The Chatter: RBI's Governor, Canara Bank, IRCTC, & More
Q1 FY27 | Edition #80
Welcome to the 80th edition of The Chatter — a newsletter where we dig through what India’s biggest companies are saying and bring you the most interesting bits of insight, whether about the business, its sector, or the wider economy. We read every major Indian earnings call and listen to the interviews so you don’t have to.
We’re always eager to improve—please share your ideas on how else we can innovate “The Chatter” format to better serve your needs.
In this edition, we have covered 5 companies across 4 industries along with a keynote address by Sanjay Malhotra, Governor, RBI.
Regulator
Reserve Bank Of India
Financial Services
Canara Bank
Tourism & Hospitality
Indian Railway Catering and Tourism Corporation Limited
Healthcare
Apollo Hospitals Enterprise Limited
Wockhardt Limited
Chemicals
Solar Industries India Limited
Regulator
RBI Governor |Winning in the AI Era: The New Playbook for Indian Banks
The Reserve Bank of India (RBI) is India’s central bank and primary financial regulator. In his FIBAC 2026 address, Governor Sanjay Malhotra outlines a strategic playbook for banks navigating the AI era. He highlights AI’s potential to transform credit underwriting, operational efficiency, and fraud defence, while warning against risks like model opacity, algorithmic bias, vendor dependence, and lost human oversight. The speech emphasises a principles-based, proportionate approach to governing AI adoption across the financial sector.
The RBI views artificial intelligence as the most significant structural shift for Indian banking since the liberalisation of the 1990s. Investors should recognise that AI is not just a technology project but a fundamental change in how banks will evaluate risk and price capital.
“The theme of the conference – Artificial Intelligence - has been well chosen. It is apt and timely. It is a theme that, I believe, will define this decade of Indian banking as decisively as liberalisation defined the 1990s and digitalisation defined the 2010s. I also like the use of the word “playbook”. Artificial Intelligence is not a single technology to be procured, nor a project to be completed. It is a new way of doing business, of running a bank. It is a shift in how we evaluate risk, serve customers, price capital, and organise institutions. Many banks in this room are already deploying AI, and many more are considering it. The only question is whether you shape the AI journey with intent, or you let it shape you by default.”
— Shri Sanjay Malhotra, Governor
The regulator is on track to implement Basel III guidelines by April 2027 and has finalised several frameworks for credit risk and dividends. This provides a clear regulatory roadmap for banks to align their capital and operational policies with international standards.
“On strengthening financial stability, we have taken a number of measures. We have finalised the standardised approach for credit risk capital, ECL framework, Effective Interest Rate (EIR) related changes in investment guidelines, prudential norms on project finance, related party transactions, dividends policy, guidelines on Net Open Position (NOP) among others. We are well on target to implement all applicable Basel III guidelines with effect from April 1, 2027 on a calibrated glide path. The regulatory architecture is further bolstered by our enhanced supervision, especially with regard to technology risk.”
— Shri Sanjay Malhotra, Governor
AI can significantly lower the cost of credit delivery by using alternative data like GST filings to reach borrowers who lack traditional financial histories. This transition allows for faster identification of financial stress and opens new growth segments in retail and MSME lending.
“First, AI changes the economics of credit delivery fundamentally. Traditional underwriting relies on financial history – precisely the data that is thin or absent for a new-to-credit borrower, a gig worker, or a small enterprise without formal books. AI models, trained on alternative data – cash flows, GST filings, utility payments, digital footprints – can extend the frontier of “bankable” India considerably further than manual underwriting ever could, at a fraction of the marginal cost per loan. At the same time, AI-enhanced credit risk models, liquidity forecasting, and scenario analysis allow banks – and, indeed, us, as the regulator – to see emerging stress earlier than lagging financial statements permit.”
— Shri Sanjay Malhotra, Governor
The RBI expects AI to drive down cost-to-income ratios by automating routine tasks like document processing and regulatory reporting. This operational efficiency is critical for improving the long-term profitability and productivity of the Indian banking sector.
“Fourth, it can enhance operational efficiency. There is scope to reduce cost-to-income ratios or intermediation costs in India. Effective adoption of AI can significantly improve the productivity of Indian banks across operations, sales and customer service, and credit and collections. Document processing, reconciliation, and internal audit sampling are all ripe for AI-assisted automation, freeing skilled staff for judgment-intensive work. It can automate transaction reporting and regulatory return preparation, reducing both compliance cost and the operational risk of manual error.”
— Shri Sanjay Malhotra, Governor
Traditional security systems are no longer sufficient to stop modern frauds that happen instantly via digital APIs. Real-time machine learning is now required to identify transaction anomalies before losses actually occur.
“Fifth, it is AI that can beat AI-delivered fraud. Fraud today moves at the speed of an API call. A rules-based fraud engine, however well designed, is perpetually one step behind a fraudster who adapts more frequently. It is only machine-learning models which continuously learn from transaction patterns and can identify anomalies in real time rather than after the loss has crystallised.”
— Shri Sanjay Malhotra, Governor
The RBI is concerned that complex AI models are often unable to explain the reasoning behind credit rejections. This lack of transparency poses a risk to accountability and could lead to new regulatory requirements for explainable AI models.
“The first risk is the “black box” problem. Many advanced AI models – particularly deep learning and generative systems – do not readily explain their own reasoning. When an AI system recommends against extending credit to a small business, both the borrower and the regulator are entitled to know why. Opacity is not merely an inconvenience; it strikes at the heart of accountability. It makes it exceedingly difficult for auditors, boards, and the Reserve Bank to be confident that a model is doing what it was designed to do.”
— Shri Sanjay Malhotra, Governor
Reliance on a small number of AI vendors or models could lead to systemic failures if an error occurs across multiple banks simultaneously. Such “herding” behaviour in trading models could worsen market volatility during periods of financial stress.
“The third risk is concentration and herding. If a handful of foundation models, or a handful of technology vendors, come to underpin credit and trading decisions across much of the banking system, an error, a bias, or a vulnerability in that shared infrastructure ceases to be one bank’s problem and becomes a systemic one. AI-driven trading models, if too similar across institutions, can synchronise behaviour in stressed markets and amplify volatility rather than dampen it – a risk this Reserve Bank watches with particular care.”
— Shri Sanjay Malhotra, Governor
Management cannot use algorithmic decisions to avoid accountability for poor lending or operational outcomes. Banks must maintain human oversight to override automated systems, ensuring that legal and ethical responsibility stays with the institution.
“The seventh – perhaps the most important – is the erosion of human judgment and accountability. No matter how sophisticated the model, the responsibility for a bank’s decisions rests with the bank, not with its algorithm. “The model decided” can never be an acceptable answer to a customer, an auditor, or the Reserve Bank. Meaningful human oversight – the ability to explain, to intervene, and, where necessary, to override – must remain a design principle, not an afterthought.”
— Shri Sanjay Malhotra, Governor
The RBI is directing banks to immediately establish formal governance policies and regular stress-testing for their AI systems. This shift indicates that AI risk will now be supervised with the same intensity as traditional credit and market risks.
“Establish board-approved AI governance policies, with clear accountability for outcomes, not merely for technology procurement. Build the capacity to explain AI-driven decisions that materially affect a customer, particularly in lending and fraud outcomes. Red-team and stress-test AI systems before deployment and periodically thereafter, just as you would stress-test any other material risk. Preserve meaningful human oversight at every point where an AI system’s error could cause material harm to a customer or to financial stability.”
— Shri Sanjay Malhotra, Governor
Financial Services
Canara Bank | Large Cap | Financial Services
Canara Bank is one of India’s largest public sector banks, providing a wide range of retail and corporate banking services. It focuses on maintaining strong asset quality while strategically balancing its credit-deposit ratio to drive margin growth.
The bank moved its credit-to-deposit ratio from 75% to 80% to earn better yields on loans compared to investments. Investors should watch if they can push this further toward 82% without compromising liquidity.
“So yes, our CD ratio was down a little; it was at 75%. You earn less yield on investments, around 6.90%, whereas the yield on advances is at 8%. So it was obvious we wanted to grow on the advances side, though in a calibrated manner. We grew very calibratedly and kept underwriting standards in mind; we are very mindful of that as well. As of now, we are at an 80% CD ratio, and we can still grow one or two percentage points here and there, but we are focusing much more on deposits.”
— Brajesh Kumar Singh, MD & CEO
The bank plans to replace expensive bulk deposits with retail deposits to support its upward margin trajectory. Successfully reducing reliance on these high-cost funds will be a key driver for profitability in coming quarters.
“The trajectory is on the positive side. Yes, we have some leeway. We had high-cost bulk deposits, or dependency on bulk was a little on the higher side. So we will be running down some of those high-cost bulk deposits and replacing them. It will not be entirely possible to replace them with CASA, but gradually we will replace them with retail deposits, be it retail term or retail CASA.”
— Brajesh Kumar Singh, MD & CEO
The bank has already exceeded its $1.5 billion target for FCNR deposits, reaching over $2 billion. This successful fundraise provides a cheaper source of foreign currency funding during a period of high domestic deposit competition.
“We gave guidance that we would be garnering $2.3 billion to $2.5 billion across three routes: FCNR(B), ECB, and OFCB. We will be targeting ECB and OFCB in October, November, and December, considering this FCNR(B) dispensation is only up to September. Our target for FCNR(B) was $1.5 billion, but against that, we have already raised more than $2 billion.”
— Brajesh Kumar Singh, MD & CEO
FCNR deposits are replacing 7% bulk rates with much cheaper 1.5% effective costs due to RBI swaps. The exemption from regulatory reserve requirements on these funds adds an extra 22 to 23 basis points of cost savings.
“It is helping us not directly on the margin count, but on repricing some of our high-cost bulk rates. Last month, whatever we were repricing was above 7%, whereas here we are offering 6.5%. But that also comes with the concessional swap, the ₹3 swap offered by the Reserve Bank of India, which costs somewhere around 3%. So we are only paying around 1.5% there, saving about 1.5%. Again, this does not attract CRR and SLR, saving another 22 to 23 basis points. So it is definitely helping us.”
— Brajesh Kumar Singh, MD & CEO
Management expects to exceed its 12% loan growth guidance despite a high base from emergency credit schemes. This optimism suggests strong underlying demand across business segments and potential for earnings surprises.
“The guidance is there, but we will certainly better it. In the first quarter, there was help from the emergency line of credit dispensation, which helped MSMEs. Furthermore, due to the West Asia crisis, there was higher utilization of overseas lines of credit, and our dollar assets also got repriced. It was a combination of everything taken in perspective, but we will certainly better the 12% guidance we have given.”
— Brajesh Kumar Singh, MD & CEO
Higher yields in the bond market are driving corporate borrowers back to banks for their funding needs. Demand is particularly robust in sectors like green energy and data centres, providing fresh growth avenues.
“There is a lag between the deposit growth rate and advances growth rate, so some of this money will bridge that gap. Yields have hardened in the debt market, making it costlier for corporates, so they are turning to banks. We will find good opportunities there. In retail as well, we are growing very well in the RAM (Retail, Agriculture, MSME) sector. Everywhere there is demand: power, energy storage, green energy, and data centres. A lot of demand is coming from these emerging sectors as well.”
— Brajesh Kumar Singh, MD & CEO
Beyond capital needs, the bank is raising overseas funds to take advantage of concessional swaps and support rupee stability. These strategic borrowings are expected to lower the bank’s overall cost of liabilities.
“We are not doing this purely for margins or augmenting our capital base; we have other motivations. We want dollar inflows into the country to help stabilise the rupee. Additionally, there are cost benefits because the swap is supported by the RBI; we get a concessional swap on ECBs as well. So we will register cost advantages on that count.”
— Brajesh Kumar Singh, MD & CEO
The bank is raising its targets for overseas foreign currency borrowings from the initial $1.1 billion mark. This aggressive pursuit of dollar funding highlights a proactive approach to managing the current tight liquidity environment.
“Just like everywhere else where we are bettering our guidance, we initially thought of $1 billion to $1.1 billion, but I think we will be bettering that target as well.”
— Brajesh Kumar Singh, MD & CEO
Tourism & Hospitality
Indian Railway Catering and Tourism Corporation Limited | Mid Cap | Hospitality
IRCTC is the state-owned monopoly providing online ticket booking, catering, and travel services for the Indian Railways network. The company also produces Rail Neer bottled water and manages diverse tourism packages across the country.
Management reported a year-on-year revenue increase of 210 crore rupees, primarily driven by growth in the catering segment. This data provides a baseline for understanding which business units are currently contributing the most to the company’s top-line expansion.
“Overall, we had revenue of ₹1,370 crore versus ₹1,160 crore in the corresponding quarter of FY25. To talk about the revenue mix first: out of this ₹1,370 crore, ₹732 crore came from catering, ₹109 crore from Rail Neer, ₹361 crore from internet ticketing, and ₹168 crore from tourism. So there was a delta of ₹210 crore between ₹1,370 crore and ₹1,160 crore.”
— Rahul Himalian, Chairman and Managing Director
The company explained that because 86% of its incremental revenue growth came from low-margin catering, overall profitability did not grow as fast as sales. Investors should note that the business mix is shifting toward lower-margin services, which puts pressure on the consolidated bottom line.
“Catering has a conventional margin of around 10% to 12%. Internet ticketing has around 80% to 85%, tourism has 14% to 15%, and Rail Neer has 14% to 15%. So, ₹181 crore out of the ₹210 crore growth came from catering, which enjoys a margin of only 10% to 12% and forms around 54% of total revenue. That was the primary reason for our overall profits not scaling up—number one.”
— Rahul Himalian, Chairman and Managing Director
Geopolitical tensions in West Asia led to higher costs for plastic resins used in the Rail Neer bottled water segment. This highlights how global supply chain disruptions and commodity price volatility can directly erode the profitability of the company’s manufacturing operations.
“Number two, the West Asia crisis impacted the Rail Neer segment largely because the cost of raw materials, such as the resins which account for the preform caps and shrink rolls, increased the cost from ₹55 crore to ₹61 crore—that is ₹6 crore plus.”
— Rahul Himalian, Chairman and Managing Director
A policy change to increase gratuity and retirement benefits resulted in a one-time 20 crore expense during the quarter. This is a non-recurring cost, meaning earnings in future quarters should normalise once this impact is cycled through.
“Then, there was an HR decision we took where the gratuity limit was increased from ₹20 lakh to ₹25 lakh, along with post-retirement settlement benefits. This impacted around ₹20 crore, of which ₹10 crore was booked on catering itself since catering forms around 54% of revenue.”
— Rahul Himalian, Chairman and Managing Director
Operational costs were affected by the launch of several pilot train projects that were not present in the previous year’s comparison. The financial drag from these programs is expected to diminish over the coming quarters as the number of active pilot trains is reduced.
“Lastly, the Proof of Concept (POC) trains, which were not there in Q1 of FY25, had six trains, causing around a ₹4.7 crore impact. In Q2 of FY26, there will be around four trains, and two trains in Q3.”
— Rahul Himalian, Chairman and Managing Director
Management guided for a return to 30% or higher EBITDA margins as one-off headwinds subside and new high-speed trains are introduced. This guidance provides a clear profitability target for investors to track as the company attempts to recover from recent margin compression.
“So these were the retrograde factors which caused our EBITDA margin to come down. The West Asia crisis has stabilised, the HR impact will not repeat, and there is a tapering in the POC train impact. With all these factors, and with the introduction of new Vande Bharat sleeper trains, we will try to maintain an EBITDA margin of 30% plus.”
— Rahul Himalian, Chairman and Managing Director
A major overhaul of the ticketing platform is nearly complete, with a full rollout scheduled for the current quarter. A successful launch is critical for maintaining the company’s dominance in the digital ticketing space and improving the user transaction experience.
“As far as the new website is concerned, the beta version was launched on 15th July. Now, around 80% to 85% of the utilities and interface have been developed on that website. Anytime—maybe 15 days down the line or within this quarter—we will be able to come up with the full-fledged version of the website.”
— Rahul Himalian, Chairman and Managing Director
The new website will prioritise speed and ease of use by removing intrusive ads and secondary verification steps. While this improves the customer experience, investors should monitor if the loss of advertising real estate has any material impact on non-fare revenue.
“It features no advertisements, no CAPTCHAs, no pop-ups, and offers a seamless booking experience with faster ticket booking speeds for the user.”
— Rahul Himalian, Chairman and Managing Director
Healthcare
Apollo Hospitals Enterprise Limited | Large Cap | Healthcare
Apollo Hospitals Enterprise Limited is a leading integrated healthcare provider in India, operating a vast network of hospitals, pharmacies, and primary care clinics. The company specialises in high-end tertiary and quaternary care while expanding its digital presence through the Apollo 24/7 platform.
Apollo’s revenue growth is being fueled by a healthy mix of higher patient volumes and better pricing power. This indicates that the business is not just relying on price hikes but is successfully attracting more patients.
“Speaking of the drivers of growth in the hospital space, we had a revenue of ₹3,562 crore, representing a growth of 22%. Of this, 13% is volume growth. In terms of occupancy, we grew by 10%. There was an ARPOB growth of about 11%, driven by the insurance sector, which forms 46% of our mix. The rest of it was price”.
— Suneeta Reddy, Managing Director
Management sees a clear path to maintaining over 20% growth by combining steady performance from mature hospitals with new capacity. The target occupancy of 74% provides a benchmark for judging how well the company uses its assets.
“74% is the sustainable occupancy level. Going forward, established units will deliver 12% to 13% growth, while another 7% will come from new units, ensuring that overall growth remains above 20%.”
— Suneeta Reddy, Managing Director
Apollo plans a massive ₹8,000 crore expansion but intends to pay for it mostly using the cash it generates internally. This low reliance on debt for such a large project reduces financial risk for shareholders.
“Going forward, the capex will be around ₹8,000 crore. Currently, we have strong free cash flows and cash reserves in the bank. We generate close to ₹800 crore of free cash flow annually, which, along with existing reserves, will fund most of it. We may raise a small amount of debt towards the end of the expansion cycle.”
— Suneeta Reddy, Managing Director
New facilities are expected to start making a profit relatively quickly, with the major Gurugram site hitting break-even in just one year. Fast turnaround times for new hospitals are critical for maintaining overall return on capital.
“Sarjapur will break even faster. For Gurugram, we expect to achieve EBITDA break-even in 12 months.”— Suneeta Reddy, Managing Director
The return of international medical tourism is providing a high-margin boost to the business. Management expects new infrastructure, like the Navi Mumbai airport and Gurugram hospital, to further accelerate this lucrative segment.
“We saw 24% revenue growth from international patients. Going forward, I expect this momentum to increase—especially with the opening of our hospital in Gurugram, where there is potential for international patients to contribute up to 30% of revenue. Additionally, the opening of the new airport in Navi Mumbai will boost international patient inflows. All in all, the outlook is strong, and we expect to sustain this momentum.”
— Suneeta Reddy, Managing Director
Apollo is focused on stripping out structural costs to push its total group margins higher over the next year and a half. For investors, this suggests that earnings could grow faster than revenue as the business becomes leaner.
“Right now, we are seeing strong operational leverage, with a 29.2% EBITDA margin in established hospitals. Going forward, we expect a structural cost reduction of about 150 basis points, which should take us to a 25% EBITDA margin overall in the next 18 months.”
— Suneeta Reddy, Managing Director
The retail healthcare and diagnostics arm is showing explosive growth and improving profitability. This diversification beyond large hospitals helps balance the business and taps into the high-growth diagnostic market.
“AHLL had a very good quarter, with total revenues at ₹499 crore. EBITDA margins also improved, driven by strong growth in diagnostics, which grew by 60%. The core focus on diagnostics and clinics will continue to drive Apollo Health & Lifestyle forward. Additionally, utilisation at Spectra and other healthcare formats has improved, lifting EBITDA to ₹49 crore.”
— Suneeta Reddy, Managing Director
Management is downplaying the risk of government-imposed price caps on hospital rooms by shifting the focus to the massive need for healthcare infrastructure. This suggests the company is confident it can navigate regulatory hurdles through collaboration and its low-cost advantage.
“The broader picture emerging is that India’s healthcare spending should increase to 5% of GDP, alongside a growing recognition of the structural demand for quality healthcare. Secondly, Indian healthcare costs are already a fraction of international costs. Focusing solely on room rent caps is less relevant when looking at the bigger picture. We are eager to collaborate with the government, insurers, and the broader sector to build the critical healthcare infrastructure India badly needs.”
— Suneeta Reddy, Managing Director
Wockhardt Limited | Small Cap | Healthcare
Wockhardt is a global biotechnology and pharmaceutical company focused on drug discovery and the manufacture of complex generics. The company is notably active in the development of novel antibiotics and insulin biosimilars to address unmet medical needs.
Management highlights a significant financial turnaround as the company moves from negative to positive EBITDA. This indicates that the business has reached an operational inflexion point where top-line growth is translating into profitability.
“See, our performance both on the top line, operating results, and bottom line has been consistently good over the last several quarters, and that is continuing. The major reason is that we have an overall top-line growth of about 26%, and our EBITDA, which was negative last year, is in a positive space this year at ₹107 crore.”
— Habil Khorakiwala, Founder and Chairman
The company identifies its international segment as the primary engine for recent revenue expansion. Investors should note that management expects this global momentum to be sustained throughout the current fiscal year.
“A major part of the revenue, as you would have noticed, has come from our international business, and that is our important focus area for future growth. That higher level of growth will continue during the year.”
— Habil Khorakiwala, Founder and Chairman
The company expects its core operations to sustain a 20% growth rate while new drug launches provide additional upside. This suggests a base layer of stable growth while the newer, high-potential molecules are scaled toward profitability.
“Our normal business will continue to grow at least 20% plus over the next 12 to 18 months. Our new molecules, like Zidebactam, would be additional as far as revenue is concerned. Because there is an initial investment in creating the organisation, we would be either at a break-even point or a little plus or minus.”
— Habil Khorakiwala, Founder and Chairman
The Chairman provides a specific timeline for when the company’s long-term research investments are expected to deliver explosive revenue results. This marks FY29 as the critical window for the company to achieve its target scale and valuation re-rating.
“Definitely FY28. In FY28, we would see the very beginning of rapid growth, and from FY29 onwards, you will see our growth like a hockey stick.”
— Habil Khorakiwala, Founder and Chairman
Management is committing to a steady R&D intensity to support the global expansion of its new antibiotic pipeline. This provides investors with a predictable cost model even as the absolute investment in clinical trials grows alongside revenue.
“Actually, the spend would remain at 10% to 12% of our revenue for the next 3 to 5 years, because we intend to take these products which we have now introduced in India—that is Emrok and Miqnof—over a period of time for global clinical trials and enter Western markets. Similarly, our WCK 6777, which is a unique once-a-day antibiotic, will be entering Phase 2 clinical trials and Phase 3. So over the next 4 to 5 years, R&D expenses will remain more or less consistent based on the top line, so it will increase proportionally.”
— Habil Khorakiwala, Founder and Chairman
The company forecasts a trajectory of gradual margin expansion over the coming years before a major spike in the late 2020s. This aligns with the expected commercialisation of high-margin novel drugs in global markets.
“I must tell you that our margins will continue to improve year-on-year, and they will improve significantly after FY29.”
— Habil Khorakiwala, Founder and Chairman
The Chairman reaffirms the company’s multibillion-dollar peak sales potential for its lead molecule, Zidebactam. This highlights the long-term cash flow potential of the company’s patent-protected intellectual property.
“When we talk of peak sales, it always means during the life of the patent. So it is quite possible that we reach this peak sale a little earlier as well, but definitely during the life of the patent, that would be our peak sales target. We might actually do better given the feeling and feedback we are getting, but I think we will stay with those numbers.”
— Habil Khorakiwala, Founder and Chairman
The company explains its deliberate approach to staggering new drug launches to ensure effective medical marketing and doctor adoption. This measured strategy aims to maximise the commercial success of each product rather than overwhelming the market.
“The other molecules we will be introducing over a period of years. At any given point in time, we cannot introduce too many products, because new molecules cater to the same customer group, and a lot of medical and scientific communication is required for them to understand a new molecule. So we need a reasonable gap between molecules, and that is how we are monitoring our research program. Based on potential and priorities from both business and scientific standpoints, we will introduce various other products over a period of time.”
— Habil Khorakiwala, Founder and Chairman
Chemicals
Solar Industries India Limited | Large Cap | Chemicals
Solar Industries India Limited is a leading manufacturer of industrial explosives and defence ammunition with a global presence. The company serves the mining, infrastructure, and defence sectors through advanced manufacturing facilities in India and several international markets.
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Management is aiming for a substantial jump in revenue to ₹14,000 crore this fiscal year. Achieving this target would represent over 40% growth, signalling strong confidence in both domestic and defence demand.
“Yes, our ambitious guidance for this year has been ₹14,000 crore as against ₹9,800 crore in the previous year. The first quarter has been a good start for us, and we are very optimistic that the ₹14,000 crore figure is quite achievable. Since we gave the guidance just a couple of months back, we may revise it after our half-year results.”
— Shalinee Mandhana, Joint CFO
The defence business is seeing triple-digit growth but operates on long lead times from product development to supply. This implies that current orders will provide a steady, multi-year revenue stream rather than just one-off gains.
“Coming to the defense top line: yes, we are very happy to state that defense has been a key growth driver for our business, registering a growth of 123% year-on-year. But as you see, the defense business always has a slow-moving cycle—starting from product development to getting the product qualified, securing orders, and setting up the supply chain. So we see ₹4,500 crore as the current visible number for this year. But as I said, let the further quarters evolve, and we’ll see how the numbers unfold in upcoming quarters for any revision.”
— Shalinee Mandhana, Joint CFO
Profit margins have stabilised at 28% due to internal efficiencies and a higher contribution from high-margin defence products. Investors can likely treat this higher margin profile as a sustainable baseline for future earnings projections.
“Yes. We could maintain margins of around 28% in this first quarter despite volatility in most commodity prices. This has been achieved mostly on account of strong execution from our team members, efficient supply chain management, and the operational gains we have achieved through our recent expansions. Also, another segment which has recently come up is the defense revenue, which started generating good numbers since last year. We see margins around 28% as the new normal for our business at this growth stage.”
— Shalinee Mandhana, Joint CFO
Domestic growth is being fueled by power sector demand and new manufacturing plants across India. This geographical diversification helps the company capture regional demand while reducing transportation costs.
“We had stated with the annual results that volume growth this year should be around 15% and price growth should be around 18% to 20%, leading to around 30%–35% growth at both domestic and international levels. We maintain this guidance. The domestic business was really helped by good demand from the electricity segment, which led to demand from the mining sector and bodes well for our industry. We also benefitted from the commercialization of our Dhulla plant in northwestern India and the expansion of our Dholpur plant in northern India. We are also setting up a plant in Odisha and another plant in Southern India over the next 1–2 years. All of this should provide good backing for growth in the domestic market.”
— Shalinee Mandhana, Joint CFO
The company is negotiating a major contract for extended-range Pinaka rockets expected later this year. Securing this order would significantly bolster the defence order book and provide clear revenue visibility for the coming years.
“Coming to Pinaka: yes, we have an order book of around ₹18,000 crore from defence, where Pinaka is the largest contributor. We expect the Pinaka extended-range order to come in soon; it is currently in the negotiation stage, and we do see the order coming in before the end of this year. Once the order comes in, those Pinaka numbers will be added.”
— Shalinee Mandhana, Joint CFO
Trials for the Bhairavastra weapon system are nearing completion, with orders expected to start hitting the books next fiscal year. This marks the entry of another significant product line into the defence portfolio for mid-term growth.
“With respect to Bhairavastra, we are at a very advanced stage. Most of the trials we conducted have been completed, and the final testing and final lot trials are underway. We expect the trials to be completed before the end of this year and orders to flow in from next year.”
— Shalinee Mandhana, Joint CFO
Solar Industries has established capacity for 300,000 artillery shells and expects revenue to begin in the second half of this year. This new business vertical utilises existing facilities and expands the company’s addressable market in conventional ammunition.
“Yes, we have good demand for 155 mm shells and have set up the facility. Progress is ongoing, and final trials are in process. We will start seeing some revenue recognition from this vertical in the second half of this year. Some numbers may come in during H2. As for the capacity of 3 lakh units, at present it is very difficult to say; let’s see how the numbers roll in. We may comment further in the fourth quarter.”
— Shalinee Mandhana, Joint CFO
Years of effort in South Africa and Australia are finally paying off, with South Africa becoming the largest international revenue source. This highlights the company’s ability to successfully navigate complex regulatory environments in foreign markets to achieve scale.
“South Africa and Australia have been really good. If you recall, we slogged for 3 to 4 years before finally entering these markets. Currently, South Africa is the top revenue-generating international market for us, and we are expanding both in South Africa and neighbouring regions.”
— Shalinee Mandhana, Joint CFO
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Quotes in this newsletter were curated by Shahid Barmare.
Disclaimer: We’ve used AI tools in filtering and cleaning up these quotes, so there may be some mistakes. Now, if you are thinking why we are using AI, please remember that we are just a small team of 5 people running everything you see on Zerodha Markets 😬 So, all the good stuff is human, and mistakes are AI.