HEG Limited: Navigating Market Headwinds with Strategic Diversification in Q2 FY26

HEG Limited, a prominent player in the graphite electrode industry, has demonstrated commendable operational resilience in the second quarter of fiscal year 2026, despite a challenging global market. The company reported a consolidated revenue from operations of INR 699.22 crore, marking a significant increase from the previous quarter and the corresponding period last year. This robust top-line performance was primarily driven by higher sales volumes, even as graphite electrode prices remained largely flat. The consolidated Profit After Tax (PAT) stood at INR 143.33 crore, reflecting healthy profitability, while the calculated consolidated EBITDA reached INR 237.90 crore, underscoring the company's efficient operations.

The global crude steel market, a key determinant for graphite electrode demand, experienced a 1.5% year-on-year decline in production during the first nine months of 2025. This slowdown was largely attributed to weak domestic demand and production curbs in China, which also saw its finished steel exports surge by 9.2% in Q2 FY26. This influx of Chinese steel intensified global competition and exerted downward pressure on international steel prices, consequently affecting graphite electrode demand. However, India emerged as a bright spot, posting a strong 10.5% year-on-year increase in crude steel production, providing a crucial demand anchor for HEG. The company's ability to maintain over 90% capacity utilization in the last two quarters, one of the highest in the industry, highlights its operational efficiency and strong market position amidst these headwinds.

Strategic Vision and Future Growth Pathways

HEG Limited is not merely navigating the present but is also strategically charting its future growth. The company has announced an expansion of its graphite electrode capacity by an additional 15,000 tons, aiming to reach a total capacity of 115,000 tons by the end of 2027. This INR 650 crore capital expenditure project is expected to commence production in the first quarter of calendar year 2028, positioning HEG to meet the anticipated incremental demand from the global shift towards low-emission electric arc furnace (EAF) steelmaking.

A significant part of HEG's future strategy involves its demerger process, which aims to separate its core graphite electrode business from its new energy materials and green technology ventures under HEG Greentech. While the demerger process has taken longer than anticipated, NCLT approval is expected by April 2026. This restructuring is designed to allow each entity to pursue focused growth strategies and unlock greater shareholder value.

Under the HEG Greentech umbrella, the company is making substantial strides in new energy materials. TACC Limited, a wholly owned subsidiary, recently secured a ₹1,230 crore credit facility from the State Bank of India. This funding will support a greenfield manufacturing facility in Dewas, Madhya Pradesh, with an annual capacity of 20,000 MTPA for lithium-ion battery grade graphite anode material. This project is a pioneering initiative in India, aimed at reducing import dependency and building a domestic ecosystem for advanced energy materials, aligning with India's clean energy and electric mobility goals. Revenue from the anode segment is expected to begin flowing from Q4 FY27.

Furthermore, HEG Greentech is expanding its Battery Energy Storage System (BESS) EPC business, with plans to increase its installed capacity from 1 GWh to 6 GWh by Q1 FY27. This expansion caters to both stationary energy storage and mobility applications. The company is also developing an IPP (Independent Power Producer) vertical focused on BESS plus Solar projects, with the first 200 MWh project expected to be operational by Q2 FY27 and an additional 1,000 MW/2,000 MWh tender targeted for commissioning by Q2 FY28. These initiatives underscore HEG's commitment to diversifying its revenue streams and capitalizing on the burgeoning green economy.

Financial Health and Outlook

HEG Limited maintains a robust financial position, being a long-term debt-free company with a treasury size of approximately INR 1,167 crore as of September 30, 2025. This strong liquidity provides the company with significant financial flexibility to fund its ambitious expansion and new venture projects without incurring additional debt. Management expressed confidence in the medium- to long-term growth trajectory, anticipating that the combination of EAF-led structural demand growth and supply rationalization will gradually lead to market stabilization and margin recovery in the graphite electrode industry.

For the new Greentech businesses, management projects that EBITDA should at least double in FY27 compared to FY26 figures, indicating strong growth potential once these projects become operational. The company's diversified customer base, exporting 65-70% of its production to about 35 countries, and its captive power generation capacity of 80 MW further enhance its competitive edge and operational stability.

Sustained Growth and Strategic Clarity

HEG Limited's Q2 FY26 performance reflects a company that is not only resilient in the face of market challenges but also strategically agile in pursuing future growth. By leveraging its core strengths in graphite electrode manufacturing and making calculated forays into new energy materials, HEG is positioning itself as a key player in India's clean energy transition. The significant investments in anode material production, BESS EPC, and IPP projects demonstrate a clear vision for diversification and sustainable growth. With a strong balance sheet and a clear strategic roadmap, HEG Limited appears well-prepared to capitalize on emerging opportunities and deliver sustained value to its stakeholders in the coming years.