HEG Limited Q1 FY27 Earnings Call Summary

Event Participants

Executives

9 Ankur Khaitan, Manish Gulati, Neha Rajvanshi, Om Prakash Ajmera, Puneet Anand, Ravi Jhunjhunwala, Ravi Tripathi, Riju Jhunjhunwala, Salil Bawa

Analysts

9 Ahmed (Unifi Capital), Akhilesh Kumar (Emkay Global), Amit Lahoti (Aditya Birla), Chirag (SKP Securities), Deepak Poddar (Sapphire Capital), Kaushal Sharma (Equinox Capital), Kirtan Mehta (Baroda BNP Paribas), Rohan (Arihant Capital), Ronak Agarwal (iThought PMS)

Financials & KPIs

Geographic & Segment Commentary

• Middle East & MENA: ~20% of revenue historically; Middle East conflict caused shipping delays and elevated freight, but volumes were diverted across 30+ countries with no volume loss (plant operated at 91%+). Management declined to disclose country-wise splits citing competitive sensitivity.
• Exports: Consistently 70-75% of revenue for 25-30 years; HEG exports to virtually every steelmaking region including US, Europe, Africa and Latin America.
• United States: <10% of business; CVD preliminary determination expected end-July and anti-dumping by end-September 2026. Management confident of no dumping and ability to redirect volumes to alternate markets if duties are unreasonable.
• India: Domestic crude steel output grew ~7.1% YoY to ~87 million tons in H1 CY26, supported by infrastructure, construction and manufacturing demand; remains one of the strongest performing steel markets globally.

Company-Specific & Strategic Commentary

• Capacity expansion: 100,000 tpa plant is the world's largest single-location graphite electrode facility; expansion to 115,000 tpa on track for commissioning by early 2028. Next two largest global plants are ~70,000 tpa each, widening HEG's scale advantage.
• Demerger: Composite scheme progressing well; NCLT has reserved its order, with timeline and record date to be announced post-pronouncement; investor call planned for HEG Advanced Materials business.
• TACC anode project: 20,000 tpa capacity; ~70% of capacity to be contracted (3-5 year deals with Tier 1 global customers) within 1-1.5 months; commercial production from Q1 FY28; capex ₹2,200-2,300 crores (40% spent to date).
• Bhilwara Energy: Two debt-free hydro plants (~300 MW) generating ₹320-350 crores annual free cash flow; 75 MW hydro project (acquired from Statkraft, ~30% complete) to start by 2030; 300 MW C&I solar project within 18 months; HEG Greentech targeting 4-digit EBITDA by 2030 across all businesses.
• EAF transition: OECD estimates ~71 million tons of new EAF steelmaking capacity planned globally by end-2028; 20-21 million tons commissioned in CY24-25 and 8-10 million tons in H1 CY26, validating HEG's expansion rationale.

Guidance & Outlook

Risks & Constraints

Q&A Highlights

Revenue Mix & Middle East Exposure

• Question: What was the share of Middle East in Q1 revenue and where were lost volumes diverted? (Amit Lahoti, Aditya Birla; Ahmed, Unifi Capital)
• Answer: Middle East is ~20% of revenue over the year; no volume was lost - the company operated at 91%+ utilization with volumes spread across 30+ countries, just postponements rather than cancellations (Manish Gulati). Management declined country-wise detail citing competitive sensitivity; exports remain 70-75% of revenue, consistent for 25-30 years (Ravi Jhunjhunwala).

Pricing Outlook & Price Hike Timing

• Question: When will price hikes flow into earnings and what magnitude is expected? (Amit Lahoti; Rohan, Arihant Capital; Ahmed)
• Answer: HEG is booked 3-4 months ahead, committed through September; new business is being booked at higher prices, so hikes show up from October onwards (Manish Gulati). GrafTech announced $600-1,200/t and Tokai Carbon $930/t increases; with only 3-4 producers globally, HEG will follow, though nothing substantial will land in the next 1-2 quarters (Ravi Jhunjhunwala).

Needle Coke Cost Inflation

• Question: How much has needle coke risen and when will it hit the P&L? (Kirtan Mehta, Baroda BNP Paribas; Rohan)
• Answer: Needle coke is up ~$200-300/t due to oil prices and demand (Manish Gulati). Companies carry 3-4 months of stock plus a 3-4 month conversion process, so impact will not be felt for at least 3-5 months (Ravi Jhunjhunwala). Total cost impact is ~10-15% of electrode cost of production; needle coke itself has risen by a higher percentage (Manish Gulati).

EAF Capacity Additions

• Question: How much of the projected CY26 EAF capacity has been commissioned in H1? (Akhilesh Kumar, Emkay Global)
• Answer: ~20-21 million tons commissioned in CY24-25 and 8-10 million tons in H1 CY26; ~60 million tons expected across CY26-28, all on the anvil though timing may vary ±10-20% (Manish Gulati; Ravi Jhunjhunwala).

TACC Anode Contracts & Capex Phasing

• Question: How much of the 20,000-ton anode capacity is contracted given FY28 is only 8 months away? (Akhilesh Kumar)
• Answer: ~70% of capacity contracts will close within 1-1.5 months, all 3-5 year long-term contracts with top Tier 1 global players (Ankur Khaitan). Capex of ₹2,200-2,300 crores is 40% spent; 90% of payments done by FY27, balance 10% in Q1 FY28 (Puneet Anand).

Greentech Debt & Capital Structure

• Question: How much debt will sit on Greentech post-demerger and how was the Statkraft stake funded? (Akhilesh Kumar; Ahmed)
• Answer: ~₹1,500 crores gross debt will appear on the March 31, 2027 balance sheet, of which ₹1,240 crores is secured from SBI for TACC; the 30,000-ton future expansion will be 70:30 debt-financed (Puneet Anand). Statkraft stake purchase was funded 50% via commercial banks and 50% from family office/BEL, with debt being retired over time (Om Prakash Ajmera).

Greentech Business Potential

• Question: What is the revenue/EBITDA potential of the anode and Bhilwara Energy businesses? (Deepak Poddar, Sapphire Capital)
• Answer: Anode project starts commercial production Q1 FY28; revenue of ₹600-700 crores in year 1 (40-50% utilization), ₹1,200+ crores in year 2, ₹1,500-1,600 crores in year 3 at ~35% EBITDA margin (Riju Jhunjhunwala). Hydro plants deliver ₹320-350 crores annual FCF; 75 MW hydro (2030) and 300 MW solar (18 months) add ~₹200 crores EBITDA; HEG Greentech targets 4-digit EBITDA by 2030 (Riju Jhunjhunwala).

US Trade Actions (CVD/ADD)

• Question: How will HEG derisk volumes if US CVD/ADD duties are imposed? (Ronak Agarwal, iThought PMS; Kirtan Mehta)
• Answer: US is <10% of revenue; CVD preliminary by end-July and anti-dumping by end-September; HEG is confident it has not dumped and can absorb volumes in other markets if duties are unreasonable (Manish Gulati). "We will retain America... we might lose some sort of market share, but we're not going to leave that country" (Ravi Jhunjhunwala).

Market Supply-Demand Dynamics

• Question: How can pricing improve when the market is in supply surplus, with Western competitors at 60-65% utilization? (Kirtan Mehta)
• Answer: Chinese supply into the market is roughly half of the 200,000 tons the analyst assumed; steel industry utilization is below 75% globally and demand will grow as ex-China production recovers - over 50% of ex-China steel is from EAFs, and no new blast furnaces are being built in Europe/US (Manish Gulati).

Key Takeaway

HEG delivered a strong Q1 FY27: standalone revenue rose 11% YoY to ₹681 crores, EBITDA jumped 38% to ₹211 crores (29% margin), and PAT grew 53% to ₹110 crores, rebounding from Q4 FY26 MTM-driven losses on foreign equity investments. The 100,000 tpa electrode plant ran at 90%+ utilization, with pricing power supported by GrafTech ($600-1,200/t) and Tokai Carbon ($930/t) hikes expected to flow through from October as HEG targets maintaining ~29% margins. Strategically, the 115,000 tpa expansion remains on track for early 2028, the demerger awaits NCLT pronouncement, ~70% of TACC anode capacity is being contracted with Tier 1 customers, and HEG Greentech targets 4-digit EBITDA by 2030. Key watch points include Middle East-driven input cost inflation ($200-300/t needle coke increase), US CVD/AD determinations due July/September, and the pace of global EAF commissioning underpinning long-term electrode demand.