HEG Graphite electrodes · battery anode · hydro and storage · Noida

The shape of the company

HEG is three businesses at three different stages, which is precisely why it is being split. One earns today and swings with the steel cycle. One earns today and does not swing at all. One earns nothing yet and carries the entire growth case.

Reported group ratios blend all of this: ROE 7.4%, ROCE 8.0%, debt-to-equity 0.2x, interest cover 11.9x. Inventory runs 389 days — a structural feature of a business whose input is needle coke bought far ahead of use, not a working-capital failure.

The headline claim: ₹1,000 crore of EBITDA, in each business

The forward-looking number that now frames both halves of HEG was put on the record in a television interview, not a filing. On 20 August 2026, a week after the NCLT order, Riju Jhunjhunwala, Vice Chairman, spoke to Nigel D'Souza and Ekta Batra on CNBC-TV18 (“NCLT Approves HEG's Demerger Into 2 Entities”, CNBC-TV18, 20 August 2026). The channel's own summary of the segment reads “HEG Advanced Materials EBITDA can move towards Rs 1,000 cr”. The exchange itself is worth setting down exactly, because the figure was put by the anchor and adopted by management — fully for one business, and not for the other.

Advanced Materials — the hydro-plus-anode entity. The anchor's question: “In the next three years or so, do you think this advanced materials business — which predominantly is the renewable energy business, as well as what you're trying to do on the anodes front — do you think it can do around a thousand crores of EBITDA? Would that be possible?” Mr Jhunjhunwala's answer, after describing the anode plant, its LOIs and the graphene work:

“I think what you're saying is absolutely true. I mean, we stick by that, and I think we should be able to exceed what you're saying.”

So the claim, precisely: at least ₹1,000 crore of annual EBITDA from HEG Advanced Materials within about three years — roughly FY29 to FY30 — from hydro, the anode plant and the renewable pipeline combined, not from any one of them. It matches what the same executive told analysts on the Q1 FY27 call a month earlier: “by the year 2030, we should be aiming at a 4-digit EBITDA between all the businesses combined.”

Graphite electrodes. The anchor then turned to the other half: “There are some estimates that maybe it could move to around 1,000 crores in terms of EBITDA by 2029. Is that a fair estimate?” The reply did not adopt the number:

“The graphite electrode space is more cyclical in nature, and what we've seen in the last two years is really the bottoming out of a very low cycle. Going forward, most definitely — as we saw in the first quarter itself — prices are hardening; September onwards we will start taking some price increases. And going forward, the way the electric arc furnaces are being put in the US and Europe, and no extra graphite capacity has been created in the world in the last 20 years, I think we should see a very comfortable situation of demand-supply for us.”

That is a cycle argument, not guidance. Read carefully: ₹1,000 crore for Advanced Materials is management's own claim; ₹1,000 crore for electrodes by 2029 is a street estimate that management neither confirmed nor denied.

What has to be true. Set each figure against the numbers management has already put on record, all of which appear on this page.

The sum clears ₹1,000 crore — but only with every line delivered on schedule: the anode plant commissioning in April 2027 so that year three is FY30, reaching ₹1,500–1,600 crore at the full 35% margin, and both pipeline projects contributing. Strip the anode plant out and the platform earns about ₹550 crore; at the year-one anode figure of ₹600–700 crore of revenue at 35%, roughly ₹760–800 crore. About half the headline number is a plant with no revenue and no named customer today. The interview also enlarged the plan: three-year capex of “more than around 6,000 crores”, 60–70% debt-funded, with peak debt “around 4,000 crores” to be repaid “in the first three or four years itself” — against ₹2,200–2,300 crore for the anode plant's first phase and ~₹1,500 crore of gross debt expected on the March 2027 balance sheet.

For electrodes the arithmetic is tighter. FY26 operating profit was ₹218 crore on ₹2,576 crore of revenue; Q1 FY27 was ₹151 crore, an annualised run-rate near ₹600 crore. ₹1,000 crore by 2029 needs about ₹3,450 crore of revenue at the ~29% margin management cites on its own basis, or about ₹4,500 crore at Q1 FY27's 22.1% — a third to three-quarters more revenue than FY26 on 15% more tonnage. Even on the kinder basis that means price increases of the order of 15–20% that hold, and a needle coke rise Mr Jhunjhunwala put at “around 20%” passed through in full: “we'll more than happily pass on those … HEG will be the clear winner out of that.” Q3 FY27, when both land, is the first test of whether that path exists.

Vertical one: electrodes, and why the cycle may be turning

This is the business that pays for everything else. HEG runs 100,000 TPA at above 90% utilisation while Western peers sit at 60–65%. Exports are 65–70% of production across roughly 35 countries, with the Middle East about 20% of sales and the United States below 10%. A brownfield expansion adds 15,000 tonnes by early 2028 — timed, as management put it, to "capture the peak of the new EAF commissioning cycle."

The structural case is genuine. Electric arc furnaces made 51% of steel outside China in 2024, up from 44% in 2015, and the OECD counts roughly 71 million tonnes of new EAF capacity planned for 2026–28. Every EAF consumes graphite electrodes. Carbon border adjustment rules push the same direction. China, by contrast, is only about 11% EAF.

The industry outside China is four companies. When GrafTech and Tokai announced price increases, HEG could follow rather than fight. But the H2 realisation thesis rests on announcements, not realised prices — management pointedly declined to say whether GrafTech's increase is sticking: "How much gets eventually absorbed by the steelmakers, that remains to be seen."

The price-cost lag cuts both ways. Q1's margin was flattered by cheap legacy needle coke. From November to January a $200–300 per tonne increase lands, while HEG's own price increases start only in October — and management explicitly could not say what average increase it would achieve: "we'll know in next 1 or 2 months." Q3 FY27 is where the margin-maintenance promise is settled, not Q2. Also pending: US countervailing-duty and anti-dumping determinations, on volume below 10%.

Vertical three: hydro, the quiet engine

Bhilwara Energy's two run-of-river plants total around 300 MW, carry no debt, and generate ₹320–350 crore of free cash flow a year. The economics are better than the headline: 30–40% of output is peaking power sold at ₹7–10 per unit against roughly ₹4 for regular power, blending to about ₹5.5. Statkraft's 49% of Malana Power has been bought in.

The pipeline adds 75 MW of hydro around 2029 and a 300 MW DC commercial-and-industrial solar project within roughly 18 months — together an estimated ₹200 crore of incremental EBITDA.

This is the asset that makes the whole plan work. A pre-revenue anode plant is financeable inside an entity that also owns contracted, debt-free hydro cash flow. Without it, the anode bet would have to be funded entirely from a cyclical exporter's balance sheet.

Vertical four: TACC, and honest scale

TACC Limited, wholly owned, is building a 20,000 TPA synthetic graphite anode plant on 105 acres at Dewas, Madhya Pradesh. Capex is ₹2,200–2,300 crore, about 40% spent, part-funded by a ₹1,240 crore SBI facility. Phase 2 of 10,000 tonnes (~₹800 crore) is targeted for 2029; the land supports 30,000. The stated long-term roadmap is 100,000 TPA.

Management gave a three-year build: ₹600–700 crore of revenue in year one at 40–50% utilisation, above ₹1,200 crore in year two, ₹1,500–1,600 crore in year three at around a 35% EBITDA margin, four-to-five-year payback. Seventy percent of capacity is to be contracted on three-to-five-year Tier-1 deals.

Scale needs framing in both directions. Against Himadri's commissioned line, TACC's phase one is a hundred times larger. Against the world, it is roughly 0.5% of a graphite-anode market near 3.7 million tonnes in 2026 — and even 100,000 TPA would be under 3%. China holds around 90% of anode production and close to 98% of graphitisation capacity; BTR, Shanshan and Zichen alone shipped about 40% of global volume in 2024.

Roughly 1,000–1,100 tonnes of anode supports 1 GWh of cells, so 20,000 TPA serves 18–20 GWh — meaningful for India, immaterial globally. The point is not global share. It is whether India builds a domestic alternative to a Chinese supply chain that is now subject to export controls.

What management actually said about the anode plant

The 28 July 2026 call is the fullest disclosure on TACC to date. These are the exchanges that matter, in the speakers' own words.

On contracting — the question an analyst pressed, given FY28 was then eight months away. Ankur Khaitan, MD & CEO of TACC:

“We are talking with the customers for 3 to 5 years contracts. And almost about 70% of the contracts will be closed by the next 1, 1.5 months. And all these contracts will be long-term contracts with the top Tier 1 players across the world.”

Asked to confirm whether 70% of contracts meant 70% of capacity, he confirmed: capacity. No customer was named, and no contract has since been announced. That 1–1.5 month window closed in September 2026.

On the revenue build — Riju Jhunjhunwala, Vice Chairman, volunteered the full three-year shape:

“It will start commercial production Q1 of next year. So we hope to operate at around 40% to 50% capacity utilization, which should give us a revenue of around INR600 crores to INR700 crores in the first year, which would ramp up to more than INR1,200 crores in year 2. And in year 3, crossing around INR1,500 crores, INR1,600 crores. And again, the margins that we are looking at… roughly an EBITDA margin of 35% for — under all these 3 numbers.”

On capex phasing — Puneet Anand, Group Chief Strategy Officer:

“Out of the entire INR2,200 crores, 40% is already been spent. The larger amount will be spent in next 3 quarters. And we are hoping that the entire 95% — 90% payment will be done by FY '27 and balance 10% will be done in FY '28, first quarter.”

On funding, the same executive was precise: “till date, we haven't drawn any much money for TACC as a debt… TACC debt, what we have secured till date is INR1,240 crores from SBI and balance is from our own capital and the internal accruals,” with project financing on a 70–30 basis drawn in FY28 and FY29.

On Bhilwara Energy's debt, three executives answered in sequence — Om Prakash Ajmera: “there is no debt in the company”; Ravi Jhunjhunwala: “It's 0. It's basically zero… And it has been like this for a number of years.” The Advanced Materials entity's gross debt was confirmed at ₹1,500 crore.

What is absent from the call is as telling as what is present. Across 48,000 characters there is no mention of qualification, samples, yields or technology partners — the words simply do not appear. Management has been explicit about why: “it is not the right forum — we have competitors all over the world.”

Why anode is harder than building a plant

Three steps, and only the last is a moat.

HEG's advantage is that it is not starting cold. The group already owns the upstream chain — carbon, graphitisation, purification, particle engineering — because that is what an electrode plant does. TACC is one step downstream from what HEG has done for decades. What it has not yet demonstrated is the final step.

Himadri is the instructive contrast. Its 200 TPA line is described in its own disclosure as a validation asset rather than a revenue line — commissioned to clear customer approvals while the scale-up decision stays open, backed by a decade of in-house anode R&D and investments in Sicona (Si-C anode) and International Battery Company. HEG is doing the opposite: committing ₹2,200 crore before qualification is public.

The demerger: what splits, and the share count nobody leads with

The composite scheme of arrangement was approved by the NCLT on 13 August 2026, took effect on 1 September 2026, and carries a record date of 7 September 2026. The electrode business moves into HEG Graphite Limited (proposed to be renamed HEG Limited), which lists afresh — management's estimate is 45–60 days, so around October. The existing listed entity keeps anode materials, ~278–300 MW of hydro, BESS EPC and the solar-plus-storage IPP, and is proposed to be renamed HEG Advanced Materials Limited — the “HEG Greentech” of earlier calls. Every HEG shareholder receives one HEG Graphite share of ₹2 for each HEG share held (1:1); Bhilwara Energy's shareholders receive eight HEG shares of ₹2 for every seven BEL shares of ₹10. Ravi Jhunjhunwala leads HEG Graphite as Chairman, MD and CEO; Riju Jhunjhunwala becomes Chairman, MD and CEO of HEG Advanced Materials for a five-year term. (HEG press release, 25 August 2026.)

HEG has roughly 19.7–19.8 crore shares today. The Advanced Materials entity emerges with about 32.9 crore — some 13 crore new shares to Singularity across both tranches, to promoters, and to RSWM. That is a 66% larger share count. Anyone modelling per-share outcomes off HEG's current base will be wrong by a wide margin. Management was explicit that no fresh issuance follows once this is routed.

Debt is being tidied in parallel. A ₹1,200 crore raise — half bank, the rest family office and Bhilwara Energy — leaves ₹600 crore in BEL's books that management says will be retired before consolidation. Against that, roughly ₹1,500 crore of gross debt is expected on the 31 March 2027 balance sheet, largely the SBI anode facility. HEG Limited itself is debt-free with about ₹858 crore of treasury.

Can the demerger unlock value?

Probably yes — but for a narrower reason than the usual conglomerate-discount argument, and not in the way a re-rating story is normally told.

The case for. The two halves cannot share a multiple. Electrodes are cyclical and export-led; FY26 delivered an 8.5% operating margin and Q4 FY26 alone posted an operating loss of ₹148 crore. That is a business priced on mid-cycle earnings. Advanced Materials is contracted hydro cash flow plus an option on battery materials — assets that attract different buyers and different multiples. Separating them lets each be underwritten on its own terms, and lets an infrastructure investor own hydro without taking a steel-cycle view.

The case against, or at least for patience. Value is unlocked when the market can price the parts, and today it cannot price the larger part. TACC has no revenue, no named customer and no public qualification. Until a Tier-1 deal is announced, a standalone Advanced Materials listing gives the market a hydro business it can value and an anode business it must guess at. A separate listing does not manufacture information.

The dilution is the sharpest constraint. A 66% higher share count means the demerged entity must be worth substantially more in aggregate for existing holders to be better off per share. The hydro cash flow of ₹320–350 crore is real and valuable; whether it plus a pre-revenue plant clears that bar depends almost entirely on what multiple the market assigns to an unqualified anode asset.

The honest read: the demerger creates the conditions for a re-rating rather than the re-rating itself. The unlock event is not the NCLT order. It is the first named Tier-1 qualification.

The honest summary

HEG is a well-run cyclical business with a genuine structural tailwind — 71 million tonnes of new EAF capacity, a four-player industry outside China, and the best utilisation in the Western world — using a debt-free hydro portfolio to fund a credible entry into a supply chain China controls almost entirely.

Every part of that sentence is supported by disclosure except the last step, which is the one that decides the outcome. The upstream capability is real; the qualification is not yet evidenced. The demerger creates the conditions for the market to price these separately, but it cannot supply the missing information.

Anyone underwriting the anode story today is underwriting management's execution record rather than disclosed evidence — on a management that has moved the demerger date four times and the anode capex three. That is a legitimate thing to do. It should just be done knowingly.