Graphite-maker HEG announces ₹750-cr buyback

2018-11-26

Nov. 26, 2018 - Our Bureau HEG, one the largest graphite manufacturers in India, plans to buyback 13.63 lakh shares or 3.41 per cent of the paid up capital at ₹5,500 a share.

The company, which plans to spend ₹750 crore in the share buyback, expects to complete the process in three months after the regulatory and shareholders approval.

The company will invest ₹1,200 crore to expand its graphite electrode production capacity by 20,000 tonnes to 1 lakh tonnes over the next 30 months. As of September quarter, cash and current investments were at ₹667 crore and net worth at ₹3,226 crore.

Public investors’ holding in the company was at 12.8 per cent. Of this, the number of investors with holdings of less than ₹2 lakh was 11.2 per cent. Due to the relatively large number of shares to be tendered by retail shareholders, the acceptance ratio is likely to be low.

Ravi Jhunjhunwala, Chairman and Managing Director, HEG said the company has a policy to return about 35 per cent of the profit to investors and buyback is tax-friendly due to the 20 per cent tax on dividend payout.

On a fresh capacity addition, he said the demand and prices of graphite is still holding up though there are some concerns on steel demand. Moreover, he said the cost of graphite in entire steel production cost is just 6-7 per cent.

Prices of graphite, the preferred raw material for steel making through electric arc furnace, has gone up to $14,000 a tonne from $2,000 in the last two years.

Allaying concerns on China restarting graphite production impacting prices, Jhunjhunwala said the company produces ultra-high power electrodes which are not produced in China.