Solar Industries’ defence share may fall to 22-25% by FY30 after Omnia deal: Jefferies

Solar Industries’ proposed Rs 13,000-crore acquisition of South Africa-based Omnia Holdings is expected to reshape its revenue mix, reducing defence’s projected contribution to 22-25% by FY30 from the earlier 35-40% estimate, according to Jefferies.

Omnia generates 54% of its revenue from agriculture, primarily fertilisers, while the remainder largely comes from mining explosives. Following the acquisition, agriculture could contribute around 24% of Solar Industries’ consolidated revenue by FY30, while explosives could account for approximately 52%.

The mining business complements Solar Industries’ existing operations and could expand its presence in markets such as Canada, Australia, and the US. Although agriculture is outside Solar’s core business, the two companies use ammonium nitrate as a common raw material.


Omnia manufactures ammonium nitrate, which Solar Industries currently purchases from external suppliers. The acquisition could therefore strengthen the company’s backward integration and improve its control over a critical input, Jefferies noted.

However, the transaction could dilute Solar Industries’ earnings per share by 4-6% in FY28 and FY29 under Jefferies’ normalised growth assumptions for Omnia. The impact is expected to moderate to around 1% by FY30.

Jefferies’ estimates differ from management’s guidance, which indicates that the acquisition could be EPS-accretive by 0-3% even without factoring in substantial synergy benefits.

The deal could also temporarily increase Solar Industries’ leverage. Consolidated net debt-to-equity is projected to rise to 1.2 times in FY28 before declining to 0.8 times in FY29 and 0.5 times in FY30, supported by strong cash generation.

Jefferies noted that Omnia is currently a net-cash company and the acquisition values it at around 16 times trailing FY26 earnings. Solar Industries’ management also has a healthy record of capital allocation and cash-flow management, the brokerage said.

Even after factoring in the lower defence contribution, near-term EPS dilution and higher leverage, Jefferies remains bullish on Solar Industries. The brokerage retained its Buy rating with a target price of Rs 28,160, citing potential EPS CAGR of over 30% and return on equity exceeding 25%.

How has the stock performed in last 2 days?

Solar Industries shares fell another 4% to Rs 18,480 on Wednesday, extending their two-day decline to over 17%. The stock had plunged nearly 14% on Tuesday after the company announced the Rs 12,951-crore acquisition of South Africa’s Omnia Holdings.

Despite the selloff, the stock has gained over 300% in three years and around 850% in five years. Solar Industries currently has a market capitalisation of about Rs 1.68 lakh crore.

Disclaimer: This article has been written by Somanjali Das, who is not a SEBI-registered Research Analyst or an Investment Adviser. Somanjali Das and his/her ‘relative(s)’ (as defined under Section 2(77) of the Companies Act, 2013) do not hold any financial interest in the companies mentioned in this article as of the date of publication. The views/recommendations mentioned in this article, wherever applicable, are those of the respective SEBI-registered Research Analyst/brokerage and have been reproduced/reported with due attribution. They should not be construed as the views or recommendations of The EconomicTimes Digital or the journalist. Readers are advised to consider the original research report and make their investment decisions based on their own assessment. Brokerage disclaimers here