Detailed narrative
Strong Q2 & H1 FY26 Financial Performance
Midwest Limited delivered an exceptional Q2 FY26, with EBITDA and PAT growing by 52% and 80% year-on-year, respectively, and EBITDA margins exceeding 29%. For H1 FY26, revenue from operations increased to INR301 crores, an 8% rise, while EBITDA grew 16% to INR86 crores, pushing margins above 28%. The company's financial health was further underscored by a CRISIL A stable rating upgrade and a more than doubling of cash flows from operations to INR125 crores compared to H1 FY25.
Strategic IPO & Capacity Expansion
The company successfully raised INR250 crores through its IPO, marking a significant milestone. These proceeds are earmarked for Phase 2 expansion of its quartz facility, integration of electric dump trucks and solar energy at select mines, and repayment of borrowings. Phase 1 of the quartz processing plant, with a capacity of 303,000 metric tons per annum, has already been commissioned, catering to solar, glass, and engineered stone industries. Phase 2 aims to double this capacity to 606,000 metric tons per annum by FY28, with an estimated capex of INR125-130 crores.
Diversified Business Model & New Verticals
Midwest Limited operates a diversified and integrated business model, with over four decades of expertise in natural stone. They are India's largest producer of Black Galaxy and Absolute Black Granite, accounting for approximately 20% of Black Galaxy production and 64% of its exports in FY25. Building on this, the company is diversifying into heavy mineral sands (ilmenite, rutile) and rare earth materials (monazite), with operations for heavy mineral sands expected in FY27. They also received a letter of intent for a pilot project of Monazite cracking in Kerala.
Operational Efficiency & Decarbonization Initiatives
The company is actively pursuing operational efficiencies and decarbonization. This includes the adoption of electric dump trucks in mines, which are expected to save INR20 lakhs per truck per annum, and integration of on-site solar installations. A 1 MW solar plant is already operational, with further expansion planned to be operational by the next half of the year. These initiatives are projected to reduce energy consumption and carbon footprint by 15-20%.
Improved Financial Health & Working Capital Management
Midwest Limited demonstrated improved financial health, with working capital days reducing by 18% from 120 days to 99 days, supported by better credit terms with overseas customers and LC-backed bill discounting. The capital gearing ratio stood at a healthy 0.38 times, and receivables decreased to INR190 crores from INR239 crores. Post-IPO, the company plans to repay over INR50 crores of debt, bringing total debt to around INR120 crores.
Future Growth Outlook & Profitability Targets
Management aspires to achieve 2.5 times FY25 revenue and over 3 times FY25 profitability within the next 2-4 years, targeting an average ROCE of 35%. They anticipate EBITDA margins from new projects to be north of 35% within the next 15-20 months, leading to an overall improvement in blended EBITDA margins from the current 28-29%. Quartz capacity utilization is targeted at 60-70% in FY26 and 80-85%+ in FY27, with a payback period of 3-4 years for Phase 2.
Rare Earths Market & Regulatory Support
The company highlighted the high growth potential in the non-China rare earths market, driven by demand for applications like EV motors, wind turbines, and defense. Monazite, a byproduct of their heavy mineral sands operations, will be processed to extract Neodymium and Praseodymium oxides. Management expressed optimism about potential PLI (Production Linked Incentive) schemes for rare earth minerals processing in India, with discussions already underway and a scheme hoped for in the next few months⏳.