Midwest H1 profit rises, but operating cash turns negative

Midwest Limited reported consolidated profit after tax of Rs 61.285 crore for the half year ended September 30, 2026, but net cash used in operating activities was Rs 6.729 crore. Cash generation before tax fell to Rs 20.609 crore after working-capital movements, while income taxes paid reached Rs 27.338 crore.

Why did Midwest report negative operating cash flow despite higher profit?

Midwest reported negative operating cash flow because its Rs 82.851 crore profit before tax did not translate into cash after movements in operating assets and liabilities and tax payments. Operating profit before working-capital changes was Rs 100.543 crore, but cash generated from operations fell to Rs 20.609 crore before the Rs 27.338 crore tax outflow.

The resulting Rs 6.729 crore operating cash outflow contrasts with an operating cash inflow of Rs 124.661 crore in the half year ended September 30, 2025. This reversal came even as profit after tax increased by Rs 9.196 crore from Rs 52.089 crore in the prior-year half year to Rs 61.285 crore in the latest period.

Profit and cash flow differ because profit includes accounting adjustments that do not necessarily involve a current-period cash payment. Midwest added back Rs 18.045 crore of depreciation and amortisation and Rs 8.474 crore of finance costs in arriving at operating profit before working-capital changes.

Which working-capital movements used Midwest's operating cash?

Midwest's main cash outflows within working capital were Rs 25.751 crore for trade receivables, Rs 14.157 crore for inventories and Rs 19.813 crore for trade payables. These movements contributed to the reduction from Rs 100.543 crore of operating profit before working-capital changes to Rs 20.609 crore of cash generated from operations.

Other financial assets used Rs 5.876 crore, other assets used Rs 2.633 crore, other financial liabilities used Rs 2.857 crore and other liabilities used Rs 9.755 crore. Provisions added Rs 0.908 crore, but this was insufficient to offset the cash absorbed by the other disclosed operating accounts.

The year-on-year movement was notably different for receivables and inventories. In the half year ended September 30, 2025, trade receivables released Rs 48.567 crore and inventories released Rs 11.150 crore, whereas both accounts consumed cash in the latest half year; trade payables also used Rs 19.813 crore in 2026 compared with Rs 5.701 crore in 2025.

The September 30, 2026 balance sheet records inventories of Rs 57.614 crore, compared with Rs 43.457 crore at March 31, 2026, and trade receivables of Rs 251.198 crore, compared with Rs 227.617 crore. Those increases in current operating assets align with the cash-flow statement's reported outflows for inventories and receivables.

How did Midwest's cash balance and borrowings change?

Midwest's reported cash and cash equivalents declined by Rs 29.172 crore during the half year, ending at Rs 34.199 crore on September 30, 2026, versus Rs 63.371 crore at the beginning of the period. Bank balances other than cash and cash equivalents also declined to Rs 142.689 crore from Rs 165.401 crore at March 31, 2026.

Financing activities generated Rs 24.669 crore before the separately reported Rs 7.549 crore of interest paid. Midwest received Rs 32.142 crore from long-term borrowings and Rs 9.955 crore from net short-term borrowings, while repaying Rs 8.759 crore of long-term borrowings and making Rs 0.200 crore of lease-liability payments.

Balance-sheet borrowings increased at both maturities. Non-current borrowings were Rs 143.960 crore at September 30, 2026 against Rs 129.924 crore at March 31, while current borrowings rose to Rs 61.210 crore from Rs 41.903 crore.

Midwest's board approved the consolidated half-year results on November 10, 2026, and the statutory auditors issued an unmodified limited-review conclusion. The auditors noted that nine subsidiaries included management-prepared interim information covering Rs 213.911 crore of total assets and Rs 2.780 crore of net cash outflows for the half year, which management said was not material to the group.

Did higher revenue and segment profit support Midwest's earnings?

Midwest's revenue from operations increased by Rs 73.424 crore to Rs 374.380 crore in the half year ended September 30, 2026, from Rs 300.956 crore a year earlier. Profit before tax rose by Rs 12.342 crore to Rs 82.851 crore, while total tax expense increased by Rs 3.146 crore to Rs 21.566 crore.

Mining and processing remained Midwest's largest segment, reporting gross revenue of Rs 349.660 crore and profit before interest and tax of Rs 95.904 crore in the latest half year. In the comparable 2025 half year, the segment reported Rs 290.474 crore of revenue and Rs 77.863 crore of profit before interest and tax.

Quartz processing reported Rs 17.197 crore of half-year revenue, compared with Rs 0.060 crore a year earlier, but its segment result was a Rs 1.006 crore loss before interest and tax. The other segment reported revenue of Rs 7.705 crore, down from Rs 12.077 crore, and a Rs 2.470 crore loss compared with a Rs 2.469 crore profit in the prior-year period.

What operational matters and spending plans should Midwest watch?

Midwest disclosed that the Director of Mines Safety, Hyderabad Region No. 3, prohibited granite extraction at its Chimakurthy Mine after a collapse of the northern portion of the mine that originated from an adjoining mine. The prohibition remains effective until it is withdrawn, and the filing does not provide a date for any resumption of extraction.

Midwest had Rs 134.563 crore of unutilised initial public offering proceeds as of September 30, 2026, temporarily invested in short-term deposits with a scheduled commercial bank. Of that amount, Rs 126.798 crore was allocated for a loan to Midwest Neostone Private Limited to fund capital expenditure for the Phase 1 Quartz Processing Plant, Rs 4.500 crore for electric dump trucks and Rs 3.256 crore for solar-energy integration at certain mines.

The asset base reflects continuing capital deployment. Property, plant and equipment rose to Rs 458.887 crore at September 30 from Rs 386.261 crore at March 31, 2026, while capital work-in-progress declined to Rs 52.927 crore from Rs 90.374 crore and intangible assets under development increased to Rs 125.377 crore from Rs 123.350 crore.

Conclusion

Midwest's half-year results show that higher earnings did not produce operating cash in the same period. Revenue increased to Rs 374.380 crore and profit after tax reached Rs 61.285 crore, but receivables, inventories and liability movements, followed by Rs 27.338 crore in tax payments, resulted in a Rs 6.729 crore operating cash outflow.

The next disclosed developments are the deployment of Rs 134.563 crore in unutilised initial public offering proceeds, led by the Phase 1 Quartz Processing Plant allocation of Rs 126.798 crore, and the status of the Chimakurthy Mine extraction prohibition. Midwest has not disclosed either a completion date for the plant spending or a date for withdrawal of the mining restriction.