Summary
HEG Limited - Q3 FY26 Earnings Call Summary (Composite Scheme of Arrangement Update) Monday, January 19, 2026 4:00 PM IST
Event Participants
Executives 9 Ankur Khaitan (MD & CEO, TACC), Basant Jain (Joint MD & CEO, BEL), Hiren Pravin Shah (MD & CEO, REPlus), Indu Mehta (CSO), Karunesh Chaturvedi (Head Corporate Affairs), Manish Gulati (Executive Director), Om Prakash Ajmera (Group CFO), Puneet Anand (Group CSO), Riju Jhunjhunwala (Vice Chairman)
Analysts 8 Abhishek Geta (Analyst), Amit Lahoti (MK), Devang Sanghvi (Abacus), Dhananjai Bagrodia (ASK Group), Jatin Damania (Analyst), Jigar (Analyst), Nikhil Singh (Analyst), Rajesh Majumdar (Analyst)
Financials & KPIs
| Metric | Reported | Commentary |
|---|---|---|
| Proposed Scheme | 1:1 Demerger | Shareholders to receive 1 share of HEG Graphite for every 1 share held in HEG. |
| BEL Swap Ratio | 8:7 | 8 shares of HEG Greentech issued for every 7 shares held by BEL shareholders (other than HEG). |
| BEL EBITDA | ₹400 crores | Generated annually from hydro assets; projects operating at ~80% EBITDA margin. |
| Hydro Free Cash Flow | ₹300+ crores | Annual steady-state cash flow from Malana and AD Hydro assets. |
| Stage 1 Capex | ₹4,300 crores | Planned deployment by end of FY27, primarily for Anode and RE power. |
| Cumulative Capex | ₹7,700 crores | Total planned investment through FY30 across all Greentech verticals. |
| Equity Requirement | ₹2,300 crores | Based on a 30:70 capital structure; management stated they are well-capitalized. |
| Phase 1 Anode Capacity | 20,000 TPA | Targeted for completion by April 2027; expansion to 30,000 TPA planned. |
Geographic & Segment Commentary
- Advanced Battery Materials (TACC): Focus is on producing high-quality synthetic graphite anode material for Li-ion batteries at a 20,000 TPA plant near Indore. The segment targets global cell OEMs in US and Europe seeking non-Chinese supply chains, with 30% of project capex already spent. Strategic focus includes silicon and graphene doping to enhance energy density and charging speeds.
- Battery Energy Solutions (REPlus): Operates a 1 GWh cell-to-pack line being expanded to 6 GWh, targeting ₹6,000 crores revenue at peak capacity. The business provides end-to-end BESS and EV solutions, with a recent office opening in Dubai to capture the Middle East and Africa (MENA) grid-scale storage market.
- RE Power Generation (Hydro & IPP): Consists of two operational debt-free hydro plants (300 MW total) and a new 76 MW project acquisition in Uttarakhand. The IPP vertical is focusing on Solar + BESS tenders and C&I segments, targeting equity IRRs of 16-20% through a capital recycling (build-and-flip) model.
Company-Specific & Strategic Commentary
- Value Unlocking: The demerger separates the “mature cash-cow” Graphite Electrode business from the “high-growth” Greentech platform to allow independent valuation and capital allocation.
- Right to Win (Anode): Leveraging 50 years of graphitization expertise from the electrode business to compete with Chinese manufacturers on cost and quality. A 200 TPA pilot plant has already qualified material with 20 leading global cell OEMs.
- Capital Recycling Model: Management intends to divest stabilized RE IPP projects to InvITs or long-term investors within 6-12 months of operation to maximize ROCE and minimize long-term capital lock-in.
- Graphene Vertical: Planning a 4,000 MT graphene derivative plant; applications tested in cement and textiles show potential for significant consumption reduction and anti-corrosion benefits.
Guidance & Outlook
| Metric | Guidance / Outlook | Commentary |
|---|---|---|
| Anode Commissioning | April 2027 | Plant construction is 30% complete; 50% of capex is already committed. |
| Anode EBITDA Margin | ~30% | Supported by favorable power tariffs and technological efficiency vs global peers. |
| IPP Portfolio Target | 5.9 GWh (BESS) | Targets for FY30 including 3.7 GWh of solar capacity. |
| Anode Capacity Scaling | 60,000 TPA | Targeted by FY32, following stabilization of the initial 20,000-30,000 TPA phases. |
Risks & Constraints
| Risk | Context |
|---|---|
| Technology Obsolescence | Management acknowledges rapid evolution in battery chemistries (sodium-ion, solid-state) but maintains that synthetic graphite remains the standard for the 10-year EV horizon. |
| Chinese Competition | China controls ~97% of synthetic graphite supply; HEG aims to mitigate this by focusing on US/EU “Foreign Entity of Concern” (FEOC) regulations that favor non-Chinese suppliers. |
| Raw Material Volatility | Lithium and cell price volatility impacts BESS tender pricing; however, management expects stabilization within 6-12 months as supply-demand gaps narrow. |
Q&A Highlights
Demerger Structure & Shareholding
- Question: How does the promoter stake increase to 61.92%? (Amit Lahoti)
- Answer: Promoters are merging their 51% stake in BEL into HEG Greentech in exchange for shares based on an 8:7 swap ratio vetted by PwC. (Puneet Anand)
Anode Project Economics
- Question: Is a 20% ROCE aspirational given the high capex intensity? (Amit Lahoti)
- Answer: No, because non-Chinese players are willing to pay a premium for de-risked supply chains. Current discussions for long-term offtakes are very positive. (Ankur Khaitan)
Hydro Asset Valuation
- Question: At what value was the 49% stake in hydro assets acquired from Statkraft? (Jatin Damania)
- Answer: Acquired for ₹1,205 crores by exercising the Right of First Refusal (ROFR), valuing the operational hydro assets attractively relative to market multiples. (O.P. Ajmera)
Asset Recycling Strategy
- Question: Can you elaborate on the build-and-flip model for IPP? (Nikhil Singh)
- Answer: We will operate projects for 6-9 months to prove performance and then sell to yield-hungry RE InvITs (targeting 10-11% yields) to recycle our capital into new projects. (Basant Jain)
Key Takeaway
HEG Limited is executing a structural transformation to separate its legacy Graphite Electrode business from its emerging “Greentech” integrated platform. The demerger creates HEG Greentech, anchored by high-margin operational hydro assets generating ₹300+ crores in free cash flow, which will fund a ₹7,700 crore capex plan through FY30. Key growth pillars include a 20,000 TPA synthetic graphite anode plant (targeted 30% EBITDA margins) and a 6 GWh BESS manufacturing facility. Strategically, the company is positioning itself as a “China+1” beneficiary in the battery materials space, leveraging its 50-year graphitization expertise. Management guided for 16-20% IRRs in Greentech, supported by a capital recycling model for RE projects and favorable power costs for manufacturing. A key watch point remains the successful execution and qualification of anode materials with global OEMs by the FY27 commissioning date.
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