Industrial explosives maker (SIIL) is planning to raise funds from private equity. The company has not disclosed how much it is looking to scoop up through fresh issue of securities, but said its board is meeting on July 30 to consider the option of raising the funds, according to a BSE filing.
Founded in 1995, Nagpur-based Solar Industries India was formerly known as Solar Explosives Ltd. It has a capacity of over 2.8 lakh MT of explosives (with over 2.1 lakh MT of bulk explosives and rest being cartridge explosives), 190 million detonators and 75 million meters of detonating fuse.
For the year ended March 31, 2012, the company had net sales of Rs 967.5 crore with net profit of Rs 101.2 crore. It currently has a market cap of Rs 1,576 crore. At the current market price, a further 10 per cent stake dilution would mean funding of around Rs 157 crore or $28.5 million.
The promoters (Nuwal family) held 74.9 per cent stake in the public listed company as of June 30 and so the company can dilute close to 33 per cent stake, while still ensuring the promoters own the majority stake.
The company, which has 17 manufacturing facilities in India besides a unit each in Zambia and Nigeria, is currently building a new plant in Turkey. It claims to have increased market share in India from 24 per cent to 27 per cent in FY12.
The explosives industry is highly regulated due to high safety and security concerns. The explosives are used in the mining sector and worldwide demand is driven by economic development, energy and base mineral demand.
The Indian explosives market is driven by increased spending and activity in the Indian infrastructure segment. The Indian market of civil explosives is pegged at around 0.7 million tonnes worth Rs 2,750 crore, annually. This accounts for around 5 per cent of the global civil explosive consumption and the local market is growing around 6-7 per cent annually.
India is the world’s eighth-largest explosive manufacturer and has over two dozen players in the business.
In India, the mining sector accounts for 80 per cent of the demand for explosives, which in turn was dominated by coal mining (with Coal India being a big customer); around 20 per cent of the demand for explosives in India was catalysed by the infrastructure sector.
This would be first PE funding for the company, which went public over six years ago. Five years ago, it acquired Navbharat Coalfields Ltd, a privately held company which is engaged in coal mining and washery projects.
(Edited by Prem Udayabhanu)