HEG Limited — Q4 FY26 earnings call

Call held 8 May 2026

Management summary

HEG reported strong full-year FY26 performance with significant revenue and profit growth, driven by high capacity utilization and cost control. However, Q4 FY26 saw a reported loss of ₹189 crores, primarily due to unrealized fair value losses and rupee depreciation. The company is progressing with its capacity expansion to 115,000 tons by early 2028 and remains confident in long-term demand for graphite electrodes, despite near-term market volatility and geopolitical disruptions.

Highlights

  • Full-year FY26 revenue increased 19.32% to ₹2,569 crores from ₹2,153 crores in FY25.

  • Full-year FY26 EBITDA grew 28.09% to ₹497 crores from ₹388 crores in FY25, with margins improving from 17% to 19%.

  • Net profit for FY26 surged 79.21% to ₹181 crores from ₹101 crores in FY25.

  • Maintained over 90% capacity utilization for the full year, and 95% production utilization in Q4 FY26.

  • Recommended a final dividend of ₹3.4 per equity share for FY26.

Concerns

  • Q4 FY26 reported a loss of ₹189 crores, mainly due to unrealized fair value losses on foreign investments and rapid rupee depreciation.

  • Unrealized FX losses amounted to ₹35-40 crores in Q4 FY26.

  • Sales volume in Q4 FY26 was down by approximately 1,000 tons QoQ due to regional sales mix and postponement of Middle East orders.

  • Geopolitical tensions in the Middle East caused disruptions and order deferrals.

Key financials

2 periods

Q4 FY26

  • Loss
    ₹-189 Cr
  • Unrealized FX Loss
    ₹35 Cr
  • Production Utilization
    95%

FY26

  • Revenue
    ₹2,569 Cr
    YoY +19.3%
  • Total Income
    ₹2,660 Cr
    YoY +16.7%
  • EBITDA
    ₹497 Cr
    YoY +28.1%
  • EBITDA Margin
    19%
  • Net Profit
    ₹181 Cr
    YoY +79.2%

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.

Order book

medium confidence

Execution

Orders booked for three to six months ahead, with production cycles of 2-5 months and shipping taking 40-45 days.

Cancellations & deferrals

  • postponed: Approximately 1,000 tons of sales volume impacted due to postponement of Middle East orders.
The company is booked until September, but Q4 sales volume was slightly lower due to regional mix and postponed Middle East orders, which are being diverted.

Source: Q&A

Capital allocation

high confidence
  • Capex Capex disclosed
    • Capacity expansion from 100,000 tons to 115,000 tons
    And as you are aware, we have already announced our next expansion to 115,000 tons, which is likely to be operational by early 2028.
  • Debt Debt disclosed
    The Company remains financially strong with no long-term debt as of 31st March 2026.
  • Dividend ₹3.4/share (final)
    The Board of Directors has recommended a final dividend of INR 3.4 per equity share face value of INR 2, subject to shareholder approval at the upcoming Annual General Meeting.
  • M&A GrafTech Acquisition · Pending regulatory

    Strategic long-term investment due to GrafTech's backward integration in needle coke, providing a hedge against cyclical volatility.

    I would like to reaffirm that our position remains unchanged. This was undertaken as a deliberate long-term investment, and our conviction continues to be anchored in the structural foundations, fundamentals of this business, rather than near term market movements. Cyclical volatility is intrinsic to this industry, and interim fluctuations in no way alter our outlook or our resolve. We remain fully committed to this investment, and we are confident in the long-term value it will create for our stakeholders. We are pleased to inform that the composite scheme of arrangement is progressing well. The NCLT convened meetings of the equity shareholders, secured creditors, and unsecured creditors of HEG are scheduled for Tuesday, 5th May, to seek their approval of the same. Subject to shareholder, creditor, and other regulatory approvals, we anticipate that the scheme could be approved by the NCLT sometime in the second quarter of this financial year.
  • Liquidity Cash ₹792 Cr Company has a treasury of around INR 792 crores and no long-term debt.
    The Company remains financially strong with no long-term debt as of 31st March 2026. It had a treasury of around INR 792 crores.

Guidance & targets

Capacity

  • HEG Capacity Expansion Capacity · early 2028 · High confidence 115,000 tons

    From 100,000 tons today

    And as you are aware, we have already announced our next expansion to 115,000 tons, which is likely to be operational by early 2028.

    — Ravi Jhunjhunwala

  • New EAF Capacity (ex-China) Capacity · by 2028 · High confidence 60 million tons
    To the best of our knowledge, about 20 million tons of new Greenfield electric arc furnaces have already been commissioned in the last 12 to 18 months all over the world, and we believe an additional 60 million tons are at different stages of implementation, which should be in production by 2028, and another about 30 million tons by 2030.

    — Ravi Jhunjhunwala

  • New EAF Capacity (ex-China) Capacity · by 2030 · High confidence 30 million tons

    — Ravi Jhunjhunwala

Volume

  • Incremental Electrode Demand (ex-China) Volume · by 2030 · High confidence 200,000 tons
    This kind of a growth in electric arc furnace-based steel industry is unprecedented in the history of the steel industry, and is expected to translate into incremental electrode demand of around 200,000 tons by 2030, excluding China.

    — Ravi Jhunjhunwala

Profitability

  • EBITDA Margin (committed volumes) Profitability · Q1 FY27 and Q2 FY27 · Medium confidence 17-18%
    Now, these two quarters where we have committed volumes maybe around 17-18 or something. I can't hazard a guess. It depends upon what happens in the balance of the quarter. Should be around that number.

    — Manish Gulati

  • EBITDA Margin (overall) Profitability · Q1 FY27 and Q2 FY27 · High confidence 20%
    Sir, these are correct. So, the EBITDA range will be the 20% we can say for the next 1st Quarter and to 2nd Quarter.

    — Ravi Tripathi

  • EBITDA Margin (full year) Profitability · FY27 · High confidence more than 20%
    And for this whole year, it will be more than 20? Is it good to say that? Yes. Should be? Yes, (+20%). Should be? Okay.

    — Manish Gulati

Capacity Utilization

  • TACC Capacity Utilization Capacity Utilization · first year of operations · Medium confidence 40-60%
    And we hope that in the first year itself, we will be able to have a decent 40% to 60% kind of capacity utilization, because of the customer acquisitions that are going on right now.

    — Riju Jhunjhunwala

What to watch in Q1 FY27

EBITDA Margin for Q1/Q2 FY27

Q1 FY27 and Q2 FY27
Current 19% (FY26)
Target 20%

Why it matters

To verify if the company can achieve its guided EBITDA margin of 20% in the near term, indicating improved profitability.

Sir, these are correct. So, the EBITDA range will be the 20% we can say for the next 1st Quarter and to 2nd Quarter.

Risks & concerns

  • Geopolitical tensions and supply chain volatility

    medium

    Current geopolitical tensions in the Middle East contribute to volatility in energy markets and supply chains, impacting operations and order fulfillment.

    Management acknowledged

  • Chinese steel exports and trade protectionism

    medium

    Elevated Chinese steel exports (over 100 million tons annually) impact global pricing and drive increased trade protectionist measures worldwide.

    Management acknowledged

  • Unrealized losses from fair value and rupee depreciation

    medium

    Q4 FY26 reported a loss of ₹189 crores mainly due to unrealized fair value losses on foreign investments and rapid rupee depreciation (approx. 5% in the quarter).

    Management acknowledged

  • Potential anti-dumping/countervailing duties in US

    medium

    Talks of countervailing and anti-dumping duties in the US against Indian and Chinese imports could impact trade flows, though HEG believes its cost competitiveness might allow it to absorb some impact.

    Analyst acknowledged

  • Cyclical volatility in the industry

    low

    Cyclical volatility is intrinsic to the industry, leading to interim fluctuations in market movements.

    Management acknowledged

Q&A highlights

6 direct
Pricing strategy and impact of needle coke costs Partial
Now, it depends from region to region how much price we can get. And also, I would say that we already have some increase in cost due to these energies, freights. So, the price increase is very necessary to be done. How much will be the quantum, whether it will be 300, 400, 500 is very difficult to say at this stage.

Analyst sought quantification of price hikes and cost pass-through, which management could not provide specifically, indicating market uncertainty.

Asked by Amit Lahoti

TACC Greentech customer qualification and ramp-up Direct
But the sampling works are going extremely well, as well as the plant commissioning. There is no change in the plant commissioning date from April. And we hope that in the first year itself, we will be able to have a decent 40% to 60% kind of capacity utilization, because of the customer acquisitions that are going on right now. So, there are no issues on technology that we are facing currently.

Provides specific targets for TACC's initial capacity utilization and confirms no technological bottlenecks, indicating smooth progress for the new venture.

Asked by Amit Lahoti

Q4 sales volume and revenue decline Direct
Yes, Rajeshji, about this Q4, there is a slightly less volume to the tune of, I guess, about 1000 tons and some depression in price, but that is only because of how the regional sales mix. See, we are shipping to 40 countries. So, which lots, which customers, where they are going, but there is no depression in price per se, because in the market, it's just because of our size mix and order mix, which goes quarter-on-quarter. So, this quarter, we had some low-price orders going, which dragged down the price a little bit.

Explains the specific reasons for the QoQ volume and revenue dip, attributing it to temporary factors like regional sales mix and postponed Middle East orders, rather than a fundamental market depression.

Asked by Rajesh Majumder

Impact of Middle East disruption on sales Direct
Yes, absolutely, there is disruption. The orders, which we had from all these customers, like Kuwait and Saudis, and they all have to be postponed. So, instead, we had orders from other customers. So, they are being given precedence. So, they are going now. And as soon as the State of Hormuz opens and business normalizes, the pending orders, which we are holding for Middle East, they will also quickly be shipped.

Confirms the direct impact of geopolitical events on order fulfillment and provides a timeline for resolution, suggesting a temporary rather than structural issue.

Asked by Rajesh Majumder

Quantification of FX loss in Q4 Direct
Yes, this is Raj. See, this FX loss is completely unrealized loss that we should quantify in the range of INR 35 crores to INR 40 crores within the quarter.

Provides a specific numerical impact of the unrealized FX loss, clarifying the reason for the reported quarterly loss.

Asked by Raj Kiran Gandhi

Needle coke supply/demand dynamics and battery sector competition Direct
The only reason that we decided to invest whatever we invested to buy GrafTech shares was primarily because that is the only graphite company in the world who is 75 to 80% backward integrated. I am talking of GrafTech. That's the only graphite company who has a needle coke plant of its own to the extent of about 75% of their own capacity. So, if you go back to 5 years ago, 6 years ago, when the electrode prices went up by 3x, 4x, 5x, over a period of time, the same thing happened with needle coke. And the needle coke prices went up from about $1,000 to about $4,000 in a matter of 5, 6, and 7 quarters. GrafTech was the only company which had about 80% of their captive requirement was being met by their own coke plant.

Explains the strategic rationale behind the GrafTech investment and clarifies the distinct demand dynamics for needle coke in electrodes vs. batteries, highlighting the unique position of integrated players.

Asked by Ajas Lakhani

Why price increases are happening now in the graphite electrode industry Direct
Well, sir, the graphite electrode industry was looking for a price rise not from now for the last almost 2 years because this is unsustainable for them. For our peer group, incurring losses quarter-by-quarter was unsustainable. So, everybody was hoping for things to turn around and price rises to happen. But if you say why now, probably the last straw in the camel's back that now with this additional Middle East thing war, it's not totally unsustainable for them. So, I think now this was the right time. If not now, then when? It's like that. But as you said about the timing, then I should say that all of us including HEG were looking for a price increase to happen for last quite a few quarters and it didn't happen. And over and above, now there is a Middle East situation, rise in energy, rise in freight. So, this is the last straw in the camel's back.

Provides a clear explanation for the timing of recent price increases, linking them to long-standing industry unsustainability exacerbated by recent geopolitical and cost pressures.

Asked by Rohit Potti

3 min read 7 chapters

Detailed narrative

Global Steel Market Dynamics and Electrode Demand

Global crude steel production in Q1 2026 declined by 2% YoY to 459 million tons, with China-driven recovery. Excluding China, global steel production declined 1.3% over Q4 2025. India remains a standout performer with 5% QoQ growth. The structural shift towards Electric Arc Furnace (EAF) steelmaking, driven by decarbonization policies and trade realignments like CBAM, is expected to significantly boost long-term demand for graphite electrodes. New EAF capacity additions of 60 million tons by 2028 and 30 million tons by 2030 (ex-China) are projected to create incremental electrode demand of 200,000 tons by 2030.

FY26 Performance and Q4 Challenges

HEG delivered strong full-year FY26 results, with revenue growing 19.32% to ₹2,569 crores and EBITDA increasing 28.09% to ₹497 crores, pushing margins from 17% to 19%. Net profit for the year surged 79.21% to ₹181 crores. The company maintained over 90% capacity utilization throughout the year, reaching 95% production utilization in Q4. However, Q4 FY26 reported a loss of ₹189 crores, primarily due to ₹35-40 crores in unrealized fair value losses on foreign investments and rapid rupee depreciation, alongside a 1,000-ton QoQ sales volume dip due to regional mix and postponed Middle East orders.

Capacity Expansion and Operational Efficiency

HEG has successfully expanded its capacity from 80,000 to 100,000 tons and plans a further expansion to 115,000 tons, expected to be operational by early 2028. The company's plant near Bhopal remains the largest single-site electrode plant globally, contributing to its cost competitiveness. Management emphasized its focus on operational efficiency, cost discipline, and customer diversification to deliver resilient performance.

Strategic Investment in GrafTech

HEG reaffirmed its long-term strategic investment in GrafTech, made 1.5-2 years ago, citing GrafTech's 75-80% backward integration into needle coke production. This integration provides a hedge against the cyclical volatility and price surges seen in needle coke, which is critical for electrode manufacturing. The composite scheme of arrangement related to this investment is progressing, with NCLT meetings scheduled for May 5, 2026, and expected approval in Q2 FY27.

Pricing Strategy and Cost Management

The company is actively seeking price increases for unbooked orders in H2 FY27, acknowledging the necessity due to rising energy and freight costs. While needle coke purchases are covered until September, other input costs are subject to market fluctuations. Management noted that the industry has been seeking price increases for the past two years due to unsustainable margins, with recent geopolitical events acting as a catalyst for current price adjustments.

TACC Greentech Progress

The TACC Greentech venture is making good progress with customer qualification processes, engaging with leading OEMs globally. The plant commissioning date from April remains on track, with expectations of achieving 40-60% capacity utilization in its first year of operation. No technological bottlenecks have been identified, indicating a smooth ramp-up for the new business segment.

Financial Strength and Shareholder Returns

HEG maintains a strong financial position with no long-term debt as of March 31, 2026, and a treasury of approximately ₹792 crores. The Board has recommended a final dividend of ₹3.4 per equity share for FY26, reflecting the company's commitment to shareholder returns despite the Q4 reported loss driven by non-operating factors.

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