Introduction to Midwest’s IPO
Midwest, acknowledged as the largest producer and exporter of Black Galaxy Granite, has announced its intention to raise ₹650 crore through an Initial Public Offering (IPO). The company has submitted its draft papers to the Securities and Exchange Board of India (SEBI), indicating a strategic move to enhance its capital base and foster growth. The IPO will consist of new share issuances worth ₹250 crore and an offer for sale (OFS) amounting to ₹400 crore.
Details of the IPO
Breakdown of Funds
The OFS will feature significant contributions from the company’s promoters, with Kolareddy Rama Raghava Reddy planning to sell shares worth ₹360 crore and Guntaka Ravindra Reddy contributing ₹40 crore. Additionally, Midwest is contemplating raising another ₹50 crore via private placement, which may adjust the total IPO size if successfully executed.
Ownership Structure
The promoter group currently holds a substantial 95.83% stake in Midwest, while Swadha India Emerging Opportunities Scheme 1 owns the remaining 4.17%. Recently, Swadha India invested ₹100 crore into Midwest, acquiring 14,08,851 shares at a price of ₹709.80 per share.
Operations and Production Capacity
Midwest operates 16 granite quarries in the states of Telangana and Andhra Pradesh, focusing on the production of dimensional blocks and slabs of both Black Galaxy Granite and Absolute Black Granite. The former material is primarily utilized in real estate developments, while Absolute Black Granite finds extensive use in temples and monuments, highlighting Midwest’s essential role in various industries.
Utilization of IPO Proceeds
The funds raised through the IPO will be allocated strategically. A significant portion, approximately ₹156 crore, will be dedicated to capital expenditure aimed at establishing a Phase 2 quartz processing plant. Additionally, funds will be utilized for purchasing electric dump trucks and integrating solar energy solutions across certain mines. Another ₹53.8 crore is earmarked for loan repayment, with the remaining proceeds directed towards general corporate purposes.
Financial Performance
Midwest has experienced remarkable growth, showcasing a staggering 84.3% increase in net profit for the fiscal year 2024, totaling ₹100.3 crore. This follows a revenue surge of 16.5%, climbing to ₹585.6 crore from ₹502.5 crore in the previous fiscal year. As of August 2024, the company has reported outstanding borrowings amounting to ₹150.4 crore.
Conclusion
With consistent growth, strategic planning, and a robust operational framework, Midwest is positioning itself for a successful IPO. As it seeks to expand its production capabilities and enhance its sustainability initiatives through the new funds, investors will be monitoring this offering closely.
