solar Industries rallied 7 per cent to Rs 1,143 in the intra-day trade on the BSE on Monday after the company signed contracts worth of Rs 409 crore to supply 1 million pieces of multimode hand grenade to the Ministry of Defence.

"Economic Explosives Ltd, wholly owned subsidiary of Solar Industries India, has signed a contract for supply of Multi-Mode Hand Grenade (MMHG) with Ministry of Defense, Government of India," Solar Industries said in a regulatory filing.

The contract is for supply of "Ten Lac" pieces having an approximate value of Rs 409 crore. The contracted quantity is to be delivered over a period of two years, it said. READ HERE

Solar's order book at the end of Q1FY21 was at Rs 1,153 crore, of which Rs 710 crore of the state-owned mining company Coal India. The current Rs 409 crore order win would act as an important catalyst for growth and sustaining profitability going ahead. Further step towards indigenization of defence equipment by the government is expected to bode well for the company.

With commencement of bidding for commercial mining of coal in India, large international mining companies are expected to enter this segment with latest technologies. This will augur well for the explosive industry as coal producing companies will procure explosives for value addition rather than commodity purchase as done by PSU's. The government is also determined to reduce the country's coal import from 242.9 million tonnes and reduce its foreign exchange outflow which stands at about Rs 2 trillion.

"The production of coal, however, is likely to slow in the near term as the sector has been impacted by the recent outbreak of Covid-19 that led to a lockdown in March 2020. The impact is likely to continue till the 1st and 2nd quarter of FY 2020-21. Although, long term prospects of the sector remain intact as government initiatives and company specific measures are likely to fuel growth," Solar Industries said in annual report 2019-20.

Solar group is one of the largest domestic manufacturers and suppliers of bulk and cartridge explosives, detonators, detonating cords, and components. It has manufacturing facilities in 25 locations in India, and plants in Nigeria, Zambia, South Africa, and Turkey. In fiscal 2011, the group entered the defence sector to manufacture high energy explosives, delivery system, ammunition filling and pyros fuses.

At 10:11 am, the stock was trading 3 per cent higher at Rs 1,099 on the BSE, as compared to 1.2 per cent rise in the S&P BSE Sensex. A combined around 30,000 equity shares had changed hands on the counter on the BSE and NSE till the time of writing of this report.