Midwest (ML) is engaged in the exploration, mining, processing, marketing, distribution, and export of natural stones. The company is a producer and exporter of black galaxy granite, a unique granite variety known for its sparkling golden flakes.

ML operates 16 granite mines across 6 locations in Telangana and Andhra Pradesh, producing a wide range of granite varieties, including: black galaxy, absolute black, and tanbrown.

The company also has one granite processing facility in each of the states of Telangana and Andhra Pradesh, enabling large-scale processing and finishing of granite products. In addition to the operational mines, ML has built a strong resource base comprising 25 locations across Andhra Pradesh, Telangana, Karnataka, and Tamil Nadu for future mining operations.

During the quarter ended September 30, 2025, ML commenced operations in its quartz processing business through operating the phase I of its quartz processing plant, located at the APIIC Growth Center at Annangi Village, Prakasam District, Andhra Pradesh.

Midwest has established a strong global presence, exporting its products to 17 countries across five continents, with China, Italy, and Thailand being the primary export markets. The company‘s key customers include MP STENEKO AB (Sweden), GI-MA STONE SRL (Italy), Quanzhou Xingguang Stone Co., Ltd. (China), The Xiamen Group (China), King Marble and Granite Co. Ltd. (Thailand).

Object of the offer

The IPO consists of a fresh issue of Rs 250 crore and offer for sale of Rs 201 crore.

The selling shareholders include Kollareddy Rama Raghava Reddy who will offload 1699531 equity shares at upper price band aggregating Rs 181 crore and Guntaka Ravindra Reddy will offload 187793 equity shares at upper price band aggregating Rs 20 crore.

Out of the proceeds from the fresh issue, Rs 130.2 crore will be used to make investment in Midwest Neostone, the company’s wholly owned subsidiary, by way of a loan, towards funding capital expenditure for the phase II quartz processing plant, Rs 25.76 crore towards purchase of electric dump trucks, Rs 3.2 crore towards integration of solar energy at certain mines of the company, Rs 56.2 crore towards prepayment of certain loans and the balance for general corporate purposes.

Strengths

The company is India’s largest producer and exporter of black galaxy granite. It produced 66548 cubic meters of black galaxy granite during FY2025 and held a share of approximately 64% of the Indian export market for black galaxy granite.

ML is present across the entire dimensional granite value chain with mine to distribution capabilities. The company’s mine-to-distribution capabilities span across the dimensional granite value chain and allow it to effectively cater to its customers’ requirements. Through its 16 operational granite mines, it’s able to extract and supply dressed dimensional granite blocks to its customers. They also operate two processing facilities where smaller granite blocks are cut and polished, rendering the granite suitable for use in final products such as counter-tops, steps, windowsills, dining islands, facades and floor/ wall cladding.

The company places significant emphasis on research and development (R&D), which primarily comprises tracing, identifying and establishing new mineral deposits to expand its resource portfolio and developing methods to increase operational efficiency, reduce costs and improve the quality of its products.

ML business is led by its experienced promoter Kollareddy Rama Raghava Reddy who has more than four decades of experience in the mining industry. Further he is supported by his son Kollareddy Ramachandra, also a promoter of ML, who has over 20 years of experience in the mining industry and leads execution for ML.

Weaknesses

The company’s estimates of natural stone reserves in its mines may be materially different from the quantity and quality of natural stone that may be recovered from such mines. Further, its estimates of mine life, i.e., the operational lifespan of mine, may prove to be inaccurate and market price fluctuations and changes in operating and capital costs may render certain or all its natural stone reserves uneconomical to exploit.

One of the company’s promoters, Kollareddy Rama Raghava Reddy, had received a notice in 2015 from the Central Bureau of Investigation (“CBI”) in relation to the formation and operations of its subsidiary, BEML Midwest Limited. Any regulatory actions in relation to this notice could adversely affect the company’s andits promoter’s reputation or divert the time and attention of its management, and accordingly, may affect the company’s business. Further, outstanding legal proceedings against the company, subsidiary and promoters stood at Rs 36.8 crore, Rs 60.8 crore and Rs 23.7 crore respectively.

The company derives a significant portion of its revenue from operations from outside India and during Fiscals 2025 and 2024, more than 50% of its revenue from operations was derived from customers located in China, which acts as a global distribution hub for the Granite industry. Any adverse developments in these markets or an inability of China to continue to act as a hub to cater to the global demands, could adversely affect its business and results of operations.

The company faces customer concentration risk with its top 10 customers contributing 63.22%, 51.21%, 48.37% and 53.51% of its revenue from operations in the three-month period ended June 30, 2025, and Fiscals2025, 2024 and 2023, respectively.

The company derives a substantial portion of their revenue from the sale of black galaxy granite (69.6%, 72.4% and 70.5% in Fiscals 2025, 2024 and 2023, respectively), which is produced from three Mines located in Chimakurthy, Andhra Pradesh. The disruption of production at their black galaxy granite mines or reduction in demand for black galaxy granite could adversely affect its business.

The company’s mines, granite processing facilities, diamond wire manufacturing facility, quartz processing plant and registered office are in the southern Indian states of Telangana and Andhra Pradesh and any adverse changes in the region can adversely impact the company’s operations.

Royalty, seignorage and cess fees are a considerable component of the company’s total expenses. Changes in royalty rates, seignorageand cess fees could have an adverse effect on the company’s profitability.

Contingent liabilities and commitments as on June 30,2025 stood at Rs 140.7 crore.

Valuation

In the three months ended June 30,2025, the company earned NP of Rs 23.21 crore on sales of Rs 142.27 crore.

Consolidated sales were up by 6.9% to Rs 626.18crore in FY 2025. OPM inclined 157 bps to 27.43%, resulting in a 13.4% increase in OP to Rs 171.78crore. OI declined 9.1% to Rs 23.42 crore. Interest cost declined 4.2% to Rs 16.96 crore and depreciation increased 19.3% to Rs 10.93 crore. PBT before exceptional expenses stood at Rs 152.22 crore,up 10.5% as against Rs 137.81 crore in FY2024. The PBT after exceptional items stood at 178.01 crore, up 29.2% as against Rs 137.81 crore in FY2024. The company earned exceptional gain to the tune of Rs 25.79 crore and the same related to loss of control of subsidiary. Tax expenses increased 19.3% to Rs 44.71 crore. PAT grew 26.8% to Rs 122.41 crore.

At the higher price band of Rs 1065, the offer is made at a P/E of 37.35 times EPS (of Rs 28.51).

Listed industry peer of the company is Pokarna.In comparison,Pokarnatrades at 12.5times its P/ TTM EPS.