Metrics cut 2
- FY27 quartz volume target cut to ~120,000 tons (from 150,000 tons)
- Sri Lanka revenue contribution deferred to FY29 (from FY28)
Event Participants
Executives
3 Kollareddy Ramachandra, Dilip Kumar Chalasani, Uma Kollareddy
Analysts
10 Alok Deora, Archit Agrawal, Arvind Mahadevan, Balamurali Krishna, Chirag Gandhi, Deepesh J. Sancheti, Gursharan Singh, Manish Gupta, Prateek Singh, Yash Purbhe
Financials & KPIs
| Metric | Reported | Commentary |
|---|---|---|
| Revenue | ~₹190 crore (Q1 FY27) | +35% YoY; granite drove ~30-33% growth, quartz contributed ₹5 crore |
| EBITDA growth | +25% YoY | Diesel price spike (₹85 → ₹125-130/L) weighed ~190 bps on margin; volume growth and 3-5% price hikes offset fuel impact |
| PAT growth | +27% YoY | Margin compression from fuel more than offset by granite volume (+10% YoY) and quartz contribution |
| Granite volume growth | ~10% YoY | Black and Black Galaxy products; realization improvement from 3-5% price increase |
| Quartz volume (Q1) | ~5,000 tons, ~₹5 crore | Plant stabilized after technical glitch; realization ~₹10,000/ton; mix 60-65% engineered stone, 35% solar |
| FY27 revenue guidance | ~₹840 crore | ₹720 crore granite + ₹100-120 crore quartz; management calls this conservative and expects to beat |
| FY27 EBITDA margin | ~26-27% | Granite in line with FY26 levels; quartz dilutes blend due to low overhead absorption in year one |
| Net Debt/Equity | 0.2x | Leverage headroom for Sri Lanka capex (~₹120-150 crore) funded from internal accruals |
| Quartz Phase 2 capex | ₹125 crore | ₹60-70 crore outflow in Q2-Q3 FY27; balance in Q4 FY27/Q1 FY28 |
Geographic & Segment Commentary
Granite (Natural Stone): Revenue growth ~30-33% YoY on ~10% volume growth; demand strong, particularly from China with majority of exports on FOB basis (freight customer-borne). Diesel is ~13% of opex; Q1 fuel prices spiked 55-65% YoY, hitting EBITDA ~190 bps. Mitigation underway via fleet electrification backed by solar; 3-5% price hikes implemented, with management expecting margin normalization from Q2 as fuel rationalizes.
Quartz (Phase 1 - HQQ): Commercial operations commenced; Q1 volume of 5,000 tons (₹5 crore, ~₹10,000/ton realization). Ramping to ~20,000 tons in Q2, 10,000-12,000 tons/month run-rate by Q3, exceeding 15,000 tons/month by Q4. Break-even at 10,000 tons/month (Q3); profit expected by FY-end. FY27 volume target revised down to ~120,000 tons (from 150,000) due to Q1 technical issue, now resolved. Current plant capacity supports up to 18,000 tons/month.
Sri Lanka (Heavy Mineral Sand): Policy finalized and ratified after 12-month wait; final data submission (production, investment, timelines) underway. License expected during Q2 FY27; ground breaking ~October 2026; plant build-out 12-15 months; capex ~₹120-150 crore from internal accruals. Revenue contribution expected FY29 onwards.
Indonesia (Rare Earths - PERMINAS JV): MOU signed with Indonesian state-owned PERMINAS—first private company with country-wide access to heavy rare earths (dysprosium, terbium) via ionic clay deposits not available in India. Heavy rare earths price 4-5x light rare earths; critical for defense/aerospace magnets. MOU → agreement this quarter → JV next quarter; scope: mine to oxide; capex higher than Kerala; project report in 45-60 days; FY29 revenue contribution expected.
Kerala (KMML JV): No progress in Q1—new state government settling in and KMML MD not yet appointed. Piloting halts until new team in place; capex for pilot plant insignificant. Expect activity from next quarter once KMML leadership arrives.
Company-Specific & Strategic Commentary
Diesel Cost Mitigation: Fleet electrification backed by solar back-integration is structurally reducing diesel dependence (diesel ~13% of cost). Management asserts margin protection from future fuel shocks; Q1 demonstrated worst-case ~190 bps impact which they expect to claw back in Q2.
Rare Earths Expansion: Indonesia MOU is a step-change strategic move—access to heavy rare earths (Dy, Tb) via ionic clays, materials absent in India and mostly contracted by Chinese producers. Two-stage JV structure: mine-to-oxide (Midwest Ltd equity) and future oxide-to-magnet (Midwest Energy); NFT as technology partner (no equity).
Quartz Phase 2: Commissioning targeted in 10-12 months; suppliers finalized, orders placed. Will add ~₹40-50 crore revenue in FY28; total capex ₹125 crore.
Sri Lanka License: Policy barrier cleared; single remaining milestone is license grant (expected this quarter), then ground breaking ~October and 12-15 month build-out.
Guidance & Outlook
| Metric | Guidance / Outlook | Commentary |
|---|---|---|
| FY27 Revenue | ~₹840 crore | Conservative target—Q1 run-rate (~₹190 crore) plus H2 seasonal strength implies upside; ₹720 crore granite + ₹100-120 crore quartz |
| FY27 EBITDA margin | ~26-27% | Granite ~last year's levels; quartz absorbs ~50-200 bps dilution in first year; margin recovery from Q2 as fuel normalizes |
| Quartz FY27 volume | ~120,000 tons | Revised down from 150,000 tons due to Q1 technical glitch; break-even at 10,000 t/month in Q3; profit by year-end |
| FY28 Revenue | ~₹950 crore | Granite +10-12% ( |
| FY28 Blended EBITDA margin | ~29-30% | Quartz at ~30%+ EBITDA margins lifts blend once full volumes flow |
| Sri Lanka | License in Q2 FY27; ground break ~Oct 2026 | 12-15 month build-out; revenue contribution from FY29 |
Risks & Constraints
| Risk | Context |
|---|---|
| Diesel price volatility | Diesel is ~13% of cost; Q1 fuel spike (₹85 → ₹125-130/L) cut EBITDA ~190 bps. Mitigation: fleet electrification, solar, 3-5% price hikes; management expects normal margins from Q2 but an extended conflict could re-widen impact |
| Government project execution | Kerala stalled (new state government, KMML MD vacant); Sri Lanka policy delay already pushed project back ~6 months; Indonesia depends on JV formation timeline—management cautious on exact dates |
| Indonesia rare earth execution | MOU→agreement→JV still pending; capex higher than Kerala (overseas mining from earth vs tailings); project report due in 45-60 days; payback unknowable at this stage; heavy rare earth pricing (4-5x light) offers margin upside if volumes confirmed |
| China export concentration | Majority of exports to China; Q4 revenue historically 30-38% of annual total due to Chinese New Year restocking (Jan-Feb); any China demand/sociopolitical disruption would hit H2 revenues |
| Quartz ramp-up slippage | FY27 production target cut ~20% (150k → 120k tons) due to technical glitches; phase 2 commissioning in 10-12 months assumes machineries delivered on time (alternate suppliers being evaluated for China-sourced equipment) |
Q&A Highlights
Quartz Ramp-Up & Volume Trajectory
- Question: What volume was sold in Q1, and when will 15,000 tons/month be reached? (Arvind Mahadevan, Equiventure)
- Answer: Q1 sold ~5,000 tons (Dilip Kumar, CFO). Ramp plan: ~20,000 tons in Q2; end-Q3 run-rate 10,000-12,000 t/m; Q4 exceeding 15,000 t/m (Ram Kollareddy, CEO).
Indonesia MOU - Heavy Rare Earths Strategic Rationale
- Question: What are the details of the MOU and milestone timeline? (Yash Purbhe, Inved Research)
- Answer: Ionic clay deposits in Indonesia contain heavy rare earths (Dy, Tb) required for defense/aerospace magnets—absent in Indian monazite and mostly contracted by Chinese firms; heavy rare earths price 4-5x light. Structure: MOU → agreement this quarter → JV next quarter; capex higher than Kerala; project report in 45-60 days; JV equity split under discussion (Ram Kollareddy, CEO).
Capex & Funding Mix
- Question: What are the total capex plans and funding sources? (Chirag Gandhi, Astrid; Manish Gupta, Equinox)
- Answer: Quartz Phase 2 ~₹125 crore (₹60-70 crore in Q2-Q3 FY27); Sri Lanka plant ~₹120 crore funded from internal accruals; net debt/equity at 0.2x provides headroom. Kerala is a pilot plant with insignificant cost (Dilip Kumar, CFO; Ram Kollareddy, CEO).
FY27 Guidance & Quartz Volume Cut
- Question: Is the ₹840 crore revenue guidance too conservative given the Q1 run-rate (~₹190 crore)? And why was the 150k ton target cut? (Chirag Gandhi, Astrid; Alok Deora, Motilal Oswal)
- Answer: Guidance is deliberately conservative—"promise less, over deliver." Quartz production revised to ~120,000 tons for FY27 due to a technical issue in Q1 (now resolved); all guidance is based on 120k tons. If Q1 momentum continues, revenue should exceed ₹840 crore (Ram Kollareddy, CEO; Uma Kollareddy).
Diesel Cost Impact & Margin Recovery
- Question: How did diesel hit margins and what's the recovery path? (Chirag Gandhi, Astrid)
- Answer: Diesel rose from ₹85 to ₹125-130/L—13% of opex—cutting EBITDA ~190 bps in Q1. Mitigation: fleet electrified and back-integrated with solar; prices raised 3-5%; fuel has rationalized in Q2. Expect return to normalized margins from Q2 onwards (Uma Kollareddy; Ram Kollareddy, CEO).
Granite Seasonality Explained
- Question: What explains the QoQ (Q4 vs Q1) revenue decline? (Deepesh J. Sancheti, Maanya Finance)
- Answer: Q4 is structurally the peak (Chinese New Year restocking in Jan-Feb); Q4 historically contributes 30-38% of annual revenue. Correct comparison is YoY—Q1 FY27 up 35% YoY (Ram Kollareddy, CEO).
Kerala JV & Sri Lanka Project Status
- Question: What is the status of the Kerala JV and Sri Lanka policy? (Manish Gupta, Equinox; Balamurali Krishna, Oman)
- Answer: Kerala: no progress—new state government settling in, KMML MD not yet appointed; expect activity from next quarter. Sri Lanka: policy ratified; license expected this quarter; ground breaking ~October; revenue from FY29 (not FY28) (Ram Kollareddy, CEO).
FY28 Revenue & Blended Margins
- Question: What does FY28 look like for revenue and margins? (Alok Deora, Motilal Oswal)
- Answer: Granite ~₹800 crore (+10-12%); quartz Phase 1 ₹180-200 crore + Phase 2 ₹40-50 crore → total ~₹950 crore; blended EBITDA ~29-30% (quartz at ~30%+ margins). Phase 2 contributes ~4 months in FY28 (Ram Kollareddy, CEO; Dilip Kumar, CFO).
Sierra Leone Subsidiary
- Question: Any update on the Sierra Leone operations? (Gursharan Singh, GMA Advisors)
- Answer: No update; two concessions evaluated had local issues; minimal expenditure; still actively evaluating opportunities (Ram Kollareddy, CEO).
Key Takeaway
Midwest Ltd delivered a strong Q1 FY27: revenue up 35% YoY to ₹190 crore with EBITDA and PAT growing 25% and 27%, despite diesel prices spiking ~55-65% (₹85 → ₹125-130/L) which shaved ~190 bps off EBITDA. Granite volume grew ~10% with 3-5% price hikes; quartz contributed ₹5 crore from ~5,000 tons post-stabilization. Management guided FY27 revenue of ~₹840 crore (₹720 crore granite + ₹100-120 crore quartz) at 26-27% EBITDA margins—calling it conservative—and FY28 revenue of ~₹950 crore on full Phase 1 quartz contribution (₹180-200 crore) plus Phase 2 (~₹40-50 crore), lifting blended EBITDA to 29-30%. Strategic catalysts: Indonesia MOU with PERMINAS for heavy rare earths (Dy/Tb), Sri Lanka license expected this quarter with ground breaking in October, and quartz Phase 2 commissioning in 10-12 months. Key watch points: government project timelines (Kerala, Sri Lanka, Indonesia), diesel volatility, China export concentration, and execution of the Indonesia JV.