Solar Industries India Ltd

CHAIRMAN'S INSIGHTS

Prospering with all stakeholders

- Solar will be the first Indian company to fully indigenise and develop Loitering Munitions (LM) in house. This Indian innovation will prove to be an important step ahead in Solar's commitment of making India self reliant in ammunition.

Dear Shareholders,

On behalf of Solar Industries India Limited, I extend my warmest greetings to you. I hope you and your family are safe and in good health. It gives me great pleasure to present the Company's 27th Annual Report for FY 2021-22.

Our Strength, Our People

As we continue to navigate the uncertainties of the Covid-19 pandemic, safety and well-being of our employees still remain our topmost priority. Through these arduous times, our team at Solar has shown great resilience and strength to ensure uninterrupted operations. To support our employees, we established work-from-home infrastructure, periodically conducted RT-PCR testing and provided free vaccinations. The pandemic took the world by storm and still continues to disrupt people across the globe and I would like to laud the heroic efforts of all the frontline workers, who directly engage in the fight against the virus every day and illuminate the way for humanity.

Reflecting on FY 2021-22

After a tumultuous two years post the outbreak of the Covid-19 pandemic, the global economy has shown steady progress and recovery. Some developed economies have played a crucial role in the global economic recovery while developing economies are anticipated to experience growth. Equitable vaccine distribution and headway in medical research across the world have been crucial steps that have helped minimise the repercussions of the pandemic and gave the global economy growth a chance to recover again.

Additionally, the government has bolstered the Indian defence sector by allocating 25% of the defence R&D budget to the private sector, which will go a long way towards breaking the public sector's monopoly on creating cutting-edge military equipment.

The Indian economy is projected to grow by 8.9% in FY 2021-22, at the backdrop of favourable reforms and increased domestic consumption. The country's strong economic fundamental will help withstand short-term pressures of inflations and remain a fast growing economy in the world.

The Union Budget of FY 2022-23 has focused on overall economic growth, there has been an increase of 35.4% in Capital Expenditure as compared to FY 2021-22 which is bound to boost the economy. The budget has laid a notable emphasis on infrastructure as well as increasing support for small and medium businesses.

Additionally, the government has bolstered the Indian defence sector by allocating 25% of the defence R&D budget to the private sector, which will go a long way towards breaking the public sector's monopoly on creating cutting-edge military equipment.

In keeping with the government's Aatmanirbhar Bharat goal, 68% of capex is designated for domestic procurement, which is up by 10% over the previous budget and will reduce India's dependency on defence imports. The government also catered to the long-standing demand of the defence industry by introducing a nodal umbrella body for testing and certification.

Based on synchronised growth across major industries and supportive government reforms, the country is looking forward to a brighter future.

Business Performance

We have secured outstanding progress in FY 2021-22. Robust growth and project execution across all sectors have enabled us to surpass yearly revenue growth targets. Our sales stood at RS 3948 Crore for the current fiscal year, in comparison to RS 2516 Crore in the previous year, a 57% increase. We recorded EBITDA margins of 19.43%, as against 21.31% the year before, and our Net Profit stood at RS 441 Crore, compared to RS 276 Crore in the previous year.

Despite challenges related to an unprecedented increase in commodity prices across business verticals, increased freight and forwarding charges and foreign exchange fluctuations, we have demonstrated a strong financial performance during the year. We have also successfully commenced commercial execution of Multi Mode Hand Grenades (MMHG) orders from the defence industry. The defence sector continues to contribute to our top line along with other industries like mining, exports, overseas markets, housing and infrastructure. To keep pace with advancements in defence technologies and adopt force multipliers to counter enemy threats we took up the challenge to enter the field of drones and counter drones. Our drones can be used in both offensive and defensive roles. In offensive role these drones can be used to target enemy troops, bunkers, vehicles and tanks. In defensive role we have developed anti-drone system capable of soft kill and hard kill using micro-missiles.

A loitering munition (LM) (also known as a suicide drone or kamikaze drone) is a weapon system category in which the munition loiters around the target area for some time, searches for targets, and attacks once a target is located. Solar will be the first Indian company to fully indigenise and develop loitering munitions (LM) in-house. This Indian innovation will prove to be an important step ahead in Solar's commitment of making India self reliant in ammunition.

Positioning for Future Growth

We are committed to deliver continued and profitable business growth. Our positioning for future growth is driven by our refreshed strategy for moving forward. All our endeavours are part of a collective effort by our employees and a commendable cross-departmental collaboration. Each of our departments is led by senior management personnel, with extensive knowledge in their respective areas which they effectively execute across their departments.

With an extended focus on developing new and upgraded products, the Company aims to strategically focus on increasing its contribution to the defence sector and upgrading its existing skills. Over the short-term, we are aiming to improve product as well as process efficiency, and in order to do that we are we are stepping up technological innovation to support cutting-edge processes and upgrading our infrastructure to adapt to best industry practices.

As we forge ahead, we aim to further strengthen our position as global leaders in the explosives industry. To achieve our long-term objectives, we have announced green field investments in Australia. The proposed cartridge plant in Australia is also expected to be a key investment area that is anticipated to further aid our efforts to shorten delivery time to the customers.

The Indian economy offers promising prospects for the growth of the organisation. With better opportunities, the government's focus on sectors like infrastructure and real estate and emphasis on Atmanirbhar Bharat, Make in India, PM GatiShakti National Master Plan (PMGS-NMP), Pradhan Mantri Awas Yojana, and Housing for All, we are poised to capitalise on emerging opportunities within the country. We are optimistic that with the increased outlay for infrastructure and defence procurement, particularly with the stated policy of procuring 68% from domestic industry, industries like ours will be benefitted to a great extent.

We are not only expanding our geographical footprint, but also improving production facilities and internal capabilities by developing new and improved products in India to cement our position in an evolving market. In the overseas market, we have a strong presence in Turkey, Nigeria, Zambia, South Africa and have started operations in Tanzania and Ghana. Additionally we endeavour to broaden our reach, enhance our product portfolio and sustain market leadership in emerging markets around the world.

Dividend

We have recommended the dividend payout of 375% this year which is 25% more than the previous year.

Occupational Health

Solar is dedicated to providing a safe and healthy working environment to all its employees and workers. Our Safety, Health and Environment management is based on ISO 14001/2015 and OHSAS/800/2007 principles and supplemented by stringent regulatory standards. Our health and safety policy takes into account all occupational hazards and diligently undertakes efforts to propagate training on workplace safety. Benefits such as insurance, retirement plans, healthcare, and disability coverage are also offered to our employees.

Ethical Governance

As a responsible organisation, we lay great emphasis on corporate governance to ensure business sustainability. At Solar, we follow transparent reporting practices and consistently improve internal communication systems to create a robust corporate governance policy that focuses on active and meaningful engagement with the stakeholder community.

Sustainability, Our Responsibility

We, at solar believe in equating our growth with sustainable development of the planet. We are constantly advancing the ESG agenda by incorporating long-term sustainability into our core business operations. Our approach to sustainability is in line with the UN sustainable development goals. We have a comprehensive policy structure to guide our sustainability agenda which is in accordance with our mission. Our sustainability policies have been designed to meet the needs of our entire business.

We have taken several initiatives for reducing our emissions as well as energy and water consumption to ensure responsible operations for the safety of our environment, we regularly monitor our emissions and take necessary steps to reduce them. By following the emission requirements set forth in the Maharashtra Pollution Control Board's permission to operate (MPCB), we make sure to be a responsible and environmentally conscious Company. We understand the need to source water from surface sources and are diligently working towards water harvesting and pond building initiatives as well.

Service to Community

Solar makes it a priority to reach out to the underprivileged communities. We truly believe in making a difference in society by addressing issues related to ‘human dignity' instead of just focusing on material prosperity. Our belief is built upon the concept of ‘trusteeship', which permits us to look beyond our commercial interests and allows us to play our part in minimising economic inequalities. It also influences our CSR initiatives and enables us to effectively contribute to the socio-economic development of the communities in which we operate.

We have been able to achieve this by building infrastructures and developing dedicated skill development programmes to create employment along with building schools in several locations within the vicinity of our plant. We have also built and renovated hospitals and rehabilitation centres in order to work towards the health and hygiene of the underprivileged society.

We continually engage with our stakeholders since they are the heart of our Company and our goal remains to preserve all of our stakeholders' interests in our operations and business decisions.

Gratitude

I would like to take this opportunity to thank the entire Solar team, for their perseverance, hard work and dedication towards the Company. Each member of our team has served as a source of inspiration and despite difficulties, has helped to accomplish organisational objectives. I am truly humbled by the ability of the leadership team and the employees to remain steadfast in the face of hardship. I also remain thankful to our customers, suppliers, shareholders, business partners, and other stakeholders for their unwavering support. I look forward to continue on this truly gratifying journey to ensure success.