Solar Industries' September Quarter: Defence Sales Nearly Doubled, and the Reported EBITDA Margin Moved Only 1.1 Points on 69% More Revenue

Solar Industries India reported consolidated revenue of ₹3,519 crore for July-September 2026, up 69% from ₹2,082 crore, and EBITDA of ₹1,021 crore, up 75% ([PR]). Defence sales rose 98% to ₹1,002 crore. Yet the EBITDA margin moved from 27.95% to 29.02%, 107 bps (company figure), on revenue that grew by two-thirds. The three cost lines the company shows fell by 2.03 points of sales (our arithmetic); the reported margin moved by about half that, because other income, which the company's EBITDA includes, fell from 1.40% of sales to 0.44% (our arithmetic from the income statement in [RS]). The documents do not give the margin of any customer group, so they cannot say whether Defence scale is raising or diluting the margin.

The idea in one sentence

A moat built on scale and licences should show up as operating leverage when revenue jumps, and in Solar Industries' September quarter revenue jumped 69% while the reported EBITDA margin moved only 1.1 points, because other income, which that margin includes, fell (see below).

The fact that breaks the assumption

Revenue grew 69% (₹3,519 crore against ₹2,082 crore, [PR]). On the deck's lines, materials consumed, at 47.63% of sales against 47.44% a year earlier ([IP], quarterly result table), grew 70% in rupees (₹1,676 crore against ₹988 crore) and so took almost the same share of sales. The cost that did not keep pace was employee cost: ₹266 crore against ₹195 crore, up 36%, which is 7.57% of sales against 9.35%, a fall of 1.78 points. Other expenses rose 65% to ₹571 crore, 16.22% of sales against 16.66%. One caution on those two lines: the year-ago split in the deck differs from the results statement in [RS], which has materials consumed (cost of materials plus purchases of stock-in-trade less the change in inventories) at ₹1,015.78 crore, 48.78% of sales, and other expenses at ₹318.95 crore, 15.32% (our arithmetic); about ₹28 crore sits in a different line, and the filings do not say why. The September 2026 and June 2026 columns agree between the two. Together the three lines the deck shows were 71.42% of sales against 73.45% (our arithmetic), a 2.03-point improvement. The reported EBITDA margin improved by 1.07 points, less than the 2.03, because other income, which sits outside sales but inside the company's EBITDA, fell from ₹29.18 crore to ₹15.37 crore ([RS], income statement; 1.40% of sales against 0.44%, our arithmetic). The company does not say why employee cost grew slower than revenue or why other income fell.

One concrete thing, followed: Defence, ₹506 crore to ₹1,002 crore

Start with the line that carries the story. The customer-group table in [IP] gives Defence sales of ₹1,002 crore in Q2 FY27, 29% of sales, against ₹506 crore, 24%, a year earlier, up 98% (company figure; it is a hair short of double). In the June quarter it was ₹933 crore, so the sequential rise is 7.4% (our arithmetic). Half-year Defence sales are ₹1,935 crore against ₹925 crore, up 109% (company figure).

The order book behind it is ₹20,178 crore, of which Defence is ₹17,568 crore (87.1% of the order book, our arithmetic: 17,568 divided by 20,178) and a block labelled CIL & SCCL is ₹2,610 crore ([IP], order book slide). The two figures add to the total. The deck does not say what CIL & SCCL stands for or whether the block is domestic, so we do not describe it. Management's own words on what is next: "We are likely to get large orders from international and Indian defence sector, which include guided pinaka rockets as well in near future." (Manish Nuwal, Managing Director and CEO, [PR]). That is a statement of expectation, not a signed order.

The mechanism: where the margin went

Here is the bridge from the deck's cost lines to the reported margin (all as a percentage of net sales, Q2 FY27 against Q2 FY26, [IP]):

• Materials 47.63% against 47.44%: 0.19 point higher.
• Employee cost 7.57% against 9.35%: 1.78 points lower.
• Other expenses 16.22% against 16.66%: 0.44 point lower.
• The three together: 2.03 points lower (our arithmetic).
• 100% less the three lines: 28.58% against 26.55% (our arithmetic). The reported EBITDA margin is 29.02% against 27.95%.
• Other income, shown in [RS] below revenue from operations and not in net sales: ₹15.37 crore against ₹29.18 crore, 0.44% of sales against 1.40% (our arithmetic).

The reported EBITDA is above "100 less the three lines" in both quarters: by 0.44 points this year (29.02 less 28.58) and by 1.40 points last year (27.95 less 26.55), both our arithmetic. That gap is other income. The income statement in [RS] shows other income of ₹15.37 crore this quarter and ₹29.18 crore a year ago, which match the gap in rupees (EBITDA of ₹1,021 crore and ₹582 crore against sales less the three lines of ₹1,006 crore and ₹552 crore, a gap of ₹15 crore and ₹30 crore, our arithmetic from the deck's rounded figures). The company's EBITDA also equals profit before tax and associates plus finance cost and depreciation (₹877.84 crore + ₹55.36 crore + ₹87.95 crore = ₹1,021.15 crore for this quarter; ₹490.46 crore + ₹30.89 crore + ₹60.62 crore = ₹581.97 crore a year ago, our arithmetic from [RS]), so it includes other income. The gap narrowed by 0.96 points, and 2.03 less 0.96 is the 1.07 points the company reports (our arithmetic). Neither [IP] nor [PR] defines EBITDA, and the documents do not say why other income fell.

So why does 69% more revenue move the margin only about a point? From what the documents say: because materials, the biggest cost at 47.63% of sales, scaled one for one with sales on the deck's split; because the part that did not scale (employee cost, with other expenses) gave 2.2 points; and because 0.96 point of that was given back as other income, which the company's EBITDA includes, shrank relative to sales (our arithmetic). The company says none of this itself. Its commentary on the quarter describes contributions from "Domestic Explosives, International Explosives and Defence" and "disciplined execution" ([PR]), and gives no margin reason.

Mix: three engines, one margin

The customer-group table ([IP]) shows who supplied the 69%:

Of the ₹1,437 crore rise in revenue over a year, International supplied ₹552 crore, Defence ₹496 crore and Domestic ₹366 crore (our arithmetic). Total revenue fell 4.1% from the June quarter (our arithmetic: 3,519 against 3,668) because Domestic Explosives fell 29.2% (our arithmetic: 963 against 1,361), from 37% of sales to 27%. Over the same sequential step, materials consumed fell from 50.63% of sales to 47.63%. The company gives no reason for that fall; its commentary says only that Domestic Explosives "delivered a healthy performance during the quarter, supported by demand from the mining and infrastructure sectors" ([PR], Mr. Nuwal).

The mix question the filings cannot answer: whether Defence earns a higher or lower EBITDA margin than the explosives lines. [RS] note 3 says the Group has "its only reportable segment" in Explosives, its accessories and related services, so there is no segment margin. Our reading is that the 3-point fall in material cost as a share of sales since June, in the quarter where Domestic fell and Defence and International rose, is consistent with a mix effect, but the company gives no cost split by customer group, so it may equally be price, input cost or timing. We state the arithmetic and stop there.

Two accounting items inside the quarter

Turkey. Note 6 of [RS] says the Group "has applied Ind AS 29 - 'Accounting of Hyperinflationary economies' on its step-down subsidiaries in Turkey". The net impact of the restatement was a ₹18.37 crore debit to other expenses for the quarter and ₹43.70 crore for the half year, and an impact up to 31 March 2026 of ₹22.27 crore was credited to opening retained earnings. The Q2 charge is 0.52% of sales (our arithmetic: 18.37 divided by 3,519). The note says it was debited to other expenses in the consolidated results, so it sits inside the Other Expenses line (₹570.77 crore in [RS], ₹571 crore in the deck), and the Q2 FY27 margin without it would have been about that much higher, other things equal (our arithmetic). It is not a year-on-year effect: the cash flow statement in [RS] shows a loss of ₹36.50 crore on the same hyperinflation line for the half year ended September 2025, against ₹43.70 crore now, and no quarterly split is given for last year, so the filings do not show how much of the 1.07-point move it explains.

Omnia. Note 7 says that in the quarter Solar SA Investments Proprietary Limited, a wholly owned step-down subsidiary, and Solar Overseas Mauritius Limited, a wholly owned subsidiary, "entered into definitive transaction agreements with Omnia Holdings Limited, South Africa, in connection with the proposed acquisition of Omnia for an aggregate cash consideration of approximately USD 1.35 billion". Completion is "subject to receipt of applicable regulatory approvals and fulfilment of customary conditions precedent". No figure for Omnia's revenue, profit or business is given in the four documents. The deck shows net debt of ₹1,177 crore at the half year against ₹867 crore at FY26, a net debt to equity ratio of 0.15 against 0.13, and capex of ₹873 crore in the half; the deck does not say whether any of them reflect funding for the deal.

BEAR CASE: where this breaks

• The order book is mostly Defence. ₹17,568 crore of ₹20,178 crore, or 87.1% (our arithmetic). Orders from one buyer category can be lumpy (our reading): a delay, a reduction or a scheduling shift moves the revenue for a quarter or more. The company says it expects "large orders" in the "near future" ([PR]); nothing in the documents says one is signed. Until it is, it is an expectation.
• Domestic demand is uneven. Domestic Explosives revenue fell by ₹398 crore between the June and September quarters (our arithmetic) with no reason given. Our reading is that this fits demand that arrives in lumps, but that is a reading; the documents do not describe the domestic order cycle, and the deck shows a ₹2,610 crore block labelled CIL & SCCL in the order book without explaining the label.
• The margin evidence is thin. There is no margin by customer group, the deck's year-ago materials and other-expense lines differ from the results statement, and the reported margin includes other income that halved. Before other income the margin was 28.58% against 26.55% (our arithmetic), so the cost-line improvement is real; what a reader cannot test is whether Defence is the cause, or whether the 29.02% is a platform or a quarter.
• Hyperinflation accounting has been a charge in both years. ₹18.37 crore in the quarter and ₹43.70 crore in the half year, against ₹36.50 crore in the half year ended September 2025 (cash flow statement, [RS]); the filing does not say whether it will recur.
• An unfinished acquisition. The Omnia agreements are definitive but conditional; the integration plan is not in the documents, and the deck's balance sheet does not yet carry it.
• Strongest case against our thesis. The company's position is that its first-half performance and "the strength of the order book" support its expectation to "surpass our stated annual guidance for FY2026-27" ([PR]). The half-year numbers support it: EBITDA margin of 28.45% against 27.05% ([PR]), a 140 bps rise, on revenue up 70%. The cost lines support the company's reading and we cannot refute it: before other income the margin rose 2.03 points (our arithmetic), and the reported margin rose less only because other income fell. What the documents cannot say is whether Defence is the cause, since no margin is given by customer group.
• Limited review, not audit. The joint auditors' conclusion on the consolidated results is not modified, but the report says a review "is substantially less in scope than an audit". It also says 17 subsidiaries and 3 associates were not reviewed by their auditors and are, per management, "not material to the Group". Separately, the board approved Price Waterhouse Chartered Accountants LLP in place of the retiring S R B C & CO LLP, and the re-appointment of Gandhi Rathi & Co., from the conclusion of the 32nd AGM to be held in 2027, subject to shareholder approval ([AU]); S R B C & CO LLP continues until that AGM. The notice gives the end of S R B C's second consecutive five-year term as the reason for the change, so we read it as routine rotation, not a disagreement.

Why it costs the reader something

A reader who sees "revenue up 69%, Defence up 98%" and assumes a scale business's margin has not read the cost lines: on the deck's lines most of the operating leverage came from employee cost, and almost half of it was offset in the reported margin by a fall in other income. Assuming Defence carries a premium margin assumes something the company did not disclose. And 87.1% of the order book is one category. The licence-and-scale framing is ours; the company describes itself as the "First private sector company in India to set up an integrated facility for defence products such as high-energy materials, rocket propellants, warheads and rockets" ([PR], company profile), with "40 manufacturing facilities" in "11 countries". Those are the company's own statements: they describe scale and firsts, and say nothing about margin.

What to watch

1. The EBITDA margin against 29.02%, and other income against ₹15.37 crore.
2. Whether the large Defence orders management expects in the "near future" are signed, and the Defence share of the order book against 87.1%.
3. Domestic Explosives revenue against ₹963 crore, and any reason given for the fall from ₹1,361 crore.
4. The Omnia approvals and the first quarter it is consolidated.
5. The Turkey charge against ₹18.37 crore.

The concrete thing, again

Defence went from ₹506 crore to ₹1,002 crore in a year, and the company's EBITDA margin went from 27.95% to 29.02%. Before other income the margin rose 2.03 points, mostly because employee cost fell by 1.78 points of sales; the reported margin rose less because other income fell by about a point of sales (our arithmetic). The documents show fast growth with a better cost ratio; they do not show that Defence is the cause, because no margin is given by customer group.

Sources

• [RS] Solar Industries, outcome of the board meeting, results and review report, 3 Nov 2026 (NSE)
• [PR] Solar Industries, press release, 3 Nov 2026 (NSE)
• [IP] Solar Industries, fact sheet and presentation on the results, 3 Nov 2026 (NSE)
• [AU] Solar Industries, change in statutory auditors, 3 Nov 2026 (NSE)
• Earlier Moat & Margin piece on record orders and a margin squeeze: KEC International, Q2 record orders and margin squeeze
• Earlier Moat & Margin piece on what a company does with its cost windfall: Marico, Q2 gross margin, volume and ad spend
• Today's filings in context: Daily filing digest, 3 Nov 2026

Educational research, not investment advice. Every figure above is drawn from Solar Industries India Limited's own filings of 3 November 2026, read from the primary documents on 4 November 2026; derived figures are our arithmetic, labelled as such. MoatSCORE: 5.19 (AMBER+, first-pass), read live from the Moat Screener on 4 Nov 2026. No buy/sell recommendations, no price targets, no share prices. Moat & Margin is not a SEBI-registered Research Analyst or Investment Adviser.