Solar Industries’ Omnia acquisition to reshape growth, debt outlook

ET Intelligence Group: Solar Industries, an explosives maker, has shown resilience on bourses over one- and three-month periods amid weakness in the broader market. Strong quarterly earnings, a robust order book and expectations of further expansion following its proposed acquisition of South Africa's Omnia Holdings are some of the factors supporting the stock. Revenue and earnings before interest, taxes, depreciation and amortisation (Ebitda) of the combined entity are likely to jump two-three times by FY28 compared with ₹9,838 crore and ₹2,750 crore for Solar in FY26, respectively. Its Africa mining revenue is expected to more than triple to $900 million-$1 billion following the acquisition. The stock currently trades at a price-earnings (P/E) multiple of 85 compared with the three-year average of 93.5 and the five-year average of 79.1.

While the Omnia acquisition is likely to bolster the overall top line and profits in the long term, it may weigh on Solar's near-term profitability as the $1.4 billion (₹13,000 crore) deal will be funded through internal accruals and debt. The total debt is expected to rise to ₹10,000-11,000 crore by FY28 from around ₹1,468 crore at the end of March 2026, although management expects debt to remain below two times Ebitda.

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ICICI Securities noted in a report that the debt-funded acquisition would add around ₹1,000 crore to interest costs in FY28, which could largely offset Omnia's contribution to profit. It expects the transaction to become meaningfully EPS-accretive only from FY29.

Over the longer term, earnings are expected to improve given synergies from Omnia's ammonium nitrate facilities as the chemical compound accounts for 65-70% of Solar Industries' total raw material consumption. Additionally, the blasting services of ProBlast, a South African company Solar acquired in 2024, will strengthen vertical integration and improve margins.

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The combined entity is targeting ₹6,800-7,000 crore Ebitda on ₹31,000-32,000 crore revenue by FY28. The management also sees scope to improve BME's (Omnia's mining business operating under the BME brand) current Ebitda margin of 13-14% through these synergies.