Nilesh Panpaliya, CFO, Solar Industries India

"One of the most significant reforms of the government, the GST would indeed be a game changer and will provide a level playing field to manufacturers like us."

Aug 04, 2017 06:08 IST India Infoline News Service

Nilesh Panpaliya is CFO of Solar Industries India Ltd. He has been with the company for over 11 years. His educational qualification includes BE Electronics and MMS in Finance. He has an overall experience of 20 years in the field of Finance.  He has previously dealt with industrial Finance, merchant banking and management consultancy services.
Solar Industries India Ltd is India’s largest manufacturer and exporter of Industrial Explosives and Initiating systems. It has large presence in the global market with footprints in 42 countries. Solar is the only India-based explosives manufacturing company to have its production facilities in Turkey, South Africa, Zambia and Nigeria.
Solar Industries runs the world’s largest packaged explosives manufacturing facility at a single location at Chakdoh, Nagpur.
Replying to IIFL, Nilesh Panpaliya said, “One of the most significant reforms of the government, the GST would indeed be a game changer and will provide a level playing field to manufacturers like us.”
Give us an idea about Solar Industries India’s organic as well as inorganic expansion?
Our expansion plan is a continuous process. We are India’s largest manufacturer and exporter of explosive and initiating System, providing a complete range of industrial explosives. Solar group has evolved from a single site manufacturing Company in 1996 to a globally recognised industrial explosives company having 25 manufacturing facilities domestically and 4 overseas manufacturing facility with a presence in 42 global markets.
Our vision is to emerge as a global leader in the manufacturing of industrial and military explosives and an innovative solution provider with a focus on safety, quality and reliability. We have spent Rs 675.74 crore in capacity expansion in the last 5 years. Capex done by us for 2016-17 was around Rs 195 crore.
This year the construction of our fourth overseas manufacturing facility has been completed in South Africa and the commercial production has also commenced. We are aiming to expand our overseas presence further by increasing our manufacturing facilities from 4 to 10 countries by 2020.
Last year, we set-up facilities to manufacture warhead filling, pyros, ignitors, propellants for our country’s Pinaka Mark-II guided rocket. We are also working on setting up a world-class project for manufacture of bi-modular charge systems and fully integrated rockets which in the long run would help us increase our return on capital employed. We are open for inorganic expansions as well.

What is your view on India’s defence sector growth going forward?
We are driven by our vision of making India self-reliant in ammunition requirements. We believe that the policy level developments being carried out by the government – latest being the Strategic Partnership Program (SPP) that has come after revised Defence Procurement Procedure, (2016DPP2016) – would enable private Indian firms to play a meaningful role in the supply of defence items.
With the introduction of DPP2016 guidelines and SPP, there is now a lot of clarity. In March 2017, the government floated Requests for Proposals (RFPs) for eight types of Ammunition Items which include Large Caliber Gun Propellants, Tank Ammunition, Artillery Fuzes, Rockets, Gun Ammunition. The government has specified that long-term contracts of 10 years will be signed. These contracts will significantly boost the private sector. We will participate in most of these RFPs in association with DRDO and other leading technology providers.
With our wide experience in handling explosives substances and energetic material, our foray into this sector with a mission to create ammunition hub will be an important trigger for our next wave of growth. We are extremely confident that we are on the right track.
Could you throw some light on the company’s order book?
We have orders worth Rs 600 crore of commercial explosives domestically and Rs 140 crore of orders in defence from various customers and deliveries have already commenced. We expect to execute orders worth Rs 100 crore in defence and approx 1,400 crore domestically in commercial explosive other than exports and overseas by end of FY18. In defence segment, our target is to cross Rs 500 crore of revenue by 2020.
Please give us your geographical segmental revenue break-up?
Globally, mining segment dominates the industrial explosive consumption with around 80% of market share, our share is at 23%. Coal India is the largest client contributing 24% of revenue in FY2017 and presently contributing 16% in current quarter. Housing and infra sector’s share would be around 26% and Institutional Customers contributing 21%. Also, we have created customer footprints in 42 countries supported by our manufacturing facilities in 4 countries. Our company derives approximately 28% of consolidated revenue from exports and overseas operations, which is currently at 30% in the quarter.
What impact does GST have on your company and the overall industry?
One of the most significant reforms of the government, the GST would indeed be a game changer and will provide a level playing field to manufacturers like us. This is expected to boost the demand for our products.
How will the new defence policy aid your company’s growth?
Our country still depends largely on the import of ammunition for the defence sector. The Government has taken various initiatives through the Defence Procurement Policy 2016 with emphasis on ‘Make in India’ program inviting the private sector participation to achieve self-reliance in defence production for our armed forces.
Historically, Defence procurement policy for ammunitions was formulated to handle purchases from imports and Defence PSU’s. So when we ventured into the development of explosives for Defence, our products were either 100% import substitutes or where the technology absorption was in process. Such developments require a lot of validations and revalidation starting from the vendor including item development, process parameters, plant trials and field trials.
Currently, we are the sole manufacturer of HMX, RDX, TNT and their compounded products in the private sector and also have a large Composite Propellant plant. Most of our products have been tested and validated by various approved defence agencies.
We have set up R&D labs that are accredited by the Department of Science and Technology, Government of India. Solar has progressively invested in adding capacities to leverage better economies of scale, safety and reliability. By leveraging the existing infrastructure, we look forward to emerging as the leading private sector ammunition manufacturer in India.

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