Solar’s Defense Play Is Paying Off But Valuations Raise Concerns, Says SEBI RA

Shares of Solar Industries slipped 8% this week even as the stock was upgraded to largecap by the Association of Mutual Funds in India (AMFI) in its latest classification. 

The company’s transformation into a defense-first company has impressed analysts, however they are concerned about its valuations, given Solar Industries has rallied nearly 60% so far this year. 

According to SEBI-registered investment advisor TrueNorth Capital, defence was once a small part of Solar’s operations but has rapidly grown—rising 160% in FY25 and doubling its share of revenue from 9% to 18%. 

The company now expects defence sales to reach ₹3,000 crore in FY26, or about one-third of total revenue, amid heightened military demand and fast-tracked orders following tensions on India’s western borders.

Strong Defense Pipeline

Solar Industries recently secured a ₹6,000 crore contract for the Pinaka rocket system and is investing heavily in R&D in collaboration with DRDO. 

After deploying its Nagastra-1 drone in Operation Sindoor, it’s now progressing with Nagastra-2 and -3, while its Bhargavastra micro-missile system has cleared key trials.

To support its pipeline, Solar plans ₹2,500 crore in FY26 capex. 

International revenue now contributes 38% of sales, with facilities in Thailand and Indonesia and more on the way in Saudi Arabia and Kazakhstan. 

Solar wrapped up FY25 with a total order book of ₹17,000 crore, including ₹8,500 crore worth of defence contracts lined up over the next few years.

Solar reported ₹7,500 crore in revenue for FY25 and is aiming to grow that by 33% in FY26. 

Looking ahead, the company is eyeing ₹20,000 crore in annual revenue over the next 4–5 years, with ₹8,000 crore expected from its rapidly expanding defence business.

However, the advisor flagged risks such as soft coal and mining demand, overexposure to countries like Turkey (10% of revenue), and customer concentration. 

The stock trades at nearly 100x FY26 earnings, making it sensitive to any execution missteps, according to them.

On Stocktwits, retail sentiment was ‘bearish’ amid ‘normal’ message volume.

The stock has risen 57.3% so far in 2025.

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