Hyderabad based Midwest Limited, engaged in the business of exploration, mining, processing, marketing, distribution and export of natural stones has filed its draft red herring prospectus (DRHP) with the market regulator, Securities and Exchange Board of India (SEBI), to raise Rs 650 crore through an initial public offering (IPO).
The IPO, with a face value of Rs 5 per equity share, is a mix of fresh issue of shares up to Rs 250 crore and an offer for sale (OFS) of up to Rs 400 crore by Promoter Selling Shareholders. The offer also includes a reservation for a subscription by eligible employees and a discount is being offered to eligible employees bidding in the employee reservation portion.
The offer for sale consists of up to Rs 360 crore by Mr. Kollareddy Rama Raghava Reddy and up to Rs 40 crore by Mr. Guntaka Ravindra Reddy.
The company, in consultation with the book-running lead manager, may consider an issue of specified securities up to Rs 50 crore as a “pre-IPO placement”. If such placement is completed, the fresh issue size will be reduced.
The offer is being made through the book-building process, wherein not more than 50% of the net offer shall be available for allocation on a proportionate basis to qualified institutional buyers, not less than 15% of the net offer shall be available for allocation to non-institutional investors, and not less than 35% of the net offer shall be available for allocation to retail individual investors.
The company intend to utilize the Net Proceeds from the fresh issuance to the extent of Rs 127.05 crore for funding capital expenditure by Midwest Neostone Private Limited (“Midwest Neostone”), its wholly owned subsidiary, towards phase-II of the quartz grit and powder processing plant (the “Phase-II Quartz Processing Plant”); Rs 25.75 crore for capital expenditure for purchase of electric dump trucks (“Electric Dump Trucks”) to be used by the Company and APGM, its Material Subsidiary; Rs 3.26 crore for capital expenditure for integration of solar energy at certain Mines of the Company; Rs 53.80 crore for pre-payment/re-payment of, in part or full, certain outstanding borrowings of the Company and APGM; and general corporate purposes.
Midwest Ltd., established in 1981, has developed extensive knowledge and expertise in natural stone mining, including granite, marble, quartzite, quartz, and heavy mineral sands. The senior management team is led by Kollareddy Rama Raghava Reddy, the Founder and President, who has over 40 years of experience in the mining industry. Other members of the team include, Kollareddy Ramachandra, the Director and Chief Executive Officer, has over 20 years of industry experience and oversees the company’s execution. Mallikarjuna Rao Kommana, the Chief Operating Officer, manages all mining operations, both domestic and international, at the company’s natural stone mines.
It has been working towards decarbonizing its operations and improve the sustainability of the business by adopting advanced engineering and process optimization. Some of the key initiatives that have helped reducing its carbon footprint are vertical integration into key components like diamond wires, usage of solar energy, usage of expanding chemical powders to replace explosives besides, usage of electric dump trucks electric dressing stations Midwest has mined an average of 1.37 million cubic meters of granite annually, encompassing both marketable and waste granite between FY22-24. Over a period of 4 decades, the company expanded from granite mining and processing into areas such as quartz extraction, heavy mineral sands mining, and processing rare earth elements like titanium.
It is India’s largest producer and exporter of Black Galaxy Granite (“BGG”), a premium variety of Granite, which has a sparkling feature with flakes of a golden hue. It is used in real estate projects for applications such as countertops and vanities, flooring, cladding, bathroom walls and floors, swimming pools, fire places and external/internal aids in construction. The granite offers a unique combination of durability, beauty and versatility, making it a popular choice for architects, designers and builders around the world. It is only available in only one small village in Andhra Pradesh.
Midwest produced 57,519 cubic meters of BGG of which it exported 48,249 cubic meters in FY24 and held a share of approximately 23% of the Indian export market, according to a CRISIL Report mentioned in the DRHP. It is also one of the largest producers in Absolute Black Granite and accounted for 10.8% of the overall black granite production in India during Fiscal 2024.
According to data from the Mining and Geology Department, Government of Andhra Pradesh, the sale price for Black Galaxy Granite ranges between ₹50,000-100,000 per cubic meter while the sale price for black Granite ranges between ₹30,000-75,000 per cubic meter.
Majority of the Granite blocks extracted from its mines are sold directly to bulk customers and only a small fraction is sent to its mechanized facilities in Andhra Pradesh. Its customers comprise of processors and distributors present across 17 countries. It currently has 20 operational mines comprising of 16 granite mines, 3 Quartz Mines and 1 Marble Mine across Telengana, Andhra Pradesh, Karnataka and Tamil Nadu Midwest’s recent product additions, include Quartzite and Laza Grey Marble, are being promoted through a B2B2C strategy. These materials are positioned to substitute imported marble and quartzite in the Indian market due to their similar aesthetic and functional characteristics.
Midwest at present holds 20 mining lease licenses, five leases for which mining approvals are in the process, two granite processing units, one quartz crushing and processing unit and one diamond tool manufacturing plant.
Midwest’s revenue from operations increased by 16.54% to ₹585.62 crore in Fiscal 2024 from ₹502.52 crore in Fiscal 2023, primarily due to increase in natural stone segment, scrap sales and export incentives. Profit after tax for the year increased by 84.30% to ₹100.32 crore in Fiscal 2024 from ₹54.44 crore in Fiscal 2023.
DAM Capital Advisors Limited, Intensive Fiscal Services Private Limited, and Motilal Oswal Investment Advisors Limited are the book-running lead managers, and KFin Technologies Limited is the registrar of the issue.
