💰 Financial Performance

Revenue Growth by Segment

Standalone revenue for Q2 FY26 grew 22.7% YoY to INR 697 Cr from INR 568 Cr. The Manufacturing of Graphite Electrodes segment is the primary driver, contributing 90.45% of total turnover.

Geographic Revenue Split

Exports contribute 66.53% of total turnover, serving 42 international countries. Domestic sales serve 25 states in India.

Profitability Margins

Standalone Net Profit margin for Q2 FY26 improved to 18.8% (INR 131 Cr) from 10.9% (INR 62 Cr) in the corresponding quarter of the previous year. Consolidated Net Profit grew 28% YoY to INR 105 Cr.

EBITDA Margin

Standalone EBITDA margin for Q2 FY26 was 32.4% (INR 226 Cr), a significant increase from 24.6% (INR 140 Cr) in Q2 FY25, representing a 780 basis point improvement in core profitability.

Capital Expenditure

The company maintains a strong treasury of INR 1,167 Cr as of September 30, 2025. Planned expansion includes increasing BESS capacity from 1.5 GWh to 6 GWh by Q1 FY27.

Credit Rating & Borrowing

HEG is long-term debt free. Finance costs for Q2 FY26 were INR 8.92 Cr, primarily related to working capital. Fitch ratings are updated annually to maintain credit transparency.

⚙️ Operational Drivers

Raw Materials

Needle Coke is the primary raw material, with raw material consumption totaling INR 234.10 Cr in Q2 FY26, representing approximately 33.6% of total revenue.

Import Sources

Sourced from global markets to serve a footprint spanning 42 countries; specific country-wise import splits are not disclosed in available documents.

Capacity Expansion

Graphite Electrodes: Currently operating at 90%+ utilization. BESS: 1.5 GWh current capacity, expanding to 6 GWh by Q1 FY27. IPP: Targeting 1,000 MW/2,000 MWh by Q2 FY28.

Raw Material Costs

Raw material costs were INR 234.10 Cr in Q2 FY26 (33.6% of revenue). Needle coke prices have remained flattish between Q1 and Q2 FY26, supporting margin stability.

Manufacturing Efficiency

Maintains one of the highest utilization levels in the industry at 90%+ for the last two quarters, significantly outperforming industry peers.

Logistics & Distribution

Not specifically disclosed as a separate percentage of revenue in the provided documents.

📈 Strategic Growth

Expected Growth Rate

15%

Growth Strategy

Growth will be achieved through volume expansion in the core graphite electrode business (90%+ utilization) and aggressive diversification into green energy via HEG Greentech. This includes expanding BESS capacity to 6GWh and participating in state/central tenders for 2000 MWh IPP projects by FY28.

Products & Services

Graphite Electrodes, Lithium-ion Battery Packs (BESS), Battery Management Systems (BMS), and Energy Management Systems (EMS).

Brand Portfolio

LNJ Bhilwara Group, HEG Limited, TACC Limited, HEG Greentech.

New Products/Services

BESS packs and IPP (Solar + BESS) projects; the first 200 MWh project is expected to be operational by Q2 FY27.

Market Expansion

Expanding into the BESS EPC segment and targeting C&I and B2B segments through state and central tenders.

Market Share & Ranking

Industry leader in capacity utilization (90%+) compared to global peers.

🌍 External Factors

Industry Trends

The industry is shifting toward EAF steelmaking, which requires graphite electrodes. CBAM regulations starting in 2026 will further drive demand for sustainable production methods.

Competitive Landscape

Major competitors have announced plant closures in Malaysia and China due to slow demand, while HEG maintains high utilization and operational resilience.

Competitive Moat

Cost leadership is sustained through massive single-site scale and 90%+ utilization, which allows for superior fixed-cost absorption compared to competitors who are closing plants.

Macro Economic Sensitivity

Highly sensitive to global steel production volumes and the industry transition toward Electric Arc Furnace (EAF) technology.

Consumer Behavior

Steel manufacturers are shifting toward EAF to meet green steel targets, creating a long-term demand tailwind for electrodes.

Geopolitical Risks

Trade barriers such as the 50% reciprocal duty in the U.S. and global demand slowdowns impact export volumes.

⚖️ Regulatory & Governance

Industry Regulations

Subject to international trade tariffs (e.g., 50% US duty) and upcoming CBAM regulations in 2026 for steel-related exports.

Environmental Compliance

Formalized an enhanced sustainability roadmap in FY 2024-25; specific compliance costs in INR Cr are not yet available for reporting.

Taxation Policy Impact

Standalone effective tax rate for Q2 FY26 was approximately 19.6% (INR 31.89 Cr tax on INR 162.89 Cr PBT).

Legal Contingencies

Order CA No. NDL 1374/2025 dated December 11, 2025, was received regarding subsidiary Bhilwara Infotechnology Limited; management states there is no material impact on HEG's financial or operational activities.

⚠️ Risk Analysis

Key Uncertainties

Impact of U.S. tariff barriers on export competitiveness and the potential for prolonged flattish pricing in the global electrode market.

Geographic Concentration Risk

66.53% of revenue is concentrated in export markets across 42 countries.

Third Party Dependencies

High dependency on needle coke suppliers; 100% of key suppliers are being assessed on ESG parameters to ensure supply chain sustainability.

Technology Obsolescence Risk

Mitigated by diversifying into the BESS and green energy sectors to capture the shift toward renewable energy storage.

Credit & Counterparty Risk

Strong liquidity position with a treasury size of INR 1,167 Cr as of September 30, 2025.