HEG Limited (NSE: HEG) Q1 2026 Earnings Call dated Aug. 04, 2025
Corporate Participants:
Unidentified Speaker
Nikunj Pachisia — Executive Director
Ravi Kant Tripathi — Chief Financial Officer
Ravi Jhunjhunwala — Managing Director and Chief Executive Officer
Puneet Anand — Chief Strategy Officer
Analysts:
Unidentified Participant
Amit Lahoti — Analyst
Kirtan Mehta — Analyst
Chirag Pachisia — Analyst
Rohit Balakrishnan — Analyst
Praful Kumar — Analyst
Jatin Damania — Analyst
Saumil Shah — Analyst
Rajesh Majumdar — Analyst
Shashank Kanodia — Analyst
Rohit Aryal — Analyst
Presentation:
operator
Ladies and gentlemen, good day and welcome to HEG Limited Q1FY26 earnings conference call. As a reminder, all participant lines will be in the listen only mode and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during this conference call, please signal an operator by pressing Star then zero on your touch tone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Nikpunj Pachasia from SKP Securities Limited. Thank you. And over to you, sir.
Nikunj Pachisia — Executive Director
Good afternoon ladies and gentlemen. I’m pleased to welcome you on behalf of HEG Limited and SKP securities to this financial results conference call with the leadership team of HEG Limited. We have with us Mr. Ravi Jhunjanwala, Chairman, Managing Director and CEO, Mr. Riju Jhunjanwala, Vice Chairman, along with the colleagues Mr. Manish Gulati, Executive Director, Mr. Om Prakash Ajmera Group, CFO, Mr. Ravi Tripathi, CFO, Mr. Puneet Anand, CSO and Mr. Ankur Khattan, MD and CEO of TACC Ltd. We will have the opening remarks from Mr. Jhunjanwala followed by Q and a session. Over to you Raviji.
Ravi Jhunjhunwala — Managing Director and Chief Executive Officer
Good afternoon friends and welcome to our financial results conference call for the Q1. 2526. Let me begin with a brief overview of the global steel industry trends which continue to shape the demand environment for graphite electrodes. According to the World Steel association, global steel production in the first six months of 2025, calendar year 25 stood at about 934 million tonnes, which is a decline of about 1.9% year on year. 952.4 million tonnes in the corresponding period of last year, indicating a slowdown in the demand across major steel producing economies. China’s steel production declined by about 2.4% primarily due to weaker construction activities there and the government imposed production curbs.
At the same time, its finished steel exports surged 9.2% y o y to 58 million tonnes, increasing global competition and exerting additional pressure on international steel prices. Production outside of China fell by about 1.2% to 419 million tonnes, driven by ongoing macroeconomic headwinds and a muted industrial recovery in most of the countries. In contrast, India remained a standout performer with a 9.2% year on year increase to about 81 million tons in the first six months, supported by our continued infrastructure spending and automotive sector growth. Another large producer of steel, Japan, reported a 5% decline. South Korea fell by 2.8%.
Turkey dropped by 1.7% while United States registered a modest 0.8% increase, highlighting relative market resilience in this kind of a macro environment. Graphite electrode market continues to face challenging conditions during the quarter. The recent imposition of 25% duty in the US an important market for US and the leading consumer of graphite electrodes, is being studied and we hope that this will eventually settle down to some reasonable level as we believe discussions between the two countries are ongoing. However, given HEG’s well diversified sales footprint across all major markets, we would do our best to see that its impact on us is minimal.
On the near to medium term demand, the global transition towards low emission electric car industry making continues to gather momentum underpinned by regulatory actions and decarbonization targets. Electric arc furnaces, which offer a significantly lower carbon footprint versus its traditional blast furnaces, are central to the steel industry’s transformation. The global shift towards electric car furnace steel making continues to accelerate driven by climate goals. This transition is expected to generate substantial incremental demand for our products which is estimated at 150 to 200,000 tons annually by 2030 excluding China, reinforcing industry’s long term growth potential. As per our data, in last two years about 11 million tons of new electric carpenter’s capacities have already been installed in the Western world.
While we expect another 50 to 55 million tons to be in operation by 2027 and added 40 million tons or so between 2028 and 2030. All this totals up to a staggering figure of about 100,000 tons of new capacities which we have never seen before. As you are aware, this is all due to continued focus on lower carbon emission by every country in the world which electric car furnace steel provides. HEG continues to operate at highest utilization levels in the industry despite a stagnant demand. Last quarter we operated at 90% plus and in this background we have to remember that this 90% on our newly expanded capacity of 100,000 tons.
Our single location, a large production base combined with the competitive cost positions us as one of the lowest cost producers globally. Despite market challenges, we remain confident in the medium to long term growth of our industry. The combination of electrical furnace led structural demand growth, supply rationalization by some other industry majors in the world and current unsustainably low prices. Low price levels should gradually lead to market stabilization and pricing recovery. Considering all these, we have recently announced another expansion plan. We increase our existing capacity from 100,000 tons to 115,000 tonnes which will require a capex of about 650 crores to be completed in two and a half years from now with expected production in January March 2028 which will help us to further reduce our costs and increase our market share.
Regarding demerger, the scheme is filed with stock exchanges and all other relevant authorities after which it will go to NCLT and we do expect to get NCLT approval by end of the calendar year 2025. With this I would now like to invite our CFO Ravi Tripathi to present the financial results for the quarter and along with our Vice Chairman Viju, Executive Director Manish and Chief Strategy Officer Puneet, we’ll all be very happy to answer your questions about Electrode business as well as other diversifications which are under implementation. Thank you.
Questions and Answers:
operator
Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on the touchpoint.
Ravi Jhunjhunwala
We had to speak before that.
Ravi Kant Tripathi
Thank you sir. Good afternoon friends. I will now briefly take you through the company’s operating and financial performance. For the quarter ended 30 June 2025. For the quarter ended 30 June 2025, HEB recorded revenue from operations of Rupees 613 crores as against 571 crores in the corresponding quarter of the previous financial year. During the quarter ended 30 June 2025 the company delivered EBITDA of Rupees 154 crores as against 59 crores in the corresponding quarter of the previous year. The company on a standalone basis recorded a net profit after tax of rupees 72 crores in Q1FY26 as against 3 crores in the corresponding quarter of the previous year.
And on a consolidated basis the net profit after tax is rupees 105 crore in Q1FY 26 as against 23 crores in the corresponding quarter of the previous financial year. The company is long term debt free and had a Treasury size of nearly 977 crores as on 30th June 2025. Now to take out more questions from the Buddhist friends. The detailed presentation has been uploaded on the company’s website and on the Stock Exchange. Now we would like to address any questions or queries you have in your mind. Thank you. Over to Naveen. Over to Nikuj.
operator
Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on the Touchstone Telephone. If you wish to remove Yourself from the question queue. You may press star and two participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Manit Lahoti from MK Global. Please go ahead.
Amit Lahoti
Thanks for the opportunity and congratulations on a good set of numbers. My first question is on our expansion plan of 15,000 tonnes. So given that there were capacity curtailments globally, so there must have been an option to acquire something for cheap valuations. But we have decided to expand capacity that comes with a time period of two to three years. So if you could provide some color in terms of the thought process that has gone behind in making this decision to build instead of going inorganic.
Ravi Jhunjhunwala
See, we obviously looked at all these opportunities that you are talking about and yes, you are probably aware one of the two major producer, international producer, has formally announced that they are wanting to exit this business. So while we are, we are pursuing this, we are in contact with them, we will probably, at the right time, whenever they are ready, we’ll probably go look at the plant and then take a view. But our gut feeling has been in the last 20, 30 years that these opportunities were available to us even in the past. And as you know, most of the other graphite production happens in all the expensive countries of the world, basically Japan, Germany, France, Spain, Italy, us.
So with the cost structure that we believe that they have, and most of these are listed companies, so a lot of data is available to everyone to see. So we believe that it is still better to spend two and a half years and to build more capacity in our own country where our costs are significantly lower than if we were to acquire any plant in any western world. First of all, these plants are very, very, very old. I mean, to my memory, probably the last plant which was built, some of these plants which are currently on the block, probably the last one would have been built 60, 70 years ago or at least more than 50 years ago.
And they have not done much in those plants. So it probably doesn’t make sense to acquire a very old plant in a European or a Japanese or an American economy where obviously the costs are much higher than ours. So in the long term we looked at all the permutation combinations and we again came to a conclusion. And secondly, it’s not easy. I mean, even if you start looking at some possibility today, it’s a very long drawn process. I mean it will take at least 6, 9 months, 12 months to even conclude that deal. So when we are more or less certain that expanding in India at the existing site gives us a much more competitive edge while we will look at it.
But in the last 2015-25 years we have looked at all these opportunities and we have stepped back and expanded here. So we didn’t want to waste another 6, 9 months, 12 months and then come to that conclusion. But of course, so long as we are amongst the cheapest cost producer which we are based in India, we’ll continue to look at that opportunity. Nobody stops us to acquire one of the good plants which is on the block even after expanding. 215.
Amit Lahoti
Okay, understood. And does this capex that we have announced of 600 crores, does it include captive power plant as well or we will continue to procure from the grid?
Ravi Jhunjhunwala
No, we have always continued to buy the power from the grid. We don’t have any captive power plant. We had, we had built it long, long back but as we formally announced long ago, we had closed that down maybe more than 10 years ago.
Amit Lahoti
Okay. And lastly, just a housekeeping question. How much was the production volume in Q1?
Ravi Jhunjhunwala
In excess of 90%.
Ravi Jhunjhunwala
Yeah, as I said, we operated at more than 90% last year, last quarter and we are more or less in that same range. Maybe a couple of percentage plus and minus.
Amit Lahoti
Okay, noted. Thank you and all the best.
operator
Thank you. The next question is from the line of Kirkhan Mehta from Baroda BNP Paribas Mutual Fund. Please go ahead.
Kirtan Mehta
Thank you sir, for this opportunity. Would you be able to share your assessment of the demand supply balance outside China and what would be the average utilization level at this point of time? That was the first question.
Ravi Jhunjhunwala
Okay, shall I answer, sir?
Kirtan Mehta
Yeah, go ahead.
Ravi Jhunjhunwala
Yeah. So it’s ex China. We can safely say that electric arc furnaces most of the world is between 70 to 75% utilization as a total.
Kirtan Mehta
I was actually referring to the utilization of the graphite electrode plant as an industry outside China.
Ravi Jhunjhunwala
Okay, okay, okay. Sure, sure. See some we hear what you hear from the peer group. I mean one of them said they were at 65% in the last quarter and others would be from. I mean it’s all market hearsay. Only one of them provides a number rest of them do not do that. I believe the others would also be at a level of 60%. I would say one of them is clear because you can, you know whom I’m referring to. That was 65 and others would also be in that same range 60 between 60 to 65.
Kirtan Mehta
As a follow up. Typically we have seen the pricing sort of flexibility returning whenever the industry utilization level goes above 80% or so. So how far we are away from the situation and addition of our plants, would it sort of delay that positioning or keep the market oversupplied for few more years? And one more related question was in the US now the duties has been increased. So could it lead to the start of any of the US plant?
Ravi Jhunjhunwala
Yeah, see first I’ll answer the second question. US makes about 72% of the steel from the electric arc furnace route. So their utilizations, I mean I would. I was reading a paper, they were around 75% in US and the other question, I just missed the other question.
Kirtan Mehta
In terms of the US Basically do we see a risk of restart of any graphite electrode plants which could add supply.
Ravi Jhunjhunwala
Okay, understood. So you see the electrode in US particularly the plants which there’s no risk of restart in the sense because there’s no nothing on the ground other than the ones which are running. There’s one, one. One competitor’s plant, the two, two Japanese and their plants are on the ground and running. The one, one of the other competitor which was mothball I think runs partly or something. Whatever you have from their public documents, maybe some half of the operation is going on some machining or something. So there is no other plant other than these two which are already operational which could come up in.
In US per se. And there’s one more graphite plant in Mexico and that’s also running plant. So there’s nothing we can see that there’s some close plan which will come up other than the one small plant I refer to which runs half of it, half of the process. Well, let’s value our advance.
Kirtan Mehta
Understood, sir. And the first question was about basically as you are noting that the industrial utilization is in the range of 60 to 65%. We have announced capacity expansion of 15kt. Our Indian competitor has announced also the capacity expansion of another 25kt. So will this supply addition delay utilization level improving in the industry and thereby keep the prices under pressure for few more years? Would you see that possible?
Ravi Jhunjhunwala
I’ll answer that. I mean in my opening remarks I clearly see said that X amount of new electric car finances have already started production in the last two years. And in the next four, five years we believe that about 100 million tons of new electric car furnace capacities are being added all over the western world. We are not talking of China. And this is the first time in the history that most of the large steel companies around the world and it actually includes every country which produces steel not selected. Some countries, they are stopping their blast furnaces and converting them.
Not converting them, but they are replacing them by electric arc furnaces. Only because of the carbon emission. The electric earth furnace steel emits about 20, 22% of the carbon compared to the same steel produced by the glass furnace. So given the sensitivity of the subject of carbon emission, now about 100 million tons of new electrical furnaces are coming up somewhere in the world, in the western world, out of which about 1112 have already come in 2025, are coming within the next year, within this year and next year. And in total we do have a list of about 100 million tons.
So this 100 million tons will add demand for 150 to 200,000 tons of electrodes. And in the backdrop of this demand increase of 150, 200, 200,000 tons. Of course this will take some time. It’s not going to happen overnight, but it has started happening. New electric arc furnaces are already operational, they need more electrodes and new ones are coming up every two months, every three months, every six months for the next three, four years. So the demand is likely to go up. Supply on the supply side, as you probably have seen, as we have seen, some capacity closures have taken place in the last two, three years in Europe and in America.
So the total capacity which used to be on the ground two, three years ago has substantially come down and some more are in the offing. So, and of course, I mean whatever I just said is very important, but as I also started off by saying that we believe we are the lowest cost producer of the graphite electrode anywhere in the world. So that gives us a fitting advantage. And if we increase the capacity, when we increase from 80 to 100, we practically didn’t increase any fixed cost. And when we now increase from 100 to 115, of course there will be some increase in fixed cost, but it will be nowhere in the region of proportionate increase.
So at a marginal increase in capital, in running cost, in production cost, if we are adding more and more capacity, it adds to our competitiveness, it adds to our bottom line.
Kirtan Mehta
Understood sir, quite clear. One last question was about we have around 10% stake in Graphtech, so what would be our ambition there and how do we plan to develop further there?
Ravi Jhunjhunwala
So our intention when we started buying, and we clearly mentioned it in the last couple of calls, our intention is simply the share price. And as we have explained in the past, Graphtec happens to be the only company in the graphite business. Which has a backup of their own raw material needlecork. And as we are very bullish about the graphite demand, graphite electrode demand. So Simon Real Estate there will be demand for additional needle coke. And Graphtec happens to be the only graphite company which has a substantial backup in terms of backward integration of coke.
So when the electrode prices are rising on the backup, on the background of demand, the needle coke prices also go up. So when that happens, that will be the only graphite company which will have a twin advantage of increased prices of coke and increased prices of electrodes. And when we took this decision to buy a bit of Graphtec shares on that day about 9, 10 months, 12 months ago was unreasonably, it was probably one third of ours. It didn’t justify the kind of market cap they had with practically double the capacity of electrodes plus a backup of their raw material which nobody else has.
So in the backdrop of what we expect the demand of electrodes to grow, needle cook demand to grow. We took a view that it’s a very safe bet.
Kirtan Mehta
Understood. Thank you. It’s quite clear.
operator
Thank you. The next question is from the line of chirag Pachisia from SKP securities. Please go ahead.
Chirag Pachisia
For the new 15,000 ton. 15,000 ton per annum expansion has a. Lower capex per ton than your previous phase. So what key factors are wearing this? Improved capital efficiency and can we expect similar cost advantages in the future expansion?
Ravi Jhunjhunwala
Yeah, you see, you rightly notice that it’s less than before. See the last expansion was unique in its own way because we wanted a totally different facility to make nipples which are the critical part along with the nickels. Now here what we are doing is this 15,000 because now we have ample nipple capacity. So the investment in the last project was higher. And another thing is that now we have a big hundred thousand ton plant and we have an opportunity that there are one or two shops where one or two processes where the capacity already exists to some level.
That is why we just streamline all our processes to make all equal into that 115. So we will end up saving some money here in this to have a synergy with already 100,000 ton plan. Because there are six different processes. So one of the processes we already had that capacity. So that is how we save money.
Chirag Pachisia
Thank you sir. That’s all for me.
Ravi Jhunjhunwala
Thank you.
operator
Thank you. The next question is from the line of Rohit from I thought pms. Please go ahead.
Rohit Balakrishnan
Am I audible, sir? Yeah. Good afternoon. So just two, three questions. One was sir, in terms of Realizations. So I think you had mentioned last all that the capacity parts that have happened are yet to sort of. It takes time for them to get materially, I mean get sort of to optionalize. How do you. So now that probably they would have gotten operationalized or more closer to getting operational. How do you see the realization happening now, let’s say in the coming year? Any thoughts on that?
Ravi Jhunjhunwala
See, you have seen the steel production figures. See, graphite electrodes is a derived demand for every ton of steel made. Let’s say it consumes 1.5, 1.6 kg per tonne. So this steel production, you know the geopolitical situations. For the last two years steel has been stagnating. But you know what is happening now is of course it is not going to continue like that forever. So even the existing electric arc furnace capacities are underutilized at a 75% level. The moment see electric arc furnace is a start and stop operation. The plant manager decides in the morning how many heats I can make today either works or it doesn’t work.
So electric arc furnaces work both ways. They are very quick to ramp up their production and very quick to adjust also. So once the steel production, once we get out of this geopolitical situation going on. And of course this is in addition to the new electric gas furnaces which are coming. So we believe the prices is just a factor of demand. The moment all industry capacity utilizations of graphite electrode industry crosses 80, 85% then of course there’s farming up of prices. So we are little away from that maybe takes 2/4, 3/4, I don’t know. But yes, every electrode company in the world needs the price to rise because it’s an unviable price to work on.
We’re just keeping ourselves afloat just because of our size and being at one location and being a lower cost producer otherwise so forming of prices, I don’t know what is the timing, maybe two more quarters. But it should happen because this is. We are at the lowest end now.
Rohit Balakrishnan
Okay sir. And we mentioned a bit about Xtina but some Chinese industry also not specific to ours, but others that they also want to cut capacity or sort of non potential pumps, extreme price war kind of a scenario. So are you hearing anything, any signs that you’re seeing for our industry in the Chinese, in the Chinese market as well or nothing of that sort. Are you hearing there?
Ravi Jhunjhunwala
First of all, we are not supplying to China and whatever you have heard about their internal electrode capacity is being close. Let me, let me say this, that China Has a huge capacity of making electrodes huge. And there’s a huge exporter also all over the world. But most of the exports which they are going are for the ladle furnaces which we call the HP variety or the non UHP variety that forms the lion’s share of their exports. So what is happening inside China? Probably the electric gas furnaces which were projected to be 30% of their production is not 20 still.
So they’re going, they’re running behind their own schedule. So it’s very difficult for us to comment what is exactly happening inside China because there are only five or six integrated companies and rest are one process shops. So who’s closing capacity where? It’s very difficult to comment.
Rohit Balakrishnan
Okay, last question was on investment in draft which you outlined to the previous participant. So I mean given that one, you outlined your thesis before as well. But they also have a like they also have a large portion of debt which refinance or not refinance that they’ve gotten some extensions on the. Given that the debt that the fact that they have debt and they have interest payments as well. How do you view that for doing dedicated over time than all of us anticipate. So how do you view that as a risk to that investment? Whatever you can share.
Ravi Jhunjhunwala
Yeah, so see, you’re Talking about that one, one short debt payment of $900 million, something which is now payable after the rescheduling. It’s now payable in December 2020. Now you see with the things with the new years coming up and the expectation of steel production at least from next year to start increasing, I think that 27, 28 or 28, 29 should definitely be good years and they should be able to repay some of the debt. And of course and these scheduling possibilities always there when the industry looks good. So I think we still have three more years to go.
I think should be fine. There should be a turnaround in that time frame when the steel production also goes up. The new electrical fund has also come up, prices get firm up. There are enough margins to pay off the debt. That’s what we think. So we think our 10% stake is very much safe.
Rohit Balakrishnan
Thank you. That’s all from my side.
operator
Thank you. The next question is from the line of Praful from Diamond Asia. Please go ahead.
Praful Kumar
Hi, good afternoon gentlemen. Couple of points. When you say America as a region, does it include other geographies like Canada, Mexico, what does it include?
Ravi Jhunjhunwala
About 8 to 10% that we sell to America is USA. We are not including Canada. And that Mexico.
Praful Kumar
Okay. Okay, thank you, Ravisha. And any middle ends in terms of, you know, that you guys are working on for minimizing the impact in terms of procurement or any other levers that you guys have as management to use.
Ravi Jhunjhunwala
We have heard of a couple of options wherein by importing some raw material from us, the duty gets adjusted. But it’s very, very new. I mean all these things have just come up in the last three, four, five days. We are in the middle of studying all that and we are probably going to take some legal opinion before we come to a conclusion. So I really can’t tell you anything more than that at this stage.
Praful Kumar
Fair enough. Sir, recently on Graphtech earnings call they mentioned that the realizations from 3800 odd USD per ton is upward of 4200 for them. How does it work generally? You know, it’s a similar pricing all over the globe. You know that people follow or they can be different. So how does it converge over time? And they’ve been guiding very bullishly on, you know that all the electric arc furnace guys, given 73% of us is in electric arc furnace production, are very happy with the price hikes because they want the industry to thrive and do well from here given the nature of the industry today.
So how does it work for us?
Ravi Jhunjhunwala
I’ll answer this by saying that pricing is different in different markets for this product. The pricing is different in US pricing is different in Japan, pricing is different Middle east and different in Southeast Asia. So it varies. So of course since we are in US and since with these help of tariffs, etc. They will of course enjoy that protected marketplace. So that’s what they might be feeling upbeat about because that’s one market which is high higher rate of electric arc furnaces. So of course in that market where pricing is already elevated compared to other markets which are much more competitive, so they must be getting that additional price increases.
And typically we have seen in the. Last, in the last many, many years we’ve also seen that America, American customers tend to pay a slightly higher price if they are happy with the company. If they are happy with the quality, they’re happy with their consumption after sales.
Praful Kumar
Ravi? Sir, I wanted to broadly get the trend of realizations in terms of trend, I don’t want to pick up a quarter. But broadly the trend how the realization trend given that one of the biggest players in the industry has indicated a 10% Q on Q realization jump and he’s saying that customers have absorbed it very well. So broadly I want to understand the Trend of the realizations for you. That’s all.
Ravi Jhunjhunwala
Yeah, go ahead. As chairman said that only about 10% of our sales goes to us and 90% is other than us and which is Middle East, Southeast Asia, Europe, everywhere. So that price trend which they are talking about, the 10% we are not seeing that happen much in other areas, regions maybe slightly here and there but in some customers, some, but not generally. I cannot say that it’s 10% we are getting everywhere in Middle east and in Europe or in Southeast Asia. So US of course when the moment you have tariffs that gives them an opportunity today’s prices.
Praful Kumar
And in terms of EU.
operator
Sorry to interrupt you but I may.
Request you to rejoin the question queue for follow up questions.
Praful Kumar
Okay, thank you.
operator
Thank you. The next question is on the line of Jatindamania from Swan Investments. Please go ahead. There’s an echo from your site. Could you go to better reception area or better area where there’s no echo?
Jatin Damania
Now it’s clear.
operator
Yes, this is much better.
Jatin Damania
Yeah. So just on the previous participant questions in terms of testing during Gen we have seen the broad based increase in the graphite electrode realization but and we know that China is not that a big competitor for us given the technology and the quantity that we are using it. So there could be some amount of benefit that should come to HEG or the other domestic players who were into uh and HEB specific So by when one can assume that there could be a benefit of the realization that was taken place globally could beneficial for us.
Ravi Jhunjhunwala
I think for us. I was just looking at the pricing which you mentioned for the January quarter in April to June quarter this is just about the same a very slight increase in what we saw in April to June at the same level and about when we see the firming of our price we have to wait. We have to wait till the steel production turns around and shows some healthy increase and as I said, yes will be the first one to capture the opportunity because they just decide in a matter of days that when they have to wrap up production maybe takes two quarters or more.
But I can only say that our feeling is that this is about the lowest it could get. But at this point the inefficient plants start to close down which you have seen so it cannot go below this. So now how long it takes, it’s anybody’s guess, 2/4, 3/4. But there should be some farming of a price which is dependent on how steel production does in the rest of the world. Next, China. One more point. Rather than only talking about the price and the price increase if you talk about the margins probably that is more relevant. I mean the costs have also been pegged when the electrode prices are more or less at the same level they’re very, very slightly going up in some regions, going up in some regions not going up. So the impact is not visible. But directionally everybody believes in the industry that probably we have reached the bottom but then you also have to look at the cost. The costs have also not gone up which means the raw material prices, power prices, all other costs have not gone up in the last couple of years and we have a slight advantage that now we are able to sell another 15 17,000 tons within the same fixed cost.
Jatin Damania
Sir, thank you for the detailed answer. But now since as you mentioned that even the cost I mean has not gone up so can you throw some light in terms of how do you see a supply of hidden cope in the near to medium term and the cost dynamics for the same?
Ravi Jhunjhunwala
It’s impossible for anybody to answer that question. I mean it all depends upon what is the demand for electrode and the demand for needle coke which is our raw material depends on that. There are only few suppliers so every information is available to everybody. So when obviously when the electrode prices will start increasing the needle coke prices will also follow. It’s only a matter of time.
Jatin Damania
Okay sir and in terms of the capex that we announced that now we are moving from 100 to 115 at a estimated cost of near about 650 crores without our power but at the same time one of our computers also announced the expansion of 25,000 tons of capacity with a capex of 600 crores which includes the power. So just wanted to understand because if you look on the per ton basis we are on the higher side. So is there any change in technology or the different or you can probably answer why we are on the higher side.
Ravi Jhunjhunwala
Okay. We can only speak about ourselves, we can’t speak about somebody else. I mean I don’t know what we are doing and how they are doing. Only thing I can only tell you is that I mean we will not compromise on the equipment, we will not compromise on the cost of the equipment, we are only focusing on the quality.
Jatin Damania
Okay sir and what sorts of IRR or the payback period we can.
operator
Sorry to interrupt sir but I may request you to reach as a coach.
Jatin Damania
It’s a follow, a follow up questions so just on the IRR one can establish on this the new capex.
Ravi Jhunjhunwala
Let me.
Puneet Anand
Hi. So we are expecting in a double digit IRR on this and the payback is around lower than within four to five years.
Jatin Damania
Yes, sir. Thank you. That’s all from my side. All the best.
Puneet Anand
Thank you.
operator
Thank you. Ladies and gentlemen, in order to ensure that the management is able to address questions from all participants in this conference, please limit your questions to two per participant. The next question is from the line of Soman Shah from Paris Investment. Please go ahead.
Saumil Shah
Yeah, hi. Congratulations on that set of number. So for this quarter gone by, our capacity utilization was 90% of plus. So I mean, what’s the outlook for the remaining year? Do you, do we see our capacity utilization going up further from you?
Ravi Jhunjhunwala
I would say that 85% maybe. I’m sorry,
Puneet Anand
go ahead, go ahead.
Ravi Jhunjhunwala
So I would say that this quarter was 90% plus for the remaining quarters. Three, as we book quarter by quarter, it’s very difficult to answer for more. More than 1 quarter at a time or 2 quarters at a time. I think should be around 85% in the region of 85% for the balance 3 quarters.
Saumil Shah
Okay, okay. What is the reason for our. I mean, margins are fluctuating every quarter. I think it’s. You’re mentioning there is a mark to market profit or loss for GraphTech International. So I mean, how can we look at EBITDA margin for next 1 2/4?
Ravi Jhunjhunwala
That mark to market ends up confusing a lot of investors. But if you take it out, our EBITDAs will be very similar in the last two quarters and are likely to stay that way in the July to September quarter as well. So. But what confuses people is that mark to market, sometimes there’s a drop in price and sometimes decrease in price. So, and we always mention in the notes, if you just take that out and so you will know this quite stable EBITDA levels operationally.
Saumil Shah
Okay, but then why do we do it every quarter? Can’t we do it every year? I mean, once in a year.
Ravi Jhunjhunwala
So that, that’s what India is and that’s what auditors tell us. You have to do it every quarter. That’s the rule.
Saumil Shah
Okay, okay. And so once we remove it. 17%.
Puneet Anand
Yes.
Ravi Jhunjhunwala
No, no,
Puneet Anand
that’s right.
Ravi Jhunjhunwala
I have, I have a. No, no. I have a sheet in front of me for the EBITDA which obviously talks only about the operational ebitda. It doesn’t have to be do anything with the. Whether you made money or lost me or the investments and all that. Now the bit in 2223 was 28%, 2324 was 21% which dropped down to 17% in 24, 25. So immediate, immediate previous year was 17% and this quarter was about 23%. So 28, 21, 17, 23. So this has been the trend.
Saumil Shah
Okay, sorry. This was saying, this you are saying after I’m excluding This mark to market 23 for previous quarter.
Puneet Anand
So this is, this is including the mark to market.
Ravi Jhunjhunwala
This is including.
Puneet Anand
Yeah, this is including mark to market gain loss.
Saumil Shah
Okay. So without that it will be what, 17%.
Puneet Anand
Yeah, without this 17%.
Saumil Shah
Okay. Okay. And for my final question, sir, wanted to know more on the Greek business. So what’s the current revenue and margin and how much can we scale this business in next 12 years?
Puneet Anand
Can you repeat your question please?
Saumil Shah
I wanted to know more on the HEG Green Tech, your anode business. So what’s the current revenue and margin in that business and how much can we scale this business in next 12 years?
Puneet Anand
So on the HEG green tech thing, like, like we have already told, we are setting up the anode plant there, 20,000 ton that will be operational by March 27th. And you can see the revenue after that. Today if you ask me, there are two revenue streams from the HEG greenpack platform. One are hydro assets which are, which are in Himachal. And secondly our best company which is RE plus both of these companies are generating the revenue. So for the FY26, you can see consider a revenue of say 5 to 600 crores plus a beta of around 200 to 225 crores in this.
So apart from this there are the other businesses which we have actually announced in HG Green Tech will take some time and we feel that by FY28 the other businesses will commence and then we will see the actual revenue and the EBITDA there.
Saumil Shah
So basically the quarter gone by, even this will. This is including this green tech business.
Puneet Anand
So the quarter gone by only includes the hydro because today like the HEG owns around 40% of the equity in this. Of course the infusion by the singularity in the bel, once the company gets merged and the HEG graphite business gets demerged then only you will see the exact revenue and the profitability from the HEG Green Tech side.
Saumil Shah
Okay. Okay, Understood. Thank you. And all the best.
Puneet Anand
Thank you.
operator
Thank you. The next question is from the line of Rajesh from BNK securities. Please go ahead.
Rajesh Majumdar
Yeah. Good afternoon sir. And thanks for the opportunity. So I was wondering that after a long time we are seeing some capacity announcements by the Indian companies in graphite electrodes. Is it fair to assume that this is coming from the needlepoke availability, from the capacity closures in the world. And just second part of the question is the capacity closures are in the region of 100 to 120kt, and the capacity increases around certain region of, say, total 40kt, including UN graphite. So does that mean that there will be ample availability of needle coke in the future for at least the next three to four years to kind of avoid a large spike in needle coke prices? That was the first question, sir.
Ravi Jhunjhunwala
I don’t think we can give a very clear answer to that. But yes, what your calculations are more or less in the ballpark that over the last two, three years, some capacities of electrodes have closed down in the Western world. So obviously to that extent there is excess needle coke available. This will also have to be seen whether some of these capacities of electrodes which were closed down in the last two, three years. As I said in answer to some other question earlier, there are all these plants which were built before heg. I’m not even sure if any plant was built within five or 10 years just before Heg came in.
So most of the European and Japanese plants will be like maybe 60, 65, 70 years plus of age. So I’m not able to answer that question very clearly after having closed down the plants, whether some of these equipments have been derailed, they have been taken away, maybe at some plants they’ve removed everything and started using it for real estate, as we heard about three, four years ago in one of the plants in Germany. And, you know, after closing a plant which has been in operation, which was built 60, 70 years ago, and after having closed for two, three, four years, whether it is as easy as it looks like that you go one day and restart suddenly and starts operations.
So these are very, very vague questions to answer. Nobody has the correct answer to that. Suddenly, electrode demand was to shoot up by 30, 40, 50, 100,000 tons. So obviously there will be a clamor to restart some of these plants. Now, which plant will be in what condition that day and at what cost would you be able to restart? Not just the restarting cost, but the cost of operation operating that plant. That plant was closed in the last two, three years because it was not viable. So it will become viable to restart that plant at a cost.
Obviously, the cost means the electrode prices will have to go up to justify restarting the plant and whether you can restart that plant in 6 months, 9 months, 12 months, 2 years, this is anybody’s guess. As I said, most of these plants are more than 50, 60, 70 years old. So it’s a very difficult question to answer. Each plant will have a different story.
Rajesh Majumdar
That’s fair. Actually my other question was that because of the tariff war that we are seeing from us Japan on Chinese electrodes, is it fair to assume that there’ll be price pressures at least in the HP side of the market for a considerable period of time, at least in the near term. Because obviously that Chinese exports, I don’t know what the figure is for the first six months. Perhaps you could share that as well. Is it going to put some pressure on the pricing at least on hp?
Ravi Jhunjhunwala
No, I don’t think if you’re talking of the lower grade, what you call HP and not uhp high power and ultra high power. So there with the situation that Europe and America has created for China, Manish will tell you by probably in one case the duty is as high as 100% in some countries, Europe or America, I don’t know. But in both these countries Chinese electors are facing huge amount of duties. I mean in India it’s only 20, 25% which beat. It is very possible that there is some negotiation going on. But Manish, you remember just 93, 94% in one country.
Is it a nice. Recent in Japan 93.5%. And in US depending on the supplier it was as high as 159%. And plus the 25% we had to put extra. So I can answer Rajesh’s question. You see this HP pricing has always been competitive and we have been I think comprises about 35% of our business. And even earlier also, it’s not about today, earlier also because of Chinese low priced HP grade products, their margins have been always lower compared to the ultra high power grade. So that remains competitive. Nothing has changed there. It still continues the same way. We have to.
We have our own set of customers, we have our own country, India where the people buy whosoever buy electric arc furnace electrodes from us also tried and dilated from these electrodes from us. But so that competitiveness is there, we can’t help it. It’s not something new which has happened there for years since China developed excess capacity of graphite electrodes in the HP grade.
Rajesh Majumdar
And is our export domestic ratio still at 70:30 or has it changed anything?
Ravi Jhunjhunwala
It’s the same. It’s the same. It’s not changed. It’s around 7030 only.
Rajesh Majumdar
Okay, thank you.
operator
Thank you. The next question is on the line of Shashank Kanodia from ICICI Securities. Please go ahead.
Shashank Kanodia
Yeah, good afternoon sir. Just wanted to check what would be the Capex outlet for this year and next year. Given that we are heavy on the Anode side. The expansion electrodes as well as some maintenance capacity supposed to be spring. Secondly, how do you plan to fund it through? You know, do we see a interim debt on the balance sheet? Because that will be kind of a Brazilian and stuff. So if you can guide on the Capex and the funding of the same.
Puneet Anand
So. Hi Shashank Puri done in this slide. Shashank, the capex of Anode is already been mentioned before. So there is a capex of between 1800-1900 crores for a 20,000 tonnes for which the HEG has put 750 crore of equity. And the rest we are doing the financial closure for this expansion which we are planning which will be done in next two, three years. This will be done through internal tools plus some loans since generates cash. So. And our money will go in the phase manner. So we will be planning it. And someday.
Shashank Kanodia
So this year could we see a thousand crores of cash outflow on the Capex part Anode and Gripet all put together this year and next year.
Puneet Anand
Yeah, yeah. Easily, easily.
Shashank Kanodia
So 1000 capex, right? For both the things put together.
Puneet Anand
Like I said, the plan of Anode is going full fledge. And the capex and machinery order has already been started. So I think it could also increase.
Shashank Kanodia
Okay. Okay. And interim equals should have some debt on the books as well side incrementally. Because the cash flows are hardly 300 crores per year. And you have some amount of liquidity on the balance sheet as well.
Puneet Anand
Right. So the in family. Yes, we will be. We are raising the. We are doing the financial closure for the anode project that is undergoing for the expansion. We are already have started the paperwork and all sorts of so entering. We will be having certain data.
Shashank Kanodia
Sure sir. Thank you so much and wish you the best.
operator
Thank you. The next question is from the line of Rohit from Marshmallow Capital. Please go ahead.
Rohit Aryal
Thank you for the opportunity. First off I would like to thank the management. Your calls are always very educational. My question is basically a follow up on what the chairman said earlier on Graphtech. So you mentioned that around 10 minutes back when we bought it Graphtec was around 1/3 the market cap of HED itself. And that’s why the purchase made sense. And today if I see I think graphite is 1/4 the market cap. And so when you allocate capital to graphite Electrode capacity. Right. You chose to expand over, let’s say increasing further stake in Graphtec.
So for the $70 million that we are putting out, we could have bought maybe 50, 40% addition in Graphtec. So how do you take the decision on expanding capacity or 15, 20% of Graphtec is sort of equivalent to getting an additional 30, 40,000 tonnes capacity. Right. So how do you make the decision? And why not have more capacity in Graphtec instead of doing a organic expansion.
Puneet Anand
So. Hi Rohit Ji. Puneet, I’m on this side. I’ll take this thing. So Rohit Ji, see since if you see the history of heg, he never invested in equity. The investment in Graphtec is because we understand this business. But that doesn’t mean that we put all our eggs in one basket. So when we are doing an expansion, that is a core business of HEG and we are positive about that. Secondly, if you like our chairman already discussed earlier, also there is a huge cost difference between Graphtec and cost of production. So the graphics share is only for investment purposes which we will keep.
And whenever we feel there is a substantial profit we are making for the shareholders, we will exit. But business we are doing for a longer duration and we will do the expansions. And just to add here one more thing. So the shares which we have bought, these are bought under OPI route which doesn’t allow us both beyond 10%. And the management is not of any opinion to change it into the odi if, if we have any change in the investment decision that we will discuss with the board and will inform the investors.
Rohit Aryal
Okay. So there’s some sort of a regulation which sort of restricts us for going beyond 10 at this point in time as well.
Puneet Anand
Yes. So Indian companies are only allowed to do two routes. We have taken the OPI route.
Puneet Anand
Understood. Second opposing question on Graphtech, it’s sort of a follow up on a previous participant at least. If I see the last year’s annual cash flow they have generated an operating loss catch loss of around 100 crore. And their available liquidity is around 300 to $400 million cash loss, 90 to $100 million cash loss against the available liquidity of around 300 to $400 million. And I understand there are covenants around the liquidity also because they’re coming off some working capital as well, a line of credit there as well. So I mean while I think Mahesh sir did mention that over the next two, three years we should see upturn but given the available liquidity covers their cash flows, if you just take the last cash flows only for three, four years.
Isn’t there a risk? And in that context wouldn’t debt have been a better option to go for instead of equity? So here I’m sort of contradicting my first question. So in that context it wouldn’t have been better to expand capacity further here. Why go for Graphtech at all given this possible bankruptcy, given the cash flow loss that they have last year and if that is analyzed we you can see them getting bankrupt in two, three years.
Puneet Anand
So Rohit Ji, what’s your question here? I didn’t understand your question.
Rohit Aryal
No. So do you see the operating cash loss last year is around 90 to 100 million and the available liquidity I believe is around 300 odd million. So they seem to have Runway only for three years. So how do you think of that risk there given that some amount of liquidity is coming from line of credit which has governance attached to it.
Puneet Anand
So I can discuss only things which I know through the announcement done by graftech. We are not privy to any other information from the management directly. The thing is that we are positive about turning of this business in next few quarters also and it might turn very swiftly. So yes, there is a risk that 25 million every quarter they are burning and they have a 300 million of liquidity there. But also they have certain lines of credit which they can also withdraw if they need money. So this 900 million of debt which is there, it was during 27, the creditors actually extended it to 29 plus they have given them the additional lines also if it is required.
But we are hopeful that in next two, three years and three years is a very large period of time. We are very hopeful that the entire industry will change the kind of new EF plants are coming. So we feel that the pricing and things will change.
Puneet Anand
Understood. Fair enough. I mean this was very helpful. Yes, sorry.
Puneet Anand
We always evaluate our investments and diligently and see from the risk perspective. So whenever the management of the board of director feel that it is going on a different route. So we will take the call that day.
Rohit Aryal
Yeah, understood. Fair enough. I mean this is very helpful. Thank you so much for the opportunity. I’ll get back in the day.
operator
Thank you. Ladies and gentlemen, on behalf of SKB securities and HG Ltd. Thank you for attending the HCG quarterly con call for Q1 26. I now hand the conference to Mr. Jindinwala for closing comments.
Ravi Jhunjhunwala
Thank you friends and as always. I. Hope you’ve been able to answer most of your questions. May not all of them may not have been totally to what you expected, but under the circumstances that we are talking publicly, we have to be reserved in some cases. But we have always been trying, we have always tried to be as open as possible to the extent that we can be in the public domain. So I thank you for all your interest. Probably the longest call. And I hope you keep taking so much of interest, which will make us more and more and more alert.
Thank you.
operator
Thank you. On behalf of HEG Lim, on behalf of SKT securities, that concludes this conference. Thank you for joining us. And you may now disconnect your lines.