SOUTHWEST - South West Pinn.

📊 NSE: SOUTHWEST 🏢 Mining / Minerals / Metals 📅 Last Updated: 12/14/2025 13:36

💰 Financial Performance

Revenue Growth by Segment

Consolidated revenue grew 35% in FY25 to INR 180.3 Cr from INR 133.4 Cr in FY24. H1 FY26 revenue surged 81% YoY to INR 102.7 Cr. Coal trading contributed 21.6% of revenue in FY23 but is being minimized due to low margins (~1%) to focus on high-margin exploration services. CBM production revenue is expected to scale following a new INR 153 Cr contract with Reliance Industries Ltd.

Geographic Revenue Split

The majority of revenue is domestic (India), with significant overseas contribution from Oman through two operational rigs and a 35% stake in the Alara Resources LLC JV, which holds a $125 million (INR ~1,040 Cr) 11-year copper mining contract.

Profitability Margins

Net Profit Ratio improved as PAT grew from INR 8.3 Cr in FY24 to INR 16.4 Cr in FY25, a 97% increase. PAT margin for H1 FY26 stood at 10.52%, up 647 bps YoY from 4.05% in H1 FY25, driven by higher absorption of fixed costs and execution of higher-priced contracts.

EBITDA Margin

EBITDA margin was 18.64% in FY25 and improved to 19.77% in H1 FY26. Q2 FY26 saw a record EBITDA margin of 23.24%, an 881 bps increase YoY. Excluding the low-margin coal trading business, operating margins were significantly higher at 24.6% in FY25 compared to 18.9% including it.

Capital Expenditure

Planned capex for FY25 was INR 15-20 Cr. In H1 FY26, the company raised INR 25 Cr specifically for the purchase of new rigs to support CBM production and aquifer mapping contracts. Total funds raised in FY25 via preferential issues and warrants amounted to INR 34.81 Cr.

Credit Rating & Borrowing

CRISIL upgraded the long-term rating outlook to 'Positive' from 'Stable' in December 2025, reaffirming 'CRISIL BBB/Positive' and 'CRISIL A3+'. Total debt reduced 31% from INR 91 Cr in FY24 to INR 63 Cr in FY25. Interest coverage is monitored to remain above 2.0-2.3 times.

⚙️ Operational Drivers

Raw Materials

The primary operational costs are subcontracting charges (specifically for aquifer mapping), rig maintenance spares, and fuel, which collectively comprise the bulk of the 'Total Expenses' that reached INR 82.4 Cr in H1 FY26 (80% of revenue).

Import Sources

Rigs and specialized exploration equipment are sourced globally to maintain a fleet of over 40 operating rigs. Specific countries are not disclosed, but operations extend to Oman for copper and drilling projects.

Capacity Expansion

The company currently operates over 40 rigs. It is expanding capacity by purchasing additional rigs using INR 25 Cr raised in H1 FY26 to meet the demand for the INR 153 Cr Reliance CBM contract and government aquifer mapping projects.

Raw Material Costs

Total expenses as a percentage of revenue decreased from 85.5% in H1 FY25 to 80.2% in H1 FY26. This 5.3% efficiency gain is attributed to higher operating leverage where fixed rig costs are spread over a larger revenue base.

Manufacturing Efficiency

Efficiency is measured by rig utilization and 'fixed cost absorption.' Management targets higher revenue to maximize operating leverage, as seen in the EBITDA margin jump from 14.4% to 19.8% YoY in H1 periods.

📈 Strategic Growth

Expected Growth Rate

15-20%

Growth Strategy

Growth will be driven by the operationalization of the INR 153 Cr CBM production contract with Reliance, expansion of the aquifer mapping division for government agencies, and the 11-year copper mining JV in Oman. The company is also bidding for new orders worth ~INR 300 Cr to build on its June 2024 order book of INR 221 Cr.

Products & Services

Core services include coal, mineral, and CBM exploration drilling; 2D/3D seismic data acquisition; aquifer mapping; and CBM production services.

Brand Portfolio

South West Pinnacle Exploration Limited (SWPEL).

New Products/Services

The company has entered 'CBM Production' (Phase 2) and 'Aquifer Mapping,' which provide more stable, long-term revenue compared to one-off exploration contracts.

Market Expansion

Expansion is focused on the Middle East (Oman copper project) and domestic diversification into water mapping and critical minerals under the 'Mission Anveshan' initiative.

Strategic Alliances

Formed a JV, Alara Resources LLC, with Alara Australia (35%) and Al Tasnim Oman (30%) for a $125 million copper mining project.

🌍 External Factors

Industry Trends

The industry is shifting toward private participation in exploration. The Indian government's 'Open Acreage Licensing Policy' (OALP) and focus on critical minerals are creating a growing market for specialized exploration players like SWPEL.

Competitive Landscape

Competes with other exploration and drilling firms, though management notes they are 'geared up' with more rigs to capture a 'sizable chunk' of the INR 300 Cr+ bidding pipeline.

Competitive Moat

The moat is built on technical expertise in deep drilling and seismic data, a large fleet of 40+ specialized rigs, and a strong track record with major clients like RIL. These high entry barriers (capital and technical) make the moat sustainable.

Macro Economic Sensitivity

Highly sensitive to government mining policies and the 'National Critical Mineral Mission.' Growth is tied to India's push for domestic coal and mineral self-sufficiency.

Consumer Behavior

Not applicable as the company is B2B/B2G.

Geopolitical Risks

Operations in Oman expose the company to Middle Eastern regulatory and geopolitical shifts, though the 11-year contract provides long-term structural stability.

⚖️ Regulatory & Governance

Industry Regulations

Operations are governed by the Mines Act, Ministry of Coal regulations, and environmental norms for drilling. Compliance is managed through a formal Corporate Governance framework and Audit Committee oversight.

Environmental Compliance

The company is increasingly focused on ESG domains as part of its board oversight to retain competitive advantage in global tenders.

Taxation Policy Impact

The effective tax rate for H1 FY26 was approximately 23.4% (INR 3.3 Cr tax on INR 14.1 Cr PBT).

⚠️ Risk Analysis

Key Uncertainties

Working capital intensity remains a key risk; failure to reduce the 300+ day inventory/receivable cycle could impact liquidity by 15-20% of annual cash flow.