Midwest IPO: Granite To Quartz Transition-Should You Subscribe?

1) Company and its Business Operations

Midwest Limited is an integrated natural-stone company with operations spanning exploration, mining, processing, marketing, distribution and export of granite (notably Black Galaxy and Absolute Black), quartz grit and powder, and allied value-added products. It supplies to 30+ countries through a network of processing units and quarries, and is diversifying into heavy mineral sands (titanium feedstock such as ilmenite and rutile) and rare earth processing. Subsidiaries include Midwest Granites, Odyssy Granite, Midwest Desprec, Angel Working, Midwest AP Granite, Midwest Exports, Midwest Quartz, Midwest Neostone (Phase-II quartz expansion SPV) and Midwest Neominerals (HMS). Key milestones include sustained EBITDA margin expansion and strong RoE improvement.

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2) At a Glance

3) Industry Outlook

India is among the world’s largest producers and exporters of granite, with domestic granite production growing at a 4.7 per cent CAGR during FY22–FY25. Engineered stone (quartz-based) demand is rising as a substitute for natural stone; the global engineered stone market is estimated at around USD 27–28 billion in 2025, projected to grow at about 6.5 per cent CAGR. India’s quartz production grew at ~8.9 per cent CAGR in FY22–FY25 and is projected to grow ~8–8.5 per cent CAGR to FY30, driven by engineered stone and Solar glass demand. Midwest’s planned entry into heavy mineral sands and rare earths targets a sizeable specialty materials TAM.

4) Objects of the Issue

The IPO proceeds will fund key growth initiatives, including Rs 130.30 crore for Phase-II expansion of the quartz plant under Midwest Neostone Pvt. Ltd., and Rs 25.76 crore for electric dump trucks to modernise mining operations. Additionally, Rs 3.26 crore will go towards solar PV installations, and Rs 56.22 crore will be invested in Midwest AP Granite Pvt. Ltd. The balance will be utilised for repayment of borrowings and general corporate purposes.

5) SWOT Analysis

Strengths:
Leading franchise in Black Galaxy/Absolute Black granite; improving operating metrics with FY25 EBITDA margin at 27.43 per cent; healthy RoE and interest coverage; diversified product mix with quartz and upcoming HMS.
Weaknesses:
Working-capital intensity (FY25 120 days); export dependence; cyclical end-markets (Construction/engineered stone).
Opportunities:
Phase-II quartz capacity aimed at solar glass/engineered stone; electrification of mine haulage to cut cost/boost ESG; foray into HMS/rare earths aligns with import substitution.
Threats:
Price competition from global peers; commodity and currency volatility; regulatory and environmental permissions for HMS/rare earth projects; sector demand swings.

6) Financial Performance

a) Profit & Loss (Rs crore; margins in per cent)

b) Balance Sheet (Rs crore)

7) Peer Comparison

8) Outlook & Relative Valuation

At the upper end of the price band, Midwest Ltd is valued at a P/E of 27.02x, which is significantly higher than its listed peer Pokarna Ltd (12.73x). Similarly, Midwest’s EV/EBITDA multiple of 21.7x far exceeds Pokarna’s 7.18x, indicating a premium valuation that already factors in strong growth expectations. On the balance sheet, Midwest maintains financial prudence with a debt-to-equity ratio of 0.39 compared to Pokarna’s 0.47, showing lower leverage. Profitability metrics remain robust with RoNW at 22.11 per cent and ROA at 12.5 per cent, only slightly trailing Pokarna’s 24.11 per cent and 14.3 per cent, respectively. While these ratios demonstrate operational efficiency, the valuation premium suggests investors are pricing in the successful execution of its expansion plan.

Midwest Ltd offers a combination of stable granite cash flows and a high-growth quartz opportunity. The company’s Phase-II quartz expansion is well-timed to capture rising demand for engineered stone and solar glass. Additionally, management’s foray into heavy mineral sands and rare earths could add long-term optional value. With FY25 EBITDA margin of 27.43 per cent and RoE between 19–24 per cent, the fundamentals appear strong. However, sustained re-rating will hinge on timely completion of projects, efficient working capital management, and improving export demand.

9) Recommendation

Avoid. Despite solid fundamentals and a credible capex roadmap, the IPO’s P/E premium over peers fully prices in growth optimism. Execution and project visibility are yet to be proven, while near-term listing gains look uncertain. Investors can revisit once Phase II and heavy mineral sands progress is evident.