HEG Limited — Q2 FY26 earnings call

Call held 12 Nov 2025

Management summary

HEG delivered strong Q2 FY26 results with significant revenue and profit growth driven by higher sales volumes and efficient operations, maintaining over 90% capacity utilization. Despite global steel market slowdowns, intense competition from Chinese exports, and US tariff headwinds, the company remains debt-free and is progressing with its Greentech demerger and capacity expansion plans, anticipating long-term growth from the EAF transition.

Highlights

  • Revenue from operations increased to ₹697 crores in Q2 FY26, up 22.7% year-on-year, driven by higher sales volumes.

  • EBITDA surged by 61.4% to ₹226 crores in Q2 FY26 compared to ₹140 crores in Q2 FY25.

  • Standalone Net Profit After Tax more than doubled to ₹131 crores, an increase of 111.3% year-on-year.

  • The company maintained high capacity utilization, exceeding 90% in the first half of FY26.

  • HEG remains a long-term debt-free company with a treasury size of approximately ₹1,167 crores as of September 30, 2025.

Concerns

  • Global crude steel production declined by 1.5% year-on-year in the first nine months of 2025, indicating a demand slowdown.

  • China's finished steel exports surged 9.2% in Q2, intensifying global competition and pressuring international steel prices.

  • The graphite electrode market faces muted customer demand and aggressive export pricing from Chinese suppliers, leading to margin pressure.

  • A 50% reciprocal duty in the U.S. poses a potential headwind to competitiveness in that region.

  • The turnaround in steel demand and electrode pricing has been slower than anticipated.

Key financials

  1. Revenue from Operations ₹697 Cr +22.7%YoY
  2. EBITDA ₹226 Cr +61.4%YoY
  3. Net Profit After Tax (Standalone) ₹131 Cr +111.3%YoY
  4. Net Profit After Tax (Consolidated) ₹105 Cr +28%YoY
  5. Treasury Size ₹1,167 Cr

What they filed

Q1 FY27: revenue up 11.1%, net profit up 16.2% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue568 478 537 613 699 +23%656 +37%603 +12%681 +11%
EBITDA97 67 -61 106 118 +22%143 +113%-148 −143%151 +42%
Net profit82 83 -74 105 143 +74%207 +149%-114 −54%122 +16%
How to read this

₹ crore, as filed. The percentage beside a figure is the change against the same quarter a year earlier — never the quarter before, which would make every seasonal business look like it collapses and booms each year.

Capital allocation

high confidence
  • Capex ₹650 Cr
    • 15,000 tons capacity expansion for graphite electrodes ₹650 Cr
    • BESS EPC capacity expansion from 1 GWh to 6 GWh
    As you are aware, we have already announced further expansion of 15,000 tons with a capex of INR650 crores to be completed by end of 2027 and be ready for production in the first quarter of calendar year 2028.
  • Debt Debt disclosed
    The company is a long-term debt free and had a treasury size of nearly about INR1,167 crores on 30th September 2025.
  • M&A HEG Greentech Divestment · Pending regulatory

    Strategic separation to focus on green energy businesses including anode material, hydro power, BESS EPC, and IPP.

    HEG Greentech EBITDA expected to double in FY27 compared to FY26.

    Regarding the demerger process, the ongoing composite scheme of arrangement has been filed with the stock exchanges and remains under review. While the process has taken longer than anticipated, we are confident of receiving stock exchange approvals in due course. Upon receipt, the scheme will be filed with NCLT for its consideration. Based on the current time table, we expect NCLT approval by April 2026.
  • M&A Malana and Allain Duhangan Hydro Power Assets Acquisition · Pending regulatory

    HEG Greentech will own 100% of these assets, representing 278 MW of Hydro Capacity.

    H1 EBITDA for Greentech primarily from these operational hydro assets.

    Second is the existing Hydro Power assets. BEL currently holds 51% equity in the hydro assets and has signed a definite agreement to acquire the remaining 49% from Statkraft. Upon completion, HEG Greentech will own 100% of Malana and Allain Duhangan, which represent around 278 MW of Hydro Capacity.
  • Liquidity Cash ₹1,167 Cr Company is long-term debt free with a treasury size of approximately ₹1,167 crores.
    The company is a long-term debt free and had a treasury size of nearly about INR1,167 crores on 30th September 2025.

Guidance & targets

Regulatory Approval

  • NCLT approval for demerger Regulatory Approval · by April 2026 · Medium confidence By April 2026
    Based on the current time table, we expect NCLT approval by April 2026.

    — Manish Gulati

Capacity Expansion

  • 15,000 tons graphite electrode capacity expansion completion Capacity Expansion · by end of 2027 · High confidence End of 2027
    As you are aware, we have already announced further expansion of 15,000 tons with a capex of INR650 crores to be completed by end of 2027 and be ready for production in the first quarter of calendar year 2028.

    — Manish Gulati

Production Readiness

  • 15,000 tons graphite electrode capacity production readiness Production Readiness · Q1 CY28 · High confidence Q1 CY28
    As you are aware, we have already announced further expansion of 15,000 tons with a capex of INR650 crores to be completed by end of 2027 and be ready for production in the first quarter of calendar year 2028.

    — Manish Gulati

Profitability

  • HEG Greentech EBITDA growth Profitability · FY27 · Medium confidence Double in FY27
    Broadly, your understanding of the FY26 numbers is correct, and we expect that the EBITDA should at least double in FY27 compared to the FY26 figures we just discussed.

    — Puneet Anand

  • Anode project EBITDA margins Profitability · High confidence 30-40%
    We are expecting EBITDA margins in the range of about 30%, rather 35% to 40%.

    — Ankur Khaitan

HEG Greentech Operations

  • Anode plant operational HEG Greentech Operations · Q1 FY28 · High confidence Q1 FY28
    So the full contribution to the EBITDA will be coming from Q1 FY28, once the anode plant is operational, the Replus business has been live, and the IPP projects, which is roughly 650 MW/1300MWh based on the tender we have won.

    — Puneet Anand

  • RePlus business live HEG Greentech Operations · Q1 FY28 · High confidence Q1 FY28

    — Puneet Anand

  • IPP projects (650 MW/1300 MWh) operational HEG Greentech Operations · Q1 FY28 · High confidence Q1 FY28

    — Puneet Anand

BESS EPC Capacity

  • BESS EPC capacity expansion BESS EPC Capacity · by Q1 FY27 · High confidence 6 GWh

    From 1 GWh today

    The EPC business has an installed capacity of 1 GWh with plans to expand to 6GWh by quarter 1 FY '27.

    — Puneet Anand

IPP Operations

  • First 200 MWh IPP project operational IPP Operations · Q2 FY27 · High confidence Q2 FY27
    The first 200 MWh project is expected to be operational by Q2 FY '27.

    — Puneet Anand

IPP Tender

  • Additional 1000 MW/2000 MWh IPP tender commissioning IPP Tender · Q2 FY28 · Medium confidence Q2 FY28
    An additional 1,000 MW/2000 MWh tender is targeted for commissioning by Q2 FY28.

    — Puneet Anand

Capacity Utilization

  • FY26 capacity utilization Capacity Utilization · FY26 · High confidence 85-90%

    From 80% (FY25) today

    Now in the first half, we are 90% plus. We are hoping that by the time we close the year, we are maybe between 85% and 90%, maybe we are hoping for 90% capacity utilization.

    — Manish Gulati

Industry Demand

  • Graphite electrode demand increase from EAF Industry Demand · next 2 years · Medium confidence 30,000 tons
    So if you roughly divide it by, let's say, 1.5 kg per ton, that translates to about 30,000 tons demand increase. I'm just talking about next 2 years.

    — Manish Gulati

Market context

  • Global EAF capacity addition Industry Demand · next 2 years (CY26-CY27) · Medium confidence 20 million tons
    It's about 20 million tons, which should get added in the next 2 years, '26 and '27.

    — Manish Gulati

What to watch in Q3 FY26

NCLT approval for demerger

by April 2026
Current Under review, expected by April 2026
Target Approval received

Why it matters

Enables the strategic separation and growth of HEG Greentech businesses, unlocking potential value.

Based on the current time table, we expect NCLT approval by April 2026.

Risks & concerns

  • Global Crude Steel Production Decline

    medium

    Global crude steel production declined by 1.5% year-on-year in the first nine months of 2025, indicating a slowdown in demand across major economies.

    Management acknowledged

  • Intensified Competition from Chinese Steel Exports

    medium

    China's finished steel exports surged 9.2% year-on-year in Q2, intensifying global competition and pressuring international steel prices.

    Management acknowledged

  • Muted Graphite Electrode Demand and Margin Pressure

    medium

    Customer demand remained muted due to cautious procurement and aggressive export pricing by Chinese suppliers, intensifying margin pressure for producers globally.

    Management acknowledged

  • US Reciprocal Duty

    medium

    The recent imposition of 50% reciprocal duty in the U.S. poses a potential headwind to HEG's competitiveness in that region.

    Management acknowledged

  • Slow Turnaround in Steel Demand

    medium

    Management noted that the steel production has been languishing for the last 2-3 quarters and the turnaround is taking time.

    Management acknowledged

Q&A highlights

6 direct
Attribution of Q2 FY26 Revenue Increase Direct
Okay. See, prices, as I said in the remarks, were flat between Q2 and Q1. And rest is the top line which you're seeing is coming from higher sales in Q2 compared to Q1. ... Yes. It's completely due to volume increase only. Prices are flattish.

Clarifies that the strong revenue growth in Q2 was volume-driven, indicating healthy demand for HEG's products despite flat pricing.

Asked by Amit Lahoti

Impact of US Reciprocal Duty on Competitiveness Partial
U.S., yes, it is an important market for us. And any customer in U.S. would want a similar price compared to the local suppliers. So tariff, whatever it is, of course, if the customer is not going to pay that over and above the price, they will not increase their procurement cost. So we'll take a call once we figure out finally what kind of tariff finally gets applied.

Highlights the challenge of absorbing tariffs to remain competitive in the US market, but management also notes the limited exposure (10-12% of sales) to this region.

Asked by Amit Lahoti

Net Debt Allocation Post-Demerger Direct
Yes, we have a total treasury size at approx. INR1,200 crores, out of which INR830 crores we have allocated to the TACC and remaining with the graphite.

Provides clarity on the financial structure post-demerger, indicating how the existing treasury will be split between the graphite and green energy entities.

Asked by Amit Lahoti

Volume Growth and Margin Outlook with High Utilization Direct
Now in the first half, we are 90% plus. We are hoping that by the time we close the year, we are maybe between 85% and 90%, maybe we are hoping for 90% capacity utilization. So that is the kind of volume growth, which we have seen between '24-'25 and '25-'26, which we expect.

Confirms management's expectation of sustained high capacity utilization and corresponding volume growth for the current fiscal year, indicating continued operational strength.

Asked by Rohan Baranwal

Impact of Global Capacity Closures on Pricing and Visibility Partial
These capacities going out have not really created a big impact just because the demand environment itself is slow. But yes, when the demand goes up and the industry level, all industry, I'm not talking about HEG, all the average utilization levels will increase, then, of course, prices should start to come up.

Explains why recent competitor capacity closures haven't immediately boosted pricing, linking future price recovery to a broader increase in industry utilization driven by demand.

Asked by Rohan Baranwal

HEG Greentech's Financial Contribution and FY27 Outlook Direct
The H1 EBITDA is primarily from the hydro assets, which are already operational. The revenue for the other HEG Greentech businesses will start flowing in from Q4 FY27 for the anode segment, once the plant is commissioned. ... Broadly, your understanding of the FY26 numbers is correct, and we expect that the EBITDA should at least double in FY27 compared to the FY26 figures we just discussed.

Provides a timeline for revenue and EBITDA contribution from the new Greentech businesses and sets a clear financial target for its growth in FY27.

Asked by Chirag Pachisia

Industry Utilization Rate and Inflection Point for Price Upturn Direct
About 70%, maybe, I think so. If you combine maybe around 65% or 70% something like that. ... Maybe it should be when it crosses average utilization crosses 85% once it starts close to between 80%, 85% when the prices start to firm up. That's the past experience.

Offers management's estimate of current global industry utilization (ex-China) and a historical benchmark for when graphite electrode prices typically begin to firm up, providing context for future market recovery.

Asked by Rajesh Majumdar

Needle Coke Availability for Capacity Expansion Direct
No problem. See, the way the graphite industry, as we just talked, is somewhere between 65 to 70. Similarly, presently, the needle coke capacities are also not running full because they're also tied to us and these refineries for big refineries, our suppliers, it's not difficult to switch over their cokers from one product to other.

Addresses concerns about needle coke supply, assuring that it will not be a constraint for HEG's capacity expansion or the industry's growth, as suppliers can adapt to demand.

Asked by Rajesh Majumdar

3 min read 6 chapters

Detailed narrative

Q2 FY26 Financial Performance Overview

HEG reported robust financial performance for Q2 FY26, with revenue from operations reaching ₹697 crores, marking a 22.7% increase from ₹568 crores in the corresponding quarter of the previous year. EBITDA saw a significant jump of 61.4% year-on-year, climbing to ₹226 crores from ₹140 crores. The company's standalone net profit after tax more than doubled to ₹131 crores (up 111.3% YoY), while consolidated net profit after tax grew 28% to ₹105 crores. HEG remains a long-term debt-free entity, boasting a treasury size of approximately ₹1,167 crores as of September 30, 2025.

Global Steel and Graphite Electrode Market Dynamics

The global steel industry continues to face headwinds, with crude steel production declining by 1.5% year-on-year in the first nine months of 2025. China's output fell 2.6% year-on-year, and its finished steel exports surged 9.2% in Q2, intensifying global competition and pressuring international steel prices. The graphite electrode market is characterized by muted customer demand, cautious procurement, and aggressive pricing from Chinese suppliers, leading to margin pressure for producers globally. Management hopes for an increase in steel production and new electric arc furnace (EAF) capacities coming online in the next two to three quarters.

Demerger and HEG Greentech Strategic Pillars

The demerger process for HEG Greentech is progressing, with NCLT approval anticipated by April 2026. HEG Greentech is structured around four strategic pillars: anode material manufacturing (expected operational by Q1 FY28), 100% ownership of 278 MW hydro power assets (Malana and Allain Duhangan), BESS EPC business (expanding from 1 GWh to 6 GWh by Q1 FY27), and IPP (BESS plus Solar, with the first 200 MWh project operational by Q2 FY27 and an additional 1000 MW/2000 MWh tender by Q2 FY28). The EBITDA for HEG Greentech is projected to double in FY27 compared to FY26.

Capacity Expansion and Utilization Levels

HEG is undertaking a 15,000-ton capacity expansion project with a capital expenditure of ₹650 crores, slated for completion by the end of 2027 and ready for production in Q1 CY28. The company achieved over 90% capacity utilization in the first half of FY26 and aims for 85-90% for the full fiscal year. This high utilization demonstrates operational resilience despite the challenging market conditions. Management noted that the industry's average utilization is currently around 65-70%, with historical trends suggesting prices firm up when utilization crosses 85%.

US Tariffs and Market Diversification

The recent imposition of a 50% reciprocal duty in the U.S. presents a potential headwind for HEG's competitiveness in that region. Customers in the U.S. are likely to demand prices comparable to local suppliers, which could necessitate HEG absorbing some of the tariff impact. However, HEG's sales to the U.S. constitute only 10-12% of its total sales, and its diversified sales footprint across 35 countries helps mitigate this risk. The company is hopeful that tariffs will eventually settle at a more reasonable level.

Needle Coke Supply and Pricing Dynamics

Needle coke prices have remained flattish for the past 2-3 quarters, mirroring the stability in electrode prices. Management assured that needle coke availability is not a significant concern for future capacity expansions. Existing refineries have the technology and capability to switch their cokers to produce needle coke when demand for graphite electrodes increases, making it a flexible supply chain. The spread between graphite electrode and needle coke prices has also remained stable, contributing to the current profit figures.

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