Electrode maker HEG announces Rs 7.5-bn buyback, Rs 12-bn expansion plan

Graphite electrodes manufacturer HEG has approved a Rs 7.5-billion share repurchase programme and Rs 12-billion expansion programme, the company said in a statement. HEG proposes to buyback 1.36 million shares at Rs 5,500 apiece through the "tender route". Shares of the company on Monday closed at Rs 4,338. The buyback is at a premium of 27 per cent. 

HEG also announced an expansion of its graphite electrode capacity to 100,000 tonnes per annum (TPA) from 80,000 TPA at a cost of Rs 12 billion. The company said it will fund the expansion through internal accruals and debt, if required. "The fresh capacity is likely to come on stream within 30-36 months. HEG is currently operating at a capacity of 85-90 per cent," HEG said in a statement.                                                

"The global demand for graphite electrodes is robust as the steel industry worldwide shifts towards the more efficient electric arc furnace route. With China shutting down excessively polluting steel production by BOF/induction furnace routes, the EAF (Electric Arc Furnace) route, which is very environment friendly, is gaining market share, resulting into a robust demand for our products. Domestically, with our steel industry consolidating and newer capacities also opting for EAF route, the demand for our product within India is also likely to grow in coming years," said Ravi Jhunjhunwala, chairman & managing director, HEG.

Shares of HEG have nearly tripled in the past one year. The company is currently valued at Rs 174 billion.