MIDWESTLTD

Midwest Limited reported a robust Q3 FY26, with consolidated revenue growing 10% year-on-year to INR 128 crores. The EBITDA margin for the quarter stood at 23.7%, an improvement from 20% in Q3 FY25. For the nine months of FY26, the EBITDA margin further improved to 27% from 24.53% in the previous year. The granite business is experiencing a 'very high growth trajectory' in the domestic market and 'high demand' from China, supported by a strong RMB (around 6.9).

The company has commenced production from a new 10.9-hectare Black Galaxy mine in Q3 FY26, located adjacent to existing operations, which is expected to offer more favorable unit economics compared to current APMDC rates. Midwest is also aggressively pursuing EV conversion for its mining machinery, allocating a 'considerable portion' of IPO proceeds. They plan to convert their nine diesel trucks to electric within the 'next one or two quarters' and are prototyping the first electric excavator for future conversion.

Midwest has successfully ironed out challenges in its Quartz business and commenced commercial production for Phase 1. Work on Phase 2 has begun, with commissioning targeted for 'end of Q3 or early Q4 next year.' The company anticipates 'good volumes beyond what we planned' for the next year. The total Quartz business, encompassing Phase 1, Phase 2 (engineered stone and solar glass), and High Purity Quartz (HPQ), is projected to generate a top line of 'around INR500 core to INR550 crores.'

The company has advanced its plans for High Purity Quartz (HPQ), initially slated for Phase 3, by integrating it into Phase 2 on a smaller scale with plans to ramp up in Phase 3. HPQ, starting at 99.9% purity, targets diverse applications beyond semiconductors, including optical glass, camera lenses, and solar crucibles. Management expressed confidence in addressing the semiconductor market, leveraging India's raw material availability.

The Sri Lanka HMS project, despite a 'month or two' delay due to government policy changes, is now set to accelerate following cabinet approval for a new mining process. Phase 1 is planned for a capacity of '150,000 tons' and is expected to contribute 'around INR350 crores to INR400 crores' to the top line. Additionally, the company aims to produce monazite oxides, potentially adding 'another INR150 crores to INR180 crores' in revenue, with total Sri Lanka contributions ranging from 'INR350 crores to INR600 crores.'

Midwest is actively evaluating the Government of India's PLI scheme for permanent magnets, which could create significant domestic demand for rare earth oxides (2,000-2,500 tons needed for 6,000 tons of magnets, versus India's current 500 tons production). While a full oxide-to-magnet plant could cost 'INR1,000 crores to INR1,100 crores' with a 'INR150 crores' subsidy, the company will decide on forward integration based on the detailed PLI policy. Separately, Midwest is scouting for HMS concessions in Sierra Leone, aiming for a low-entry-cost model to develop assets within the 'next two years.'

Out of the INR 250 crores raised from the IPO, approximately INR 225 crores were earmarked for non-IPO expenses. The company has already utilized INR 54 crores for loan repayment, which has improved its gearing ratio. An additional INR 27 crores are allocated for EV dump trucks, and the remaining funds are being deployed for the Quartz Phase 2 plant, with orders and advances being placed. Long-term borrowings currently stand at 'INR164 crores' with a cost of debt 'around 8%.'

Management expressed strong confidence in achieving 'double-digit volume growth' beyond 2030, driven by new verticals like Quartz and HMS. They acknowledge challenges such as rapidly evolving technology in new sectors and the difficulty of hiring and retaining technical talent outside China. However, they are actively bolstering their team, including hiring a Business Head for Quartz from Sibelco, and are devising an ESOP scheme to align incentives. The company's focus remains on achieving 'world-class' efficiencies and leveraging geopolitical shifts for supply chain diversification.