HEG Limited (NSE: HEG) Q3 2026 Earnings Call dated Feb. 11, 2026
Corporate Participants:
Ravi Kant Tripathi — Chief Financial Officer
Navin B. Agrawal — Investor Relations, SKP Securities Limited
Analysts:
Rohan Khera — Analyst
Ahmed Madha — Analyst
Rajesh — Analyst
Rohit — Analyst
Varun Pindo — Analyst
Ahmed Madha — Analyst
Amit Lahoti — Analyst
Satyan Wadhwa — Analyst
Rohit Prakash — Analyst
Vijay Kumar — Analyst
Manan Paladia — Analyst
Presentation:
operator
Sat. Foreign. Ladies and gentlemen, you’re connected to the earnings call for HEG Limited. The call will begin shortly. Please stay connected. This is for the HEG Limited Earnings Conference. The call will begin shortly. Please stay connected. Thank you. Foreign.
operator
Good day ladies and gentlemen and welcome to HEG Limited’s Q3 FY26 result conference call organized by SKP Securities Limited. As a reminder, all participant lines will be in the listen only mode and you will be able to ask questions after the management’s opening remarks. Should you need assistance during the 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. Naveen Agarwal Head Institutional equities at SKP Securities Limited. Thank you. And over to you, sir. 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 at ATG Ltd. We have with us Mr. Ravi Junjunwala, Chairman Managing Director and CEO and Mr. Riju Junjunwala, Vice Chairman along with their colleague Mr. Manish Kulati, Executive Director, Mr. Om Prakash Ajmera Group CFO Mr. Ravi Tripathi, CFO. We also have Mr. Basan Jain, Joint MD and CEO Bhilwara Energy Ltd. Mr. Ankur Khaytan, MD and CEO TAC Ltd. Mr. Hizen Praveen Shah, MD and CEO RE Plus, Mr. Puneet Anand Group CSO and Mr.
Salil Bawa Group Head Investor Relationship. We’ll have the opening remarks from Mr. Junjudwala followed by Q and a session. Thank you and over to you Raviji.
Ravi Kant Tripathi — Chief Financial Officer
Thank you and good afternoon friends and welcome to our Financial Leaders conference call for Q3 financial year 2526. I would like to begin by setting the context on the global steel market as its underlying trends are critical for understanding the demand conditions for the graphite electrode industry. As for the latest data published by the World Steel Association, Global steel production declined by about 2% year on year in calendar year 2025, falling to 1804 million tonnes which is 1.8 billion tonnes from 1841 million tonnes in 2024, reflecting a challenging macroeconomic environment and subdued demand across major steel producing regions.
China, which is the world’s largest steel producer also recorded a 4.4% year on year decline in 2025 with crude steel production reducing from 1,005 million metric tons to 961 million metric tons. While China’s steel production has declined by approximately 7.5% over the last five years. Its steel exports have increased sharply over the same period, rising by 78% from 67 million tonnes to 190 million tonnes in 2025 over these six years, significantly intensifying competitive pressures across global steel and downstream markets. In contrast, India continued to outperform with crude steel Production increasing by 10.4% Supported by strong infrastructure spending, resilient automotive demand and ongoing capacity additions.
Among other major regions, the United states recorded a 3.1% YoY increase in crude steel production while Japan’s output declined by 4% and South Korea declined by 2.8%. European Union EU remained under significant pressure with steel Production declining by 2.6% on yoy basis due to very high energy costs and weak industrial activity. Against this backdrop, the global graphite electrode market continued to face challenging conditions with customer demand remaining muted due to cautious procurement behavior and sustained pricing pressure, particularly from elevated steel export out of China and this demand conditions remained uneven across all the regions. While near term visibility remains limited, disciplined supply improving utilization trends in certain markets and the continued shifts from electric arc furnace steel making provide support to the medium term industry fundamentals in this environment.
Our focus on operational efficiency, cost discipline and customer diversification enabled us to deliver a resilient performance during the quarter demonstrating the strength of our model. We continue to operate at the highest capacity utilizations in the industry all around the world at 85% in previous quarter and 89% in the last three quarters combined, both of which are highest in the graphite industry worldwide. Just to remind you, we have the single location largest facility in the world at a place called Mandi Beef near Bhopal with a capacity of 100,000 tons combined with a cost structure which is amongst the lowest positions US as one of the most efficient and cost efficient graphite electrode manufacturers globally.
Just to reiterate that these numbers are based on a Just to reiterate, these numbers are based on our expanded capacity of 100,000 tons of and not 80,000 tonnes which was the case until 2324 reflecting a gain in the market share at a time when the electrode arc furnace based steel production is more or less flat. Looking ahead, the global transition towards low emission EAF steelmaking continues to accelerate driven by climate goals and regulatory momentum. We once again reiterate that this transition is expected to generate incremental graphite electrode demand of approximately 200,000 tons by 2030 excluding China, reinforcing the industry’s long term growth potential.
To the best of our knowledge, about 20 million tonnes of new greenfield Electric car furnace capacities have already been added in the calendar years 2024 and 2025. And we believe another 60 million tons would be added between calendar years 2026 to 2028, which is not too long. In the next three years, 60 million tons and another 30 million tons between 2029 and 2030, taking the total new greenfield electric aqueous capacity by 110 million tons. It has never happened in the history that steel industry has added 110 million tons in the last 203040 years. Probably this would increase the worldwide electrode demand by approximately 200,000 tons compared to what it was till calendar year 2025.
Construction activity of our recently announced expansion by a further 15,000 tonnes is progressing as per schedule. And we stand by our earlier target of completing this by early 2028, which will position us well to cater to the incremental electoral demand all over the world. I once again reiterate that for the last many years our exports have constituted around 2/3 of our total sales to more than 3035 countries covering almost the entire geography. Our composite scheme of arrangement is on track. The NCLT bench at Indore has heard the matter and reserved its order on the first motion application.
We expect to receive the order within the next one or two weeks. Upon receipt of this order and in accordance with its directions, we will initiate the process of issuing notices and convening meetings of our shareholders and creditors to seek their approval for the scheme. Once the approval process is completed, we will find the second motion petition. We anticipate that this entire scheme will be approved by NCLT by Q1 2027. With that, I would now like to invite our CFO Ravi Tripathi to present the financial quarters for financial results for the matter for the quarter.
And then we’ll open up for Q and A. Thanks, Ravi. Over to you.
Ravi Kant Tripathi — Chief Financial Officer
Thank you, sir. Thank you, sir. Good afternoon everyone. I will briefly walk you through the company’s operating and financial performance for the period ended 31st December, 2025. For the nine months ended December 2025 revenue from operation stood at Rupees 1,965 crore compared to Rupees 16 crore in the same period of last year. For Q3FY26 revenue was Rupees 656 crores versus Rupees 4,477 crore in the corresponding quarter of the previous year. EBITDA for the nine month period was Rupees 623 Crores up from Rupees 393 Crores of the previous year. On a standalone basis, profit after tax for the nine month of FY26 was rupees 344 crores compared to rupees 163 crores in the same period of last year.
On a consolidated basis, profit after tax stood at rupees 455 crores as against rupees 189 crores in the previous year. Our balance sheet remains strong. The company continues to remain long term debt free and maintain a treasury balance of approximately Rupees 1155 Crores as of 31st December 2025. Looking ahead, we are confident that any improvement in the industry can significantly boost our profits. The detailed presentation has been uploaded on the company’s website as well as with the stock exchange. For your reference, we would now be happy to take your questions. Thank you for your time.
Over to you, Naveenji.
Navin B. Agrawal — Investor Relations, SKP Securities Limited
In the meantime, I just have an announcement. We just spoke about this NCLT order which is supposed to be. Which was supposed to be coming very soon. We have just a minute ago got this in our hand right now.
operator
Thank you very much. I’m sorry, sir. Go ahead. No, no. I finished. All right. We will now begin with the question and answer session. Anyone who wishes to ask questions may press Star and one on the Touchstone telephone. If you wish to remove yourself from the question queue, you may press star and 2. Participants are requested to use handsets while asking questions. Ladies and gentlemen, we will wait for a moment while the question queue assembles. To ask questions, please press star and 1. The first question is from Rohan Khera from Singularity Asset Management. Please go ahead.
Rohan Khera — Analyst
Hi. Thank you very much and congratulations for declaring great results. I’m very happy to see the utilization that you the company has been able to clog. I have three quick questions. Number one, if Ravi, you can repeat the statement that he made about the NCLT order that just before the Q and A started. Second is I wanted to understand, get a sense of the realization that the company has been clocking in this quarter and what is the overall realization that is expected for the full year in dollar terms for the graphite electrodes. And third question is if you can indicate the product mix of the graphite electrodes between ultra high power and high power, please.
Thank you.
Ravi Kant Tripathi — Chief Financial Officer
See the first figure that you are talking about. I mean obviously it’s a competitive world and we don’t want to give any number. But it’s not very difficult. I mean we know the turnover, you know the capacity utilization. We know the total capacity of the plant. It’s not very difficult to calculate that, but don’t ask me to give that number. And your second question was. About the product mix between ultra high power and high power. It is more or less in the region of 70, 75% ultra high power.
Rohan Khera — Analyst
Got it. And sir, the statement that you just made on the NCLT that you got some intimation about a minute ago.
Ravi Kant Tripathi — Chief Financial Officer
We just got that. I mean, as I was just saying that we are expecting it soon. It just so happened that while we were speaking the order came.
Rohan Khera — Analyst
Okay, great. Thank you.
operator
Thank you. The next question is from Ahmed Madha from Unifi Capital. Please go ahead.
Ahmed Madha — Analyst
Yeah, thanks for the opportunity. My question is on the volume growth. So is it fair to expect our. Nine month volumes would have grown by about 20%? I gave you the utilization rate and our capacity is 100,000 tons. So it’s very simple to calculate from there.
Ravi Kant Tripathi — Chief Financial Officer
Okay, sure. So I’m assuming 20% plus minus. By asking, this is. I just want to understand if we have improved our volumes by 18 to 20,000 tons, where have we gained market share from either is it from the Japanese competitors or the Chinese players? Because Graphtec has improved volumes about 6%. Graphite has improved by a few percentages. So I’m just trying to understand from which players, which sort of geography have we gained market share and which end market, Europe or Middle east or whatever, or India, which geographies you have gained market share? If you can just give some sense.
Navin B. Agrawal — Investor Relations, SKP Securities Limited
You see There are only four or five major regions in the world and US is the only country which produces more than 70, 72% of their total steel through electric Aqua. So that is by far the single largest market after China. And then rest, Everybody is like 30, 35, 40%. Europe is about 45 to 50%. So we have gained market share everywhere. I mean there’s no one specific region that we are catering to. We have been catering to more than 30, 35 countries all over the place. So wherever the market is, I mean we have gained a little bit of market share.
Ahmed Madha — Analyst
And would like to add from which sort of players have we gained share from. Is it fair to assume we’ve gained from Japanese players or Chinese players?
Ravi Kant Tripathi — Chief Financial Officer
There are only basically three or four bigger players in this industry now. I mean there is, there’s an American company, there’s a Japanese company and then there are a couple of very small companies. So it’s very difficult to, to give you a particular name because everybody sells a little more in one area. Little Less in another area. So obviously we probably have gained from each one of them a little bit here and there.
Ahmed Madha — Analyst
Okay, sure. And in terms of your annual pricing arrangement, would you like to give some sense despite, I mean all the tariffs and everything, we try to assume a broad realization will remain more or less the same or from whatever arrangements or the contracts we have put in for some of the geographies.
Ravi Kant Tripathi — Chief Financial Officer
See a lot of these orders have been negotiated on a 12 month basis especially in US and in other, other countries. Some, some companies negotiate on a quarterly basis, others do it on a six monthly basis. So it’s not easy to give one simple answer to that. But, but yes, I mean we are, I could safely say that at least 50 to 60% of whatever volume that we are going to sell in the next year. We have settled everything for the 50, 60% kind of a number.
Ahmed Madha — Analyst
Got it. And for that the pricing sense will be even more or less similar to what we have done last few quarters or there be a major.
Ravi Kant Tripathi — Chief Financial Officer
Yeah, you are right.
Ahmed Madha — Analyst
Okay, got it. And another question was with the still with 18 tariff I’m not sure how much disadvantage or advantage we have compared to other competitors in U. S market. So for our business mix overall you have spoken about I think 20 in U. S Americas. So that sort of number should sustain in US or will there be a significant business mix shift for us for different geographies for 2026.
Ravi Kant Tripathi — Chief Financial Officer
Our product mix is not going to change much here and there. I mean it could be a couple of percent plus minus but not more than that. We are not going to lose market share in any part of the world because of any reason. And whether it is US or Europe or Southeast Asia or wherever, of course to the extent that we will have to still pay 18% duty, to that extent there will be a hit. But we don’t want to for the long term basis. We don’t want to lose a customer. So we will absorb that cost.
Ahmed Madha — Analyst
Got it. Thank you.
operator
Thank you. The next question is from Rajesh from 361 Capital. Please go ahead.
Rajesh — Analyst
Yeah, hi, good evening everybody. So I was wondering about the investment in Graphtec. Now it is worth half the value that we invested in and the state Graphtech is going in another two quarters. That company may actually close down partially from what I understand. Is that a correct assessment? First of all. And secondly, what do we do with the investment?
Ravi Kant Tripathi — Chief Financial Officer
No, we don’t think so. I mean there is no scope for any company in this industry to close down because with the kind of growth in the Electrode demand that we are talking about, we are talking of 150 to 200,000 tons increase in the demand of electrodes in a market where the total production capacity is not more than 500,000 tonnes. So we are not anticipating any situation where any one of us is going to go out of business. I mean something, something or the other will have to happen to every one of us. Otherwise, I mean if you are talking about a 175,000 ton country, which is what Graftec is closing down, you are talking of 30% of the total world capacity going out of business.
Navin B. Agrawal — Investor Relations, SKP Securities Limited
I am not talking about full closure, unlikely to happen, partial closure, because as per graphtech cost, cash cost of production, it is somewhere around $3,700. And from next quarter the US tariffs also will come down to 18% for Indian exporters. And they’ve mentioned in the call that that would lead to lower realizations coming going forward. Does that mean that the company has a net.
Ravi Kant Tripathi — Chief Financial Officer
For us? Customers generally decide everything, practically 100% of their needs at the beginning of the year for the whole year. So the prices and the quantities and everything is more or less frozen for the whole of 2026. So there is no negotiation happening right now in America especially.
Rajesh — Analyst
Okay, but assuming prices remain where they were and they’re already at the kind of peak realization of $4,000 and they’re still making about 65 million losses every quarter, I don’t see it coming down significantly. So that is a dire scenario for a company with a net worth of just about $450 million. That’s what I thought, that maybe some capacity, because we’ve seen it even in Asia pact that some capacities have gone down closed. Is it possible that some capacity of graphic gets closed?
Ravi Kant Tripathi — Chief Financial Officer
I don’t see that. I mean if you heard their conference call and if you saw their reports, they are saying the same thing, everybody is saying the same thing, that the demand of electrode is likely to increase by 150 to 200,000 tons in the next two, three years. And as I gave you the figure recently, in the last 2, 3 years capacity of 20 million tons of new electric earth furnaces have already been added. That 20 million ton additional capacity means about 30,000 tons of demand in the next two years. We have the data for each company, each location of the new plants which are coming in.
Let’s say US. US is the main country where more and more and more electrical furnaces are being built. Because US is the only one place where 70% plus steel is produced through electric arc furnace Minus without us, that average is about 40, 42%. And as I said, 20 million tons has already been added in the last two years. Between now and end of 28, which is only two and a half, three years away, we have list of at least 25 to 30 million tons which are coming. And we more or less know which plant is going to be commissioned in which month, in which quarter in the next two years.
And so at least this 20 plus 30 which is likely to come in the next two two and a half years is 100% coming. Because where 15, 20, 30 or 50% work has already happened at the site. And these companies committed millions of dollars of investments. So 20, 30, 40% investment is already committed, work has started, orders have been placed for all the equipments. So all these are bound to come. And unless there is a total U turn, and unless there is a total U turn in the in the world towards carbon emissions and everything, it is not likely to happen.
And all these additional EAF electric arc furnaces are only coming because of carbon emission. As you know, the same steel produced through electric arc furnace versus the black furnace emits 1/5 the carbon. That’s the only reason why new and more and more electric arc furnaces are coming. So that story is not going to go away anytime soon. Yes sir, that’s a different point. That it is possible instead of 180 will come. But for this industry, even 80 or even 70 million tons of new electric car furnace resulting into a demand, additional demand of 125 to 150,000 tons is a very big huge number.
Rajesh — Analyst
I understand that in the graphtech call they also mentioned that China has a capacity of 800kt, of which nearly 200kt odd is coming in the UHP market and is also operating at about 50% utilization. So it is possible that the additional demand gets filled by Chinese electrodes. That was my related question actually.
Ravi Kant Tripathi — Chief Financial Officer
See, China of course produces much more than the rest of the world produces in terms of electrodes. But they are still pretty far away from producing the correct, the right ultra high power electrodes that we talk about. So while they are taking away the market share from all of us on the small size electrodes, what we call non ultra high power, but they are very far away from meeting the quality standards that we are able to meet, or Americans are able to meet, or the Germans or Japanese, all the western players, so to say. So that risk is not there at least in the foreseeable future.
Rajesh — Analyst
Right? So last question on this. So do we increase Our investments because we already invested about 283 crore at a much higher level. So do we increase our investment in Graphtec or we stay put or what is the final decision?
Navin B. Agrawal — Investor Relations, SKP Securities Limited
We are staying put. I mean when we took this view and started buying some shares of Graphtec, we were very clear that we are in it for a long haul. And you see till that last Friday when the results were declared, these shares were $1.9 $19.
Rajesh — Analyst
Right.
Ravi Kant Tripathi — Chief Financial Officer
And it went up from current level of $7 to $19 over the last six, nine months. So these bumps will keep coming in any industry. But we are really, we are here on a long term basis. We are not bothered about this. Neither we were going to sell at $1.80 or $18 nor we are going to sell at the current price, $17.
Rajesh — Analyst
Okay, thank you so much.
operator
Thank you. The next question is from Rohit from I thought pms. Please go ahead.
Rohit — Analyst
Yeah. Good evening sir. Congratulations on very strong numbers and congratulations on the demoder as well. Sir, my first question was so can you just help us understand how we are given where we are in the cycle. And we’ve been talking about it in the last many calls in terms of realizations being really low. But you continuously posting, continuously posted, very good margins. So I mean if you can really share some more insights on what is enabling us. Because if you look at the Indian peer and even if you look at some of the Chinese companies, numbers, whatever is available, everybody is needless to say Graftech.
But we are sort of a clear outlier in this. So what has really happened in this cycle that has enabled us to do this kind of divergence? If you can please share that, that will be really, really useful.
Ravi Kant Tripathi — Chief Financial Officer
How do you want me to respond to that question? I don’t know. I cannot talk about my competitors. And obviously the facts are facts. I mean, you know, what is their annual revenue, you know, the price of electrodes and by that you know what is the tonnage that they have sold and what is the tonnage that we have sold. Obviously there is a, there is a difference in cost of production. I mean that’s an advantage of plant in India versus a plant in Germany or France or Japan. And the second thing is if you look at all the graphite players, which is Graphtec and the Japanese company Resonac and two of us in India, we have by far the single largest plant at one location.
Our plant is 100,000 tons. The average of other plants will be like 50, 55,000 tons. And except graphite India, who has A plant in India, all other plants are either in Germany or France or Italy or US or Spain, Japan. So obviously we have a cost advantage being in India. And the size when you are talking of 100,000 ton plants located in India versus a 50,000 tonnes average in Germany or France or US or Japan, it is, it makes a huge difference.
Rohit — Analyst
So the other question was, Sir, I mean if I look at the realizations, you also mentioned the realizations have been at pretty low numbers for many quarters now. And if you look at the utilization for the industry also, it is much slower. Even Graphtec in this call they mentioned that they don’t see any uptick in realization and extremely competitive market is continuing. And you also mentioned that for 26 you don’t see much change in realizations. So I mean, given that there is this consistent overcapacity in industry despite shutdowns, how do you see the. I mean at the same time you’ve been saying that this additional 30,000 tons of electrode market has been there and another 30, 35,000 electrodes market is going to come in the next few years.
So. But still the pricing is still challenged. So I mean, what is your sense on that?
Ravi Kant Tripathi — Chief Financial Officer
You see this 20 million tons new electric arc furnace capacities have just been finished, let’s say in the last six months, nine months, 12 months. And that’s a number which everybody knows. We can give you the names on if we speak to you one to one, we can give you the names of this 20 million tons in the country and the size and everything. So and being steel industry, I mean when you put up a 20 million ton new capacity, it takes two months, three months, six months to stabilize to reach 80%, 90%, 95%. So gradually these capacity utilizations are increasing.
And as I said this year and 28, between now and 28 to two and a half years again we have a list of 30 million tons. We know the names, we know the country, we know the locations and we practically know at what stage is plant A, plant B, plant C, plant B. Because most of these investments and new capacities are being added by our existing customers practically there is no new steel company emerging anywhere in the world. So all these expansions are happening by all the established names which are already our customers. And since we are a regular supplier to them, we keep meeting them at their work locations.
So we know more or less whether they are coming in July of 20, 26 or 27 or 28 or whatever. So even if it is 20 instead of 30, it’s fine. I mean these things will happen six months here and there. Delays are bound to occur in any place. So if 20 has already come in, which will, let’s say, stabilize more and more this year and another 20, if not 30 is coming in the next two, three years. So every ton means, I mean you need more or less 1 1/2 to 2 kilos. So a million ton means 1500 to 2000 additional tons of electrodes required.
So if you’re talking of 20, 25 million tons, you’re easily talking of 20 to 35,000 tons of new demand. And the plants which have been closed down in the last three, four years, it will be very difficult to restart those plants after closure of two, three years in the Western world. To restart that plant is not going to be very easy. Especially you’ll be surprised when I tell you that Heg, we came with this plant in Bhopal in 1976, which is exactly 50 years today. This is the last new greenfield plant put up anywhere in the world.
So all these plants that we are talking about, the American company and the European companies and the Japanese companies, they are much, much older than 1976. So it’s not easy to, it’s easy to close these plants because of their cost structure, because of their size. Again, if you go through the list of the plants which have closed down in the last 2, 3 years, they are all in the region of 30, 35, 40,000 tons. So it’s simple to calculate a 30, 40,000 ton plant in Germany or Japan or US or France, their cost versus 100,000 ton plant in India.
And in fact, despite everything that we spoke about, we just announced about six, nine months ago that we are adding another 15,000 tons and the work has already started. We have already placed most of the long term delivery items and we are ready, we should be ready by middle to end of 2028, between 2, 2.5 years from now. So as we keep adding more and more capacity, obviously our cost per ton keeps coming down. And we have this advantage of one large plant and that large plant being in India versus Germany versus Japan versus us.
This is a very, this is an inherent advantage of any plant in India.
Rohit — Analyst
Right? Thank you very much sir, for that very detailed answer. So one more question was sir, as this new addition sort of comes through in terms of end customers putting in new clients and both, both the Indian pairs almost now at peak utilization, if you will. So do you see that being a very big reason or that that could be one contributing reason for the realization to start inching up because as you said, all the other plants are losing money and it doesn’t make sense to run those plants at these kind of realizations. So does that then probably lead to an improvement in realization at some time as these new plants come in sometime this year and in the next couple of years?
Ravi Kant Tripathi — Chief Financial Officer
Yeah, exactly. I mean obviously demand has to increase. I mean this 20 million tonnes which is already in operation, it may take another 6 months, 9 months, 12 months to reach 70, 80, 85% capacity utilization. So this 20 million itself will require 25 to 30,000 tons of electrodes. And then we are talking about another 30, 35 million tons before 2028.
Rohit — Analyst
Right. And the capacity that we are putting in or even what the other Indian company is putting in, would that not sort of put a brake on the price increases? Because we will have those volumes to sort of cater to. So I mean we can continue to gain more market share and outright the other players. So what is your sense on that?
Ravi Kant Tripathi — Chief Financial Officer
Manish, would you answer that?
Navin B. Agrawal — Investor Relations, SKP Securities Limited
Yes, sir. See like chairman said, so the demand which is coming is much larger than what we are adding. So we are talking about 200,000 and coming up to 2030 and the plant which we are building today, that 15,000 additional capacity is going to come on stream in the first quarter, early 2028. So by the time a couple of more electrical furnace plant would have come up, and we also think that this is for the last two, three years, the seal has been stacked, declining in some regions and there will be a turnaround. So we expect that this 15,000 would easily get absorbed.
Rohit — Analyst
Right. And if you follow some of our international competitors and even Graphite India, you will probably hear the same thing. Everybody is talking about the same 20 million tons, 30 million tons, demand increasing by 50 hundred thousand tons. So everybody has the data from the same source and basically the source is all our customers themselves.
Ravi Kant Tripathi — Chief Financial Officer
Right. Sorry, one more question on Graphtech if I can. So I mean you mentioned to a previous question that you don’t see them going under and I mean, but just from their survivability or for them to make even decent amount of profits, the realizations have to significantly go up from where they are right now. So I mean while I understand that it’s not like a year or even two years that you’re looking at, this is a long term investment and we’re looking at the overall industry dynamics. But I mean clearly they’re an inefficient player given where they are located.
So how do you see the survivability or let’s not say survivability but them making even like at least half your margins or half your trough margins. Forget margins. So I mean because the costs are what they are, right? I mean you can’t change them. You can’t change where their plants are located. So.
Navin B. Agrawal — Investor Relations, SKP Securities Limited
No, we should not be talking about them. Honestly over the course that that is you missed their con call which happened few days back. So you’re on the wrong concord with this question. You can’t say yes, of course prices should go up for everybody. The prices prevalent today are one of the lowest. All these are very right. We have a big plant at one place. So of course our costs are lower that do in India. But I think we should. We would like to avoid answering questions on competitors costs and all that.
operator
Thank you. We move to the next question. The next question is from Varun Pindo from Nugent Capital. Please go ahead. Hello.
Varun Pindo — Analyst
Hi sir. Am I audible?
Ravi Kant Tripathi — Chief Financial Officer
Yes, yes please.
Varun Pindo — Analyst
Hi sir. Congratulations on a wonderful set of results. I just had a few questions regarding the bookkeeping. So currently the dividends that we get from you know like the hydropower assets, in which segment is that reported, does that come under the share of profit and loss from the associates?
Ravi Kant Tripathi — Chief Financial Officer
Yeah, my. My colleague is going to answer that question. Puneet.
Ravi Kant Tripathi — Chief Financial Officer
Hi. So Puneet on this side. So BL which owns the hydro asset hasn’t given any dividend to HEG in last couple of years. Whenever the revenue will comes, the revenue will be shown in the other income.
Varun Pindo — Analyst
Understood.
Ravi Kant Tripathi — Chief Financial Officer
The profit you see on the associate is the profit which Bhirwada Energy has made. And since it’s an associate, so we show a proportionate profit in consolidated financials of heg.
Varun Pindo — Analyst
Understood. But then the revenue that comes under or the share of profit that comes from Bilwara, that technically from the power business only. Right.
Ravi Kant Tripathi — Chief Financial Officer
So currently yes, Bhilwada Energy largest revenue is coming from the hydro assets. Apart from that we have the best company underneath that which will generate the profits in coming quarters. Plus since Vilwada Energy is also sitting with liquid money cash, there is other income coming in Bilwada Energy because of that which has been in FD’s and all.
Varun Pindo — Analyst
Understood? Understood. So currently the other income that we are seeing in the pnl, what does that include?
Ravi Kant Tripathi — Chief Financial Officer
Other income which you see in the P L is primarily the income of the liquidity liquid assets which we have in HEG per se. Yeah, sorry.
Varun Pindo — Analyst
And sir, like the currently like apart from the hydropower assets, if you’re looking at the HEG Green Tech Business we have the energy storage. You know, the best for the IPP and the best for the commercial and industrial use. Right. Currently do we have any sort of revenue from that business?
Ravi Kant Tripathi — Chief Financial Officer
So currently the revenue largely is coming from. Yes, we have revenue from our best company which is RE plus. But it is not significant compared to the hydro revenue which we are making. You will see the right numbers of revenues and our IPP business. And the best tender which we have already won and in which we are being declared as L1 from. From say the quarter one of FY28 in the.
Varun Pindo — Analyst
Okay. Will also hold HEG green tech will also hold the anode business which will also contribute in the revenue. But that will come in FY 29th. Right.
Ravi Kant Tripathi — Chief Financial Officer
So our plant is getting commissioned by the quarter one of FY 28. And so we have assumed a certain capacity utilization in FY28. But yes, the peak revenue will come from FY29. But you will see a contribution from TAC also in FY28.
Varun Pindo — Analyst
Understood, sir. And sir, lastly like post the demerger, will there be any debt in the Green Tech business?
Ravi Kant Tripathi — Chief Financial Officer
Surely there will be a date. The debt which we will be securing for doing our projects which is the anode, the CNN ipp they will be having the date. So I think in January we did a detailed presentation on HCG Green Tech where we mentioned the entire project which we will be doing. Incoming to 2 to 4 quarters and the subsequent debt along with that.
Varun Pindo — Analyst
Understood, sir. Can you just call out the number what could be the debt in the Green Tech business? Post the demerger.
Ravi Kant Tripathi — Chief Financial Officer
So if you ask me, post the demerger which will be done in. By quarter one or FY27. The debt will be negligible there. Once the merger is done it will be not. It will be negligible. There will be no debt there per se. But once the company is created and all the projects will be on full go that time the debt will be coming. So for example the. The best tender which we have won for Gujarat and the Maharashtra Tender Wavy L1. Whenever those projects have been our PP has been signed then money will be mobilized for that.
Likewise in Anode also today we haven’t taken any debt per se. Today as in date from the. There is a contribution of a large equity from the. From the company. We are utilizing that. But we will be doing it in the next. Once the scheme has been done, the money and deploys.
operator
Thank you. The next question is from Ahmed Madha from Unified Capital. Please go ahead.
Ahmed Madha — Analyst
Yeah. Thanks for the opportunity. Again, my question was on your remarks regarding the Chinese supply, right? I mean if I quote from graphics Concol, they spoke about 2 and a half, 3 lakh tons of UHP coming out of China. China. So in our conversation we have always spoken about five major suppliers probably having about six, six and a half Lectons. What are your thoughts on the Chinese supply which probably we should account for in terms of supply dynamics. So aren’t we competing with Chinese players in Europe and other markets?
Ravi Kant Tripathi — Chief Financial Officer
Manish, will you take that?
Navin B. Agrawal — Investor Relations, SKP Securities Limited
Yes sir. Let me answer this. Actually most of the capacity which is in China is geared towards the non USB grid. We agree, yes, there are one or two companies which are now making USB products. But to achieve that kind of consistency and reliability does take time. And at the same time China is definitely working towards increasing their own electric arc furnace production. So some of this capacity we hope will be absorbed inside China and outside Java. As you, as you have seen from our results itself that he is also a very competitive company. So we are not as much, we don’t worried about their impact of their UHP on us.
And this because we can also see the commensurate demand coming. So it’s not that the market EF demand is, the electoral demand is going to be stagnant and somebody will, Chinese will eat into everybody’s share that we don’t really agree. There’s demand also coming within China and from outside China to the extent of 200,000 tons.
Ahmed Madha — Analyst
And in terms of our. If I just look at the segmental profitability of the electrode business, excluding the other income etc. The margins have improved over last 3 quarters. I’m assuming there is a component of operating leverage with higher production. Is there any advantage on raw material cost?
Ravi Kant Tripathi — Chief Financial Officer
Not, not really. It’s very, very marginal because the, the key raw material is needle cook and prices have been pretty much consistent. But takes a while for the high cost, the slightly higher cost inventory to go away. So there’s a marginal drop in the consumed, consumed raw material. And what you see, improvement in margins is basically coming from our operating levels, nothing else.
Navin B. Agrawal — Investor Relations, SKP Securities Limited
And the size, I mean now that we can add another 20,000 tons from 80 to 100, that gives us a cost advantage. Okay, sure.
Ahmed Madha — Analyst
Got it. Thank you.
operator
Thank you. The next question is from Amit Lahoti from mk. Please go ahead.
Amit Lahoti — Analyst
Yes, hi. Thanks for the opportunity and congratulations on a good set of numbers. Many of my questions have been answered as we have settled contract for half of the volumes for this year. Would it be fair to take third Quarter spread as the baseline assumption for electrode and needlecock pricing. So basically just in terms of gross spreads, if they can sustain in the coming quarter.
Ravi Kant Tripathi — Chief Financial Officer
Amit, for the next two quarters we’ll just assume a similar price. This is known not don’t expect any uptick in that. So it is just going to be very, very similar. Very, very similar. Of course everybody hopes for a price increase but for the next two quarter we don’t see it happening.
Amit Lahoti — Analyst
Right, got it. And then we did of course have about 50% tariff impact to us. Even if we take let’s say 10% as the share of your exports into us there has been a significant impact from that perspective. So now with that going down to 18% how much of incremental delta are we looking at? If you can quantify some numbers in terms of how much the impact was and then how much it will be in the coming quarter.
Ravi Kant Tripathi — Chief Financial Officer
You have to keep this in. Just a minute Manish, just a second. You in fine prints. If you see the tariff, how it is applied, there’s a provision that, let’s say, I’m just giving an example. If you are selling electrodes to somebody in America at X dollars and if you are buying your raw material or anything from America for Y dollars so that Y dollars value. So for duty calculation they are exempting the portion of the cost that you have already imported from us. So, so whatever is the selling price of electrode us may say that portion will be reduced.
So to that extent you save the duty. And now that duty has come down from 50 to 18, we are, we are quite, quite alright. I mean of course if this was the case of 50% then it will have a severe hit on our bottom line. But with 18% we are not really, of course it will hit the profit but it is not going to very significant. It’s not going to be significant.
Amit Lahoti — Analyst
Okay. But even with the duty hit which was clearly there for the third quarter in entirety and given that the performance of our peers like Graphite India and Graftech it has been affected by prices, our performance has been pretty resilient. So to that extent how much of the tariff impact goes away? Now if you can quantify that bit.
Ravi Kant Tripathi — Chief Financial Officer
You know more or less how many tons we are selling in America, you know more or less the price and I gave you the formula, if you are importing something from us that is exempted. So 18% is still 18% but that number is not staggering. I mean of course it will hit the bottom line to some extent but we can very easily absorb that. We. Are a long term player. We are not looking at the next 12 months only. I mean we don’t want to vacate the market. That’s because there is a duty.
Amit Lahoti — Analyst
Right. And then just one housekeeping question. On other expenses there is a positive delta sequentially with cost reduction in other expenses. So what exactly is it coming from? And then is it sustainable going forward?
Ravi Kant Tripathi — Chief Financial Officer
Answering this, the CFO will answer this one. The in other expenses the as compared to previous quarter it is reduced mainly because of the slightly sales reduced in that proportion. The saving cost is also reduced. That’s why the other expenses is lower than the previous quarter. Yeah, because you selling also as a cost by way of commissions and all that. So as as you can see the top line reduction in top line. So there’s slight less volumes is translated into sale and that is what you see the corresponding difference in the other expenses also.
operator
Thank you. The next question is from Satyan Wadhwa from Profusion Investment Advisors. Please go ahead.
Satyan Wadhwa — Analyst
Hi, I have two questions. One like you were talking about China. So how competitive are their prices versus versus ours and what is their cost structure like I’m sure you would know. And secondly, how are the contracts for needle coke structured? So if tomorrow electrode prices were to go up 20% would the needle coke companies try and claim their pound of flesh? Or is that a link to oil prices?
Ravi Kant Tripathi — Chief Financial Officer
See the needle gog is being contracted quarter by quarter and it’s a, it’s a process of two months for making an electrode. So we are also on the base of whatever we book in the market we make sure that the cost of that required needle coke is already locked. So that if prices go up and down so we we don’t take a hit. So that is let’s say generally we wouldn’t like to take a call for more than six months. But yeah, markets we can so that we take care of making sure that the cost is frozen.
We know it exactly. Of course when prices go up for everybody, when the graphite electrode industry will make money. Of course Neil, Coke suppliers will not be left behind. They will also increase. But first it has to come from the market. First electrode prices have to go up.
Satyan Wadhwa — Analyst
Right. I’m really just trying to understand like the last cycle that happened in 2017, 18 right. When electrode prices just shot up, then needle coke lagged quite a lot and then they kind of went up. So you had this super normal margins for a little while and then they compressed because niddle Coke prices shot up despite oil price shops.
Ravi Kant Tripathi — Chief Financial Officer
So super normal margins Came for the simple fact that this the kind of product we have which takes two months to make. So there’s certain, even increase in the system, a certain finished good, certain work in progress, certain raw material waiting because it’s all getting imported coming from outside India, something on high seas. So when electro price suddenly shot up, we did get a question and it worked the other way around two years later when the electrode markets fell, how we took a big. Everybody in the graphite industry had to take a big NRV hit.
Satyan Wadhwa — Analyst
Right? Right. Okay.
Ravi Kant Tripathi — Chief Financial Officer
This is only because of the nature of the industry, nature of the product.
Satyan Wadhwa — Analyst
Okay, understood. And what about the Chinese UHT makers? Like in the last cycle they weren’t really doing any uhd. So now they’ve got into the UHT market. How competitive is their cost versus our cost in India?
Ravi Kant Tripathi — Chief Financial Officer
No one else outside China has been able to really explain how, how Chinese price their products. Because if you sit with a piece of paper, it doesn’t work out for any product. So we can help it. We can just speak for ourselves that we are a competitive company, a large plant and we have all the wherewithal, the quality, the customer base, the costing and we can, we can find it out.
Satyan Wadhwa — Analyst
Okay, fair enough. All right, thank you.
operator
Thank you. The next question is from Rohan Baranwal from Arihant Capital. Please go ahead. Thank you very much, sir. Most of my questions have been answered.
operator
Thank you. We’ll move to the next question. The next question is from Rohit Prakash from Marshmallow Capital. Please go ahead.
Ravi Kant Tripathi — Chief Financial Officer
Thank you for the opportunity. It’s a fantastic set of numbers and I always enjoy your calls given how detailed and how patient you answer all my questions. All our questions. So my question is on the steel capacity that you mentioned is coming up in Europe and US over the next five years. Right. I am not able to reconcile that data with the current capacity utilization. So the capacity of steel is I believe between 50 to 65% right now. Which means you have a lot of capacity lying id. And even though new capacity will come and the numbers that we are discussing is quite large in context of the current capacity already there we’re talking about 10, 15% capacity coming.
So but where will the demand come from? Right. Without the steel demand coming through, we will not be able to utilize our, I mean the incremental electrode capacity also electric demand would not come. So the capacity addition is fine, but it is coming at a time when the utilization itself is low. So how sure we are we of the utilization for the new capacity and existing capacity is A question that I’m not able to reconcile with the capacity coming online.
Ravi Kant Tripathi — Chief Financial Officer
No, no, it is pretty clear. I’ll tell you what it is. I mean, basically what is happening is, and as a preamble to that, see the same steel which is produced through electric arc furnace in the same steel which is produced through the blast furnace, the carbon emission on the blast furnace steel is between four to five times of the same steel which is produced through the electric arc furnace. So now for the last three, four years, ever since, everybody in the world, every country in the world is concentrating very strongly, very seriously to reduce carbon emission.
So there is this huge movement which is happening for the last two, three years. And in which context I just said that about 20 million tons of the new electric car furnaces through 20 million tons of steel capacity through electric car furnaces have come up in the last 12 months. In the calendar year 2025, another 25 to 30 are on the way between now and 2028. So these are not additional capacities. They are coming in place of glass furnaces. Because a country like America will not allow you to produce steel in huge volumes where the carbon emission is five times compared to the same steel produced through electric arc furnace.
So they are replacing the old blast furnace route through the electrical furnace. So the demand of steel, we are not saying demand of steel is going to go up by 200, 300,000 tons, 2 million, 3 million tons. We are talking of demand of electrodes going up because there will be more electric arc furnaces which will be replacing the existing glass furnaces.
Rohit Prakash — Analyst
Do you mean to see that with this capacity addition that is coming for electrical furnace across the western world, you’re seeing an equaling capacity of blast furnace shutting down as well. Is it?
Ravi Kant Tripathi — Chief Financial Officer
Exactly, Exactly. That is exactly what is happening. If you go through some communication and on the websites of some of these companies, like let’s. I don’t know the exact, I don’t remember the exact number, but they are doing exactly this. They’re closing the blast furnaces and replacing them by the new electric arc furnaces because there is a big carbon tax that every steel company has to pay to the government as a penalty if you keep polluting the atmosphere five times more by producing that steel through glass furnaces. So the steel capacity is not increasing, but equivalent amount of glass furnace steel is being closed.
Rohit Prakash — Analyst
Understood. Okay, so that, that was helpful, sir. And I mean, given your exposure to the western steel companies. Do you have any commentary on. Because it’s. In your initial comments you talked about how Chinese Steel production is coming down but the exports have gone up significantly. So how do they see this anti insolution campaign that’s happening there? Do they see their impact and how do you. Is there any thought on how that might evolve over the next couple of years?
Ravi Kant Tripathi — Chief Financial Officer
Yeah, I didn’t hear the question clearly where the voice was not very clear to me. Can you please repeat it once more? Sorry about that. What, what were you mentioning with. Are you mentioning cbam? What exactly are you mentioning?
Ravi Kant Tripathi — Chief Financial Officer
Over the last four years we have seen the Chinese steel production coming down.
Rohit Prakash — Analyst
Okay, okay, okay. The exports go up over the last. That’s right around, right? So in your conversation with your current customers and there is talk of anti involution going on in China in terms of curbing destructive price reduction and you can see the free chemicals, is there any clarity on if you see export reduction or pricing improvement of steel coming from China?
Ravi Kant Tripathi — Chief Financial Officer
Okay, now I have clearly understood, you see that the last five years the production has declined by seven and a half percent in China. The problem is, as you keep hearing in the news also reading everywhere, that the housing demand has gone down a lot, that real estate consumption of steel has gone down. So despite a reduction in their production, their exports have gone up by 78% from 67 million metrics to 119 which are the record high. Now about the pricing, the destructive pricing, etc. You see like for example EU has a duty on you, you know that section 232, they have a severe duty on Chinese steel.
Now EU has introduced a C ban. So a lot of these Chinese steel was finding its way into EU. EU was importing almost 27 million metric tons and obviously most of that was blast furnace based. So if they put that additional carbon tax on that, to that extent they will protect their EU industry. Similarly there is some duty on Chinese imports into India. So the other countries when they are seeing low priced steel hitting their own domestic industry, they are of course raising their safeguards in whatever way possible like a section 232 in US, like a CBAM in EU, like something like a safeguard in India.
So I mean whatever we can say, but so far we have not seen this destructive or the word which you use involutionary, we have not seen that in steel. But yes, we are of course observing how each country is trying to protect their own industry from the onslaught of Chinese steel exports.
operator
Thank you. Before we take the next question, a reminder to participants that you may press Star and one to join the question queue. Next question is from Vijay Kumar From Immersion Learning Ltd. Please go ahead.
Vijay Kumar — Analyst
All my questions are answered. Basically I wanted to ask something about companies interest to increase its stake in Graphtech since graphite is also having some stake in the company. Any view on that?
Ravi Kant Tripathi — Chief Financial Officer
Now can you repeat your question please? So it’s basically about graphite. We have some stake. Do we plan to increase since the. Prices come much lower and even graphite. Has taken some stake in that company since the prices crashed day off. Is there any scope of increasing the stake? Well it’s much cheaper.
Vijay Kumar — Analyst
What was the last line you said?
Ravi Kant Tripathi — Chief Financial Officer
Is there any scope of increasing the stake? That’s what he meant. Do you want to increase your stake because the prices have fallen to that level?
Ravi Kant Tripathi — Chief Financial Officer
Yes. Yeah.
Ravi Kant Tripathi — Chief Financial Officer
So I don’t think we should talk about it publicly. So basically we have an investment committee who takes the decision on this investment. So. So more than that we can’t discuss anything on.
Vijay Kumar — Analyst
Sure. Thank you.
operator
Thank you. The next question is from Manan Paladia from MKP Securities. Please go ahead.
Manan Paladia — Analyst
Hi sir. Thank you for the opportunity. My question is on the graphite anode business. I think in the last call for the demerger you had referred to some margins based on power costs. And you’ve spoken about our power cost being significantly better than our competitors globally. I was wondering if you could throw some color on that and provide some clarity. I think that would be great sir. Thank you. So. Hi. So last time we had spoken in.
Ravi Kant Tripathi — Chief Financial Officer
Detail about, you know that in the. Anode project almost 30% of the cost is power cost. And the state government of MP has. Given us a real good deal in which you know our power prices will remain lower than five rupees. Significantly, probably lower than five rupees for at least five years from today. So that itself, I mean we don’t see anywhere whether it is China or anywhere else in the world where you would find cheaper power than this today. So that should be a good advantage to us. And that starts that power subsidy for. Us starts from the day of commencement of operations, not from today. So we’ll have a good five years to take advantage of that. Less than five rupees.
Manan Paladia — Analyst
Right. So just a quick follow up on that. You had also spoken about how you are seeing like 30,000.
Ravi Kant Tripathi — Chief Financial Officer
We seem to have lost the time for that participant. We’ll move to the next question. The next question is from Rohit from I thought Portfolio management. Please go ahead.
Manan Paladia — Analyst
Yeah, just one question. So out. So what is the peak utilization that we can do in terms of the capacity? Is it like 100% or I mean what is the practical peak that we can do from the current capacity? And it’s how you ton.
Ravi Kant Tripathi — Chief Financial Officer
I mean obviously theoretically anybody, everybody can go to 100. But see it’s a fairly complicated, It’s a very complicated technology. And that’s the reason that our plant was established in 1976 exactly 50 years ago. And there has not been a new greenfield plant of this product anywhere in the world except China. So the technology is very, very complicated. And just to give you a feel of what the complexity that you’re talking about, some of the electrodes, the minimum time that you take to produce a small size electrode, low grade electrode is five to seven weeks.
And the longest time that you take is as high as five to six months. And so that is the complexity of the technology. So if you are producing something where the process is like two to five or six months, anything goes wrong on any particular day or on any of the five or six different processes that we have to handle, it becomes a scrap. And that is the only reason that there has not been any new plant in the last 50 years.
Ravi Kant Tripathi — Chief Financial Officer
I just want to add one point here that you see 100,000 of course can be made but sometimes you don’t get the ideal, the product mix you like from the market. Of course if I limit ourselves to reduce a couple of sizes we can of course do 100. But just to answer your question or try hazarding a guess because we will also, I’m also going to see it next year how far we can push ourselves but probably 94, 95 might, might be, you know, in real working conditions. That is the. I think but we have to try.
We already at our 90 level. Now we’ll see with how far we can push ourselves to 94 or 95 subject to a certain product mix.
Manan Paladia — Analyst
Thank you very much. This is very helpful and all the very best for the coming year.
operator
Thank you very much. We’ll have to take that as the last question. I would now like to hand the conference over to Mr. Jinjunwala for any closing comments.
Ravi Kant Tripathi — Chief Financial Officer
Thank you friends for joining us on this call today. It’s probably been the longest call in the last two, three, four years and a lot of probing questions and every all of you seem to be extremely well informed about this industry. So thanks a lot and I look forward to meeting and speaking to you once again in three months time. Thank you.
operator
Thank you very much on behalf of SKP securities limited. That concludes the conference. Thank you for joining us ladies and gentlemen. You may now disconnect your lines.