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Midwest Limited Crisil Ratings has upgraded its corporate credit rating of Midwest Ltd (ML; forme...

Posted: 06 Nov 2025

Midwest Limited Crisil Ratings has upgraded its corporate credit rating of Midwest Ltd (ML; formerly, Midwest Granite Pvt Ltd) to ‘Crisil A/Stable’ from ‘Crisil A-/Positive’. The upgrade reflects the strengthening of the financial risk profile with the recently concluded initial public offering (IPO) in which the company has raised equity of Rs 250 crore. The fresh equity has strengthened the networth and capital structure. With the proceeds of the issue to be utilised towards part debt reduction and funding of the capital expenditure (capex) in the subsidiary, Crisil Ratings believes the financial risk profile is likely to further strengthen over the medium term. Also, phase 1 of the quartz processing plant is completed and operational, which will diversify the risk of product concentration from black galaxy granite that contributed 69.55% to the total revenue in fiscal 2025. With funding tied up for phase 2 capex in the quartz segment, the product concentration risk is expected to come down in the upcoming fiscals. The rating reflects the longstanding presence of ML, extensive experience of the promoters, integrated operations, geographical diversification in revenue and healthy financial risk profile. These strengths are partially offset by product concentration, vulnerability to intense competition, exposure to inherent cyclicality in demand from end-user markets, moderate working capital cycle and vulnerability of operating margin to fluctuations in foreign exchange (forex) rates. Analytical approach Crisil Ratings has combined the business and financial risk profiles of ML, along with its subsidiaries and joint ventures (JVs). This is because all these entities, collectively referred to as the Midwest group, operate in the same industry and have operational and financial linkages. Please refer Annexure - List of Entities Consolidated, which captures the list of entities considered and their analytical treatment of consolidation. Key Rating Drivers - Strengths Longstanding presence and extensive experience of the promoters: Mr K Raghava Reddy, one of the promoters of ML, has more than four decades of experience in the mining industry. He is supported by his son, Mr K Ramachandra, who has over 20 years of experience in the mining industry. Ms K Soumya (daughter of Mr Raghava Reddy) is a graduate in commerce and was instrumental in establishing ML’s diamond tools manufacturing operations and facilitating its backward integration with mining operations. ML has been engaged in the business of mining and quarrying of rough granites since 1981. It has established relationships with quarry owners and overseas customers. This has allowed the Midwest group to maintain its market position and healthy demand for its products. Geographical diversification in revenue and integrated operations: ML, along with its subsidiaries and JVs, caters to a wide number of clients, both in India and overseas. It consistently derives around 60% of its revenue from exports. The top 10 customers generated revenue of 51.21% in fiscal 2025. Diversity in geographic reach and clientele should continue to support the business risk profile. Established player in the black galaxy granite segment: The group commands a strong market position, with share of 15.7% of the overall black galaxy exports volume from India in fiscal 2025. ML is one of the leading players for this variety of granite in the entire world. The group has employed the latest technology and mechanised processes for the development and extraction of stone from the mines to have better recovery rates of the stone. Furthermore, the vast network of distributors developed over years, and association with key players in both the domestic and export markets will continue to support the business risk profile. The group also participates in reputed international trade shows, which helps improve its visibility and garner orders from new clients. Healthy financial risk profile: Capital structure and debt protection metrics were comfortable. Adjusted tangible networth (adjusted for revaluation surplus and intangible assets) stood at Rs 466.74 crore as on March 31, 2025. Phase 1 of the quartz capex is completed and has achieved commercial operations date as per timelines. Networth has further strengthened after the recently concluded initial public offering (IPO), which helped to raise capital of Rs 250 crore. The IPO proceeds will fund the phase 2 capex in Midwest Neostone Pvt Ltd and part of the existing debt. Hence, capital structure will remain strong over the medium term. On the back of healthy profitability, debt protection metrics are also expected to be strong, with interest coverage ratio of above 10 times over the medium term. Moderate working capital management: Gross current assets deteriorated to 226 days as on March 31, 2025, from 167 days as on March 31, 2024, due to increase in receivables towards fiscal-end. Majority of the receivables are backed by letter of credit (LC) and are, therefore, secured in nature. The company discounts LC and receives the payments. For domestic sales, the company makes sales based on advances. Furthermore, the group maintains average inventory of 20- 25 days, which is generally order backed. Working capital cycle is also supported by interest-free advances from the customers.