The demerger of LNJ Bhilwara Group company HEG Advanced Materials business will boost the market capitalisation of both the listed companies to ₹18,000 crore from ₹14,000 crore currently. This implies potential value unlocking of about 30 per cent, according to leading brokerages tracking the company.
Under the restructuring scheme, the existing listed entity, HEG Advanced Materials, will retain its growth businesses, including battery materials, graphene, battery energy storage and green power. The graphite electrode business will be transferred to a new entity, HEG Graphite which is expected to be listed on the BSE and NSE around 45 days after the demerger, likely in the second half of October.
Shareholders will receive one share of HEG Graphite for every share held in HEG Advanced Materials on a one-for-one basis.
Following this, shares of HEG Advanced Materials, formerly HEG Ltd, rose over 4 per cent intraday on Friday ahead of the September 7 record date for the company’s demerger.
Emkay Global Financial Services has valued the graphite electrode business at about ₹9,700 crore, or ₹503 per share, based on 12 times estimated June EV/EBITDA. The advanced-materials entity, which houses Bhilwara Energy and battery-materials venture The Advanced Carbons Company, has been valued at around ₹8,360 crore, or ₹254 per share.
Earnings Re-rating
Emkay expects graphite electrode prices to improve from the second half of FY27, potentially providing a catalyst for an earnings re-rating. “Higher GE prices” could flow through to Indian producers as global pricing strengthens, it said.
SKP Securities has also identified a favourable medium- to long-term outlook for Indian graphite electrode manufacturers. The brokerage said rising electric arc furnace capacity, global consolidation in graphite electrode manufacturing, higher Chinese electrode prices, rising input costs and improving steel production could support realisations and margins.
SKP has valued the businesses on a sum-of-the-parts basis and arrived at a target price of ₹755. Its valuation incorporates 12 times FY28 estimated EV/EBITDA for the graphite electrode business and 25 times for the graphite-anode business, along with HEG’s 45.62 per cent stake in Bhilwara Energy.
Scaling Capabilities
The demerger is intended to give investors differentiated exposure to two distinct businesses -a mature, cash-generative graphite electrode operation and a growth platform focused on advanced materials, battery energy solutions and renewable power.
Riju Jhunjhunwala, Chairman, MD and CEO, HEG Advanced Materials said the company’s immediate priority is to scale synthetic graphite anode materials and develop commercial-scale manufacturing capabilities, while expanding graphene applications.
The restructuring therefore gives investors a clearer view of the earnings and growth prospects of HEG’s legacy business while allowing the advanced-materials platform to pursue its longer-term expansion independently.