Summary
HEG Limited - Q3 FY26 Earnings Call Summary Wednesday, February 11, 2026 4:00 PM IST
Event Participants
Executives 10 Ankur Khaitan, Basant Jain, Hiren Pravin Shah, Manish Gulati, M. R. Ravi Jhunjhunwala, Om Prakash Ajmera, Puneet Anand, Ravi Kant Tripathi, Riju Jhunjhunwala, Salil Bawa
Analysts 8 Ahmed Madha, Amit Lahoti, Manan Poladia, Rajesh, Rohan Khera, Rohit, Rohit Prakash, Satyan Wadhva
Financials & KPIs
| Metric | Reported | Commentary |
|---|---|---|
| Revenue from Operations (Q3) | ₹656 crores | +37.52% YoY; driven by higher capacity utilization despite muted global pricing. |
| Revenue from Operations (9M) | ₹1,965 crores | +21.60% YoY; reflects sustained volume growth and gain in market share. |
| EBITDA (9M) | ₹623 crores | +58.52% YoY; margin expansion attributed to operating leverage and cost efficiencies. |
| PAT (9M Standalone) | ₹344 crores | +111.04% YoY; significant improvement due to higher volumes and stable cost structure. |
| PAT (9M Consolidated) | ₹455 crores | +140.74% YoY; bolstered by performance of associate companies (Bhilwara Energy). |
| Capacity Utilization | 85% (Q3) | Highest in global industry; 89% utilization maintained over the last three quarters. |
| Treasury Balance | ₹1,155 crores | As of Dec 31, 2025; company remains long-term debt-free. |
| Product Mix (UHP) | 70%-75% | Percentage of total production consisting of Ultra High Power (UHP) electrodes. |
Geographic & Segment Commentary
- Graphite Electrodes: HEG operates the world’s largest single-location facility (100,000 tons) with 85% utilization in Q3. Exports constitute two-thirds of total sales to over 35 countries. Management noted a structural shift toward Electric Arc Furnace (EAF) steelmaking globally, which is expected to add 200,000 tons of incremental electrode demand by 2030.
- Power (Associate - BEL): Profits from Bhilwara Energy Limited (BEL) are primarily driven by hydro assets and interest income from surplus liquidity. The segment is expanding into Battery Energy Storage Systems (BESS), with meaningful revenue expected from Q1 FY28.
- Anode (TACC): Currently under development with commissioning targeted for Q1 FY28. The project benefits from low-cost power (sub-₹5/unit for 5 years) in Madhya Pradesh, providing a significant competitive advantage as power constitutes 30% of anode production costs.
Company-Specific & Strategic Commentary
- Capacity Expansion: Progressing with a 15,000-ton expansion (totaling 115,000 tons) scheduled for completion by early 2028 to capture upcoming EAF demand.
- Corporate Restructuring: The NCLT Indore bench has reserved its order on the first motion for the composite scheme of arrangement; full approval and demerger are anticipated by Q1 FY27.
- Trade Dynamics: Management opted to absorb the 18% US import duty rather than vacate the market, leveraging “duty draw-back” provisions where raw materials imported from the US are exempt from the tariff calculation.
Guidance & Outlook
| Metric | Guidance / Outlook | Commentary |
|---|---|---|
| Electrode Pricing | Flat (Next 2 Quarters) | Realizations expected to remain at current low levels; 50-60% of FY27 volumes already contracted. |
| Global EAF Capacity | +110 million tons (by 2030) | Includes 20MT added in 2024-25 and 60MT expected between 2026-2028, driving electrode demand. |
| New Capacity Commissioning | Early 2028 | 15,000-ton expansion on track; long-lead equipment orders already placed. |
| HEG Greentech (Demerger) | Q1 FY27 | Final NCLT approval expected shortly; company will hold Anode and BESS businesses. |
Risks & Constraints
| Risk | Context |
|---|---|
| Pricing Pressure | Sustained global pricing pressure due to Chinese steel exports (119MT in 2025) and cautious procurement by steelmakers. |
| US Import Duties | While reduced from 50% to 18%, the duty remains a hit to the bottom line, though management plans to absorb it to retain market share. |
| Raw Material Volatility | Needle coke prices are contracted quarterly; sharp increases in coke prices typically lag electrode price increases, potentially squeezing margins. |
Q&A Highlights
Steel Capacity Reconciliation
- Question: How is new EAF capacity being added when current steel utilization is low? (Rohit Prakash)
- Answer: New EAF plants are not adding net steel capacity; they are replacing old, high-emission blast furnaces to avoid carbon taxes (Ravi Jhunjhunwala).
Competitiveness vs. China
- Question: How does HEG compete with the 200KT of UHP capacity coming out of China? (Ahmed Madha)
- Answer: Most Chinese capacity is non-UHP; achieving consistent UHP quality takes years. HEG’s low India-based cost structure and single-site scale (100KT) provide a defensive moat (Manish Gulati).
US Tariff Impact
- Question: What is the financial impact of the 18% US duty? (Amit Lahoti)
- Answer: It is not “staggering.” HEG utilizes a provision where the value of US-sourced raw materials is deducted from the taxable electrode price, partially mitigating the 18% hit (Ravi Jhunjhunwala).
Anode Business Moat
- Question: What gives HEG an advantage in the graphite anode business? (Manan Poladia)
- Answer: Power is 30% of the cost. The MP government has guaranteed power at less than ₹5/unit for five years starting from the date of commencement (Riju Jhunjhunwala).
Key Takeaway
HEG Limited delivered a resilient Q3 FY26, with 9M consolidated PAT growing 141% YoY to ₹455 crores, driven by industry-leading capacity utilization of 85-89%. Despite global pricing headwinds and US import duties, the company maintained strong margins through operating leverage and its scale as the world’s largest single-site electrode producer (100,000 tons). Management is aggressively positioning for a structural shift in steelmaking, forecasting 110 million tons of new Electric Arc Furnace capacity by 2030, which should absorb an additional 200,000 tons of electrodes globally. Strategic focus remains on the 15,000-ton electrode expansion and the upcoming demerger of the Greentech/Anode business, which is slated for Q1 FY27. While pricing is expected to remain flat over the next two quarters, HEG’s debt-free balance sheet and ₹1,155 crore treasury provide a robust cushion for its capital expenditure plans through 2028.
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