The Hindu Business Line : Solar Explosives: Invest

Investors with a long-term perspective and seeking to diversify their portfolio to rake in the opportunities in the coal mining sector can consider investing in the initial public offering by Solar Explosives. Growth opportunities in the coal sector play down the pricing factor, which is at about 15 times its annualised consolidated per-share earnings for FY-06.

However, investors with limited exposure in equities can give the offer a go by, as the listing gains are not guaranteed going by the performance of industry peers. The company proposes to raise about Rs 80 crore, a large portion of which it plans to invest in its subsidiaries.

Business

Solar Explosives manufactures slurry explosives and through its subsidiaries makes detonators, detonator components and bulk explosives. It is among the larger players in the explosives industry.

The explosives industry is largely dependant on the mining and infrastructure industries. Capacity expansion in metals, power and cement industries, which are among the major users of coal, is expected to heighten coal mining operations. Increased mining activity would in turn spur demand for explosives.

Heightened mining activity in the past couple of years helped Solar Explosives build a good record on the revenue front. The company, on a standalone basis, recorded a 20 per cent growth in revenues and earnings over a four-year period. The performance has continued into the first half of FY-05. Though the company is expected to maintain the growth rate, the stiff valuations at which shares are being offered are a dampener.

Details of the issue

Solar Explosives plans to expand its bulk explosives facility at a cost of Rs 53 crore and infuse Rs 23 crore as equity in a subsidiary which it plans to set up in Nigeria. The proposed Nigerian subsidiary would manufacture bulk explosives, cartridge explosives and house a magazine storage facility. Solar Explosives is offering 44 lakh shares in the Rs 170-190 price band. The offer, which opens on March 9, closes on March 13. SBI Capital Markets is the manager to the offer and Intime the registrar.

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