Solar Industries share price has seen a knee-jerk reaction, dropping over 8% as the street continues to digest the proposed acquisition of South Africa-based Omnia Holdings. Goldman Sachs believes this could strengthen its explosives value chain in Africa and provide access to new markets, while potentially adding 11% to 25% to earnings per share by financial year 2028,.
The brokerage said the transaction has strategic merit through greater integration across the mining value chain, access to geographies such as Canada and Brazil, and the addition of new products across mining and agriculture.
Goldman Sachs said it has not included the proposed transaction in its estimates at this stage because the deal is not expected to close before financial year 2028. The brokerage also said it was taking no view on the likelihood of completion.
Omnia deal could strengthen Solar Industries’ African operations
Goldman Sachs said Omnia’s integrated mining business could complement Solar Industries’ existing operations in South Africa. The brokerage noted that Solar Industries’ South African business currently generates revenue of around Rs 1,100 crore and operating profit of around Rs 180 crore, with an operating margin of 16.3%.
“In our view, the acquisition of Omnia is likely to result in a significant metallurgical integration across the value chain, offering a mine-to-metal proposition,” Goldman Sachs said.
The brokerage explained that Omnia’s upstream ammonium nitrate facilities could connect with Solar Industries’ manufacturing facility at Mpumalanga, while Solar Industries’ Problast business could provide forward integration closer to customers. Goldman Sachs said this could help Solar Industries increase its presence across the Southern African Development Community region.
Goldman Sachs sees access to new geographies
Goldman Sachs said Omnia could give Solar Industries access to markets where it currently has no presence, including Canada, the United States and Latin America. The brokerage noted that Omnia already has operations in Australia and Indonesia, where Solar Industries has been seeking to expand.
“In our view, there is a significant scope of complementarity with SOIL’s Initiating systems in Indonesia,” Goldman Sachs said.
The brokerage also noted that Omnia has commissioned an AXXIS plant in Western Australia, while its detonator plants in Canada have been commissioned and received regulatory approvals. Goldman Sachs said Omnia is also expanding its presence across the Southern African Development Community and West Africa.
New products could add another growth avenue
Goldman Sachs said Omnia’s product portfolio could add new areas of business for Solar Industries, including hydrogen peroxide-based explosives, electronic detonators and specialised agriculture products.
“Similarly, AXXIS detonator represents precision electronic initiating system technology and would likely compliment the existing range of SOIL’s Initiating systems, in our view,” Goldman Sachs said.
The brokerage said Omnia’s Hypex Bio product is a nitrate-free and biodegradable emulsion explosive that uses hydrogen peroxide instead of traditional ammonium nitrate. Goldman Sachs said the product has been gaining traction in western markets.
Goldman Sachs also sees scope in Omnia’s agriculture business. The brokerage said specialty products have recorded a 7.8% compound annual growth in volumes over the past six years, while the export agriculture business has delivered operating margins above 20% over the past four years.
Omnia brings a diversified mining portfolio
Goldman Sachs said Omnia’s mining revenue is spread across several commodities, reducing dependence on a single mineral. The brokerage said this could also allow Solar Industries to expand its product offerings beyond coal.
Goldman Sachs noted that Omnia has delivered higher revenue than Solar Industries, but Solar Industries has generated stronger margins and profitability. In financial year 2026, Solar Industries’ profit after tax was 2.45 times that of Omnia, while Solar Industries’ return on equity has remained higher.
Goldman Sachs sees potential earnings accretion
Goldman Sachs conducted a pro-forma analysis using Omnia’s latest reported numbers and management guidance for operating profit. The brokerage considered operating profit growth scenarios of 12% and 17% over the next two years and assumed that the acquisition would be funded through debt.
“Our analysis suggests potential accretion of 11%-25% on GSe FY28 EPS for SOIL from acquiring Omnia,” Goldman Sachs said.
According to the brokerage’s analysis, the combined entity could generate earnings per share of Rs 316 to Rs 354 in financial year 2028, compared with Goldman Sachs’ existing Solar Industries estimate of Rs 284.1. The estimated earnings accretion ranges from 11.2% to 24.7% across the scenarios considered.
Deal valuation remains within historical range
Goldman Sachs said the announced acquisition value is $1.355 billion, equivalent to around Rs 12,950 crore, representing a 14.3% premium to Omnia’s previous closing price. After adjusting for Omnia’s $100 million cash balance, the net acquisition value comes to $1.255 billion.
The brokerage said this translates into an enterprise value to earnings before interest, taxes, depreciation and amortisation multiple of 7.9 times, which falls within the 7 times to 8.1 times range seen in comparable transactions over the past decade.
Solar Industries retains ‘Buy’
Goldman Sachs retained its Buy rating on Solar Industries and raised its 12-month target price to Rs 26,550 from Rs 20,180. The brokerage said it raised its valuation multiple to 75 times from 57 times to account for the company’s willingness to pursue inorganic growth and increased opportunities in the domestic defence business.This implies an upside of xx from current levels.
Goldman Sachs said the proposed Omnia acquisition has not been incorporated into its estimates at this stage because the transaction is not expected to close before financial year 2028. The brokerage said its revised valuation therefore captures the company’s growth optionality rather than the earnings impact of the proposed deal.
Defence remains another growth driver
Goldman Sachs said Solar Industries is planning to invest Rs 12,700 crore over the next 10 years to expand its defence business. The brokerage noted that the company’s defence order backlog exceeds Rs 15,500 crore, including Rs 8,500 crore of exports.
The brokerage said recent policy changes around transfer of technology for missile systems and the testing of Bhargavastra could support higher revenue from the defence business. Goldman Sachs also said the company’s international non-defence business could remain an important growth driver as it expands into existing and new markets.
Conclusion
Goldman Sachs said the proposed Omnia acquisition could give Solar Industries a broader international platform across commercial explosives and blasting solutions, while adding access to new geographies and products. The brokerage’s pro-forma analysis points to potential financial year 2028 earnings per share accretion of 11% to 25%, although Goldman Sachs has not yet included the deal in its estimates and has taken no view on whether the transaction will be completed.
Disclaimer
The ratings, target price, earnings estimates and views mentioned in this article are based on Goldman Sachs’ research report and represent the brokerage’s analysis. This article is provided for informational purposes only and should not be considered investment advice or a recommendation to buy or sell any security. Readers should conduct their own research and consult a qualified financial adviser before making investment decisions. The securities quoted are for illustration only and are not recommendations. Investment in securities market is subject to market risks. Read all related documents carefully before investing.