HEG Advanced Materials Limited (HEGAM) Q2 2027 Earnings Call Transcript

Ladies and gentlemen, good day and welcome to HEG Advanced Materials Limited Q2 and H1 FY27 Earnings Conference Call, hosted by 361 Capital Market Private Limited. As a reminder, all participant clients 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 the conference call, please signal an operator by pressing star then zero on your touchstone phone. Please note that this conference has been recorded. I now hand the conference over to Mr. Pratim Roy from 361 Capital Market, Pvt Ltd. Thank you and over to you, sir. Please proceed.

Hi, good afternoon, everyone. On behalf of 361 Capital Market Research, I welcome you all to the Q2 and H1 FY27 Earnings Conference Call of ACG Advanced Material Limited. We are pleased to have with us today Mr. Dijil Sundinwala, Chairman, Managing Director and CEO, Mr. Om Prakash Ajmera, Joint Managing Director, CEO, Hydro Business and Director and Group CFO, Mr. Puneet Anand, Group CFO, Mrs. Neha Rajavanshi, CFO, Mr. Ravi Gupta, Company Secretary and Compliance Officer, Mr. Hiren Praveen Shah, Managing Director and CEO, RE Plus. NG Tech Private Limited, and Mr. Ankur Khaitan, Managing Director and CEO, TACC Limited. Before we begin, I'd like to remind everyone that today's discussion may contain forward-looking statements. These statements are based on the company's current expectations, assumptions, and estimates regarding future events, and are subject to various risks and uncertainties. Actual results may differ materially from those expressed or implied in these statements. We encourage participants to refer to the company's filings with the stock exchange for a detailed discussion of the risk factor. Now, I would like to hand over the call to Mr. Riju Dhuninwala for his opening remarks. Over due, sir.

Thank you and good afternoon, everyone. Thank you for taking the time to join us today for our Q227 earnings call. Before we dive into the numbers, I want to take a moment to celebrate a major milestone in our corporate journey. The successful completion of our de-merger with HEG Limited now operating as a pure clay graphite electrode platform and HEG AM stands proudly on its feet as a dedicated future-facing advanced materials and clean energy powerhouse. This gives both entities the clarity to execute their distinct strategies unhindered, and I want to sincerely thank our shareholders, regulators, and legal teams for making this new transition a reality. For those who are new to our story, HEG AM is built on the LNJ Bilwara Group's solid 65-year-plus legacy of scaling large industrial projects into highly profitable ventures. Our core motto across we do here is simple, research to revenue. Today, we operate through three fantastic pillars, TSEC, focusing on advanced carbon, battery anodes, and graphene. RE Plus NG Tech, driving battery energy storage solutions and EV solutions. And, of course, our green power reserve, which provides stable, debt-free cash flows to back our high growth ambitions. When we look at a microenvironment, the tailwind could not be stronger. The global shift towards clean energy is moving faster than ever. Global lithium-ion battery production is projected to climb from roughly 3 terawatt-hour in 2026 to 8 terawatt-hour by 2035. Naturally, graphite anode demand is tracking right along with it, expected to jump from nearly 2.9 million metric tons today to 8 million metric tons over the same time frame. Crucially, as global supply chains diversify, non-China anode demand alone is set to exceed 1 million tons by 2030. Thanks to forward-looking policies of the government of India, PLI schemes, etc., our domestic cell capacity is projected to reach 250 gigawatts by 2035. On top of that, stationary BES is turning into our fastest-growing segment, driven by data centers and grid stability, accounting for nearly 28% of the total lithium-ion market by 2030. We are sitting right where the market needs us to be. Looking at how we plan to capture this growth over the next two or three years, our execution map is fully underway. On the anode front, Our phase 1 20,000 metric tonne plant at Devas is already 61% complete, tracking for commercial commissioning by June 2027. We are already in advance discussions for over 100,000 metric tonne of customer MOUs. Looking further ahead, we have already laid out our phase 2 expansion to scale total capacity to 44,000 metric tons by March 2029 on the same land and on the same power footprint. As part of this scale-up, we are strategically driving backward integration into manufacturing our own graphitized crucibles in-house on graphene. Graphene is a revolutionary single-layer carbon wonder material whose multi-use properties transform performance across segments like concrete, trains, batteries, textiles, lubricants, and data center thermal management, among many other things. Our 10 metric ton graphene pilot plant is set up and running, and we are targeting 500 ton metric ton commercial plant to be operational by September 2028, with 90 tons of confirmed orders and LOIs already in hand. We are aggressively scaling our operational 1GW footprint towards the 6GW total capacity to capture the booming demand across EV mobility and stationary grid storage. As we talk, we are in active execution of around 1.5 to 2GW hour of solutions. Including... Q2 has laid down a very solid foundation for us. Our green power cash flows give us financial resilience. Our technology sets us apart, and our team's execution discipline keeps us firmly on track. None of this would be possible without the relentless hard work of our leaders, engineers, plant workers, and to everyone across the group who embody our core values every day. To our board, our continuous supporters, thank you. We are building HEG AM not just for the next quarter, but for sustainable, long-term value creation. Luckily, just to share with you all, our core values that we are operating on remain. Think scale. Perfect execution, hardcore R&D and innovation, invest in our team, speed of delivery, maintaining a healthy risk-free balance sheet, and lastly, what we follow in our group, absolute gold standard business ethics. To walk you through the specifics of our financial performance for this quarter, I would now like to hand over the call to our TFO, Ms. Neha Raghonshi. Neha, over to you.

Thank you, Mr. Sir, and good afternoon, everyone. It's an absolute pleasure to continue with all of you today following the two-league spiral quarter for ADP Advanced Materials. As our chairman has outlined, our structural reorganization has given us the absolute clarity needed to build a world-class, globally competitive advanced material platform. I will now take you through the financial performance of SEG Advanced Material Limited for the second quarter and first half of FY27. Before discussing the numbers, I would like to highlight that following the recent demerger of grapevine undertaking from SGD Limited, the comparative financial information for FI26 has been reinstated to exclude the demerge grapevine business. This ensures a consistent like-for-like basis for comparison and provides investors with a clearer understanding of SGD Advanced Materials financial performance. Coming to quarter 2, FI27 performance, our consolidated revenue from continuing operations stood at 430 crores compared with 176 crores in the corresponding quarter last year. Our total income for the quarter is 547 crores. EBITDA from continuing operations stood at 313 crores compared with 129 crores in Q2 FI26 translating into an EBITDA margin of 57 courses. Profit after tax from continuing operations increased to 209 crores, compared with 69 crores in the corresponding quarter last year. Moving to our H1 FI27 performance, consolidated revenue from continuing operations stood at 726 crores, compared with 329 crores in H1 FI26. Our total income for the first half stood at 871 crores. EBITDA from continuing operations was 438 crores compared with 270 crores in the corresponding period last year with an EBITDA margin of 50%. Profit from tax from continuing operations is at 269 crores compared with 168 crores in H1 FI 26. I would also like to highlight that a significant portion of the group operations in the hydro is in the hydro and wind power businesses apart from our growing the best business. The green power business is seasonal in nature and highly dependent on weather conditions, wind patterns, and water availability with a substantial portion of power generation typically concentrated between April to September. Accordingly, the financial performance is subject to seasonal variations and the results of different reporting periods may not be directly comparable. To give you the exact snapshot of our consolidated balance sheet as on 30th, September 27, 26, our total consolidated inequities since exceptionally strong at 2,510 crore. Our asset base, we hold a formidable consolidated total asset base of 4436 crores backed by 1300 crores of cash and bank balances against our long-term borrowing of 1036 crores, which renders us comfortably net cash positive on an overall cash-to-borrowing basis. On the financial and strategic front, our priority remains to maintain a proven balance between growth investments and financial flexibility. We will continue to focus on disciplined capital allocation, efficient utilization of resources, and timely execution of our ongoing capacities, extension projects across advanced materials and energy storage. As these businesses scale up, our emphasis will remain on operational readiness, manufacturing efficiency, and building a sustainable financial foundation to support the company's long-term growth ambitions. With this, I would like to thank our shareholders, our customers, business partners, lenders, and employees for their continued trust and support. I would like to open the floor and hand it back to the moderator to take your questions, please. Thank you.

Thank you. Yeah, for the team, sir? Thank you very much.

Yes, sir. Please.

Thank you.

Thank you, Neha ma'am. So, now I would like to open the floor for Q&A.

Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and 1 on their test on 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 a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Mr. Jatin Raghubanshi, from ABEX at Equity. Please go ahead.

Good afternoon and congratulations on the good side of Munger. Am I audible?

Yes, sir. You are audible. Please.

So my first question is on possible backward integration, like we are told that over 75 crore capex is going to happen and it will be replaced 17 million of import. So I just want to know like saving flow in data margin or it's already in about guidance of 30 to 35 percent. And one more, like in technology, this is in-house or we have licensed for this manufacturing capex?

Hi, thank you for the question. I believe, I mean, you're wanting to understand about the crucible project that we are doing as backward integration. So crucibles are a very important portion for the graphitizing of the anode powder. And, you know, the project that we have made will make us completely self-sustaining, and we will not have to import the crucibles from China. In addition to that, we will be, in fact, selling crucibles outside after using half the crucibles ourselves. Tell you more about crucibles, I have Ankur here with me, who's Managing Director of TSEC, and he would tell you more about.

Hi. So, as you mentioned, this is a very difficult part of the production at the graphitization process. This is a cylindrical shape graphite, which is today largely concentrated in China, but we know it very well how to think that's why we have taken up this project. And the first intent is to be very self-sufficient because this is the only raw material which today is coming from China. We are completely non-China dependent. And the second part is that we will have sufficient capacity of crucibles, which we can actually sell outside as well in the longer run. So this whole project is planned in a way that we are able to have a very healthy EBITDA as well as a very healthy payback over a short period of time.

And this technology is greenhouse or we are likened to this?

We know the technology very well. With HGG, we've been working on Crucible since the last many, many years. We know the Crucible technology very well.

Okay, and my second question is on, like, alien gigaffects is being delayed, like, so, what volume did we assume in our earlier app by trying to explain?

Your voice is, your voice is very, very heavy, unfortunately, we can't, uh, understand what you're saying.

Hello, sir, I'm telling you, like, alien gigaffects.

Sir, are you on loudspeaker, sir, please, Mr. Jatin?

No, sir. No, no, like, is it audible now?

It is audible, but sir, it is a little bit.

Yeah. So I'm asking like Indian. Hello.

You can proceed.

Yes. Okay. So Indian gigafactory has been delayed. So in starting, like what was our volume assumption and how we are planning to fill this gap?

Honestly, honestly, sir, we are unable to get... Are you talking about demand and supply of... Thank you, everyone, and welcome to the call. If you could repeat any questions, please. I think, sir, he will rejoin the queue.

We have the next question from Nishita from Sapphire Capital. Please go ahead.

Yes. Hello. Thank you for taking my question. So, I'm looking over the company for the first time. So, I'm sorry if my question would be repetitive. I just wanted to understand what is the total capex for all of these expansions that we are doing. So, like we are making an odd material capacity and then graphene capacity, also crucible. So, what is the total capex for this?

The total KPX number, including the existing 20,000 ton capacity that we are building, plus the ADISAS extension, and the extension to 44,000 ton capacity, crucibles, and graphene, is 5,500 crores.

Okay, can you break this up?

So, if I break it up, my current 20,000 ton capacity, the total KPX is approximately 2,350 crores. My new additional capacity will come at comparatively per megawatt per metric ton very less capex cost, so around that 1600 ton for additional 24,000 ton capacity. We'll be spending another 24,000 crores.

I'm sorry, 1,600 crores for additional 24,000, right?

24,000 capacity. We'll be spending 500 crores on graphene. And 475 crores on my crucible, 80,000 unit facility that we will be developing. We are already spending 250 crores on my RE plus expansion from my 1 gigawatt to 6 gigawatt capacity. And another 230 crores on one of my best IPP projects that currently we are doing in Gujarat.

Right, okay. So, the crucible capacity is going to be 85,000 units, right?

80,000, yeah.

80,000, okay. And what is the asset turn that we can expect from this?

My different business has different effect turn ratios, while Grammy, the effect turnover ratio is approximately 1 is to 1. The same is different from my Anode business, where it is comparatively higher.

Okay. So what will it be in Anode business?

0.8.

Yeah, for Anode it is 0.8.

A node as a turn is 0.8 times. So, that's lower than the destiny, right? You said it's high.

Right, sir.

Okay, okay. Understood. And I wanted to understand what sort of EBITDA margins can we expect from these businesses?

There are EBITDA margins from our note, because it's a, again, it's a price-sensitive information, but on a broader range, for a note, it will be somewhere in the range of 28 to 33%. My graphene will be higher.

Okay. So, higher than 33%?

Yeah, it's higher than 45%.

Okay, okay. And... With the crucible backward integration, our margins in anode will reach 35%. Is that right? Okay, okay. Understood. And my next question is, so we've already listed the HED Advanced Material Company. When are we going to list the HED Limited, the original business?

So, we are expecting the listing of HEG Griffite very soon. So, I think by third week of November, it will be listed. So, we are waiting for our last approvals, and once we get the approvals, we will come up with a date, but most probably it is the third week of November.

Right. Okay. And so I wanted to understand. So for guessing capacity, we already have 9 metric tons of orders in hand. But our demo capacity is just 10 metric tons. So how are we going to like do this order? How are we going?

So, ma'am, graphene is basically a nanomaterial. And this will not be a commodity, it's like a service as well. So, what happens is there's a journey behind it that since we've been working for more than two years on this, at the current facility, we have been catering in smaller batches, which is already like a commercial scale plant today, while the capacity is small. And based on this, the timeline is very well agreed for supply of the 90 metric 10 orders what we have. So, and this is very well aligned with our plant coming up, which is the first phase would be live by next year. So, the 90 metric 10 will be the first, will be serving the first from the main commercial plant, which is agreed with the customer.

Right. So, by when do we need to execute this? What is the timeline?

So, it will start by second round of next year.

Okay. So, the execution of this order will start by H2F by 28. Understood. Right. And once the capacity, like once we have the capacity for 20,000 metric ton of another material capacity also, and in the presentation, you mentioned that we already see visibility of 100,000 metric ton in that. So how fast can we ramp up these facilities that we are coming up with?

So, it's only the first year. As you can see, we have taken a very humble capacity utilization of 35% because it's a construction plant. It's a large construction plant, which is never a plug-and-play plant. And that is why the first year will have its own challenges, which we are mitigating as per the time. But at the same time, we are confident that once the capacity goes beyond 50%, then ramping it from 50% to 90% and even beyond is not a problem because the equipment are very similar and the capacity as well as the equipment are in a very linear way. So, once we start with 35, then 35 to 90 is not a problem, and at the same time, the additional 24,000 tons is also not a problem. So, this is what we are committing to ourselves as well as our shareholders as well as our customers.

Right. And are we also going to export?

Yes, the first 20,000 tons will be majorly exports.

Okay, okay. Understood. Yeah, thank you so much. Thank you, sir.

Thank you, ma'am. The next question is from Nilesh Jain from Astute Investment Management. Please proceed, Mr. English.

Hi, thank you for the opportunity. My first question is to Neha. Obviously, you've given us the total capex in terms of 5,500 crores. Can you broadly split by each financial year, maybe for the next three financial year, how much we will be capitalizing it?

So my ear on your Capex out of this is a major part of the Capex comes in FI 27 and 28, approximately 2300 in the current year, followed by 1600 to 1700 crores of Capex in next year. The balance will be incurred in financial year 29.

Okay, and just wanted to get clarification. So we had, we were planning to do two. Projects on solar, CMA, and hydro. In hydro, we decided we will not be going ahead. On the solar, what is the status? Are we looking to go ahead with that, or are we even not going ahead with that project?

So, hi, I have Mr. Ajmera, who's heading the hydro and the IPP division. He will just tell you a little more about that.

Okay. As far as the solar side is concerned, we are working on the 300 megawatt power project, a standalone solar project, on a C&I basis, and most probably this project will come in line 12 months from now.

What could be the amount we would be spending for this?

We will be spending about 1,200 crores.

Hello, sorry.

Hold on that quote.

Okay. The question is to Ankur maybe on graphing.

This is the project for which PPA is still under signing. So that is the reason. Currently in the KPEX number it is not included. So we share the details.

And if it happens, it will be a very good, you know, kind of IRR project. And actively, we are not really looking at many more CNI projects. But since this one is in our hand, and it is, you know, kind of very good double-digit IRRs in this, then we'll go ahead with this project. Thank you.

Sure, sure. My other question is for Ankur on graphing. So, obviously, we initially we are planning to add 150 metric ton. So, what do you want to understand this 500 metric ton? So, 150 incremental capacity would be the following year. Uh, and, uh... So obviously based on the conversation, which you would have with your customers also, if it would be at the same location, the entire final day metric time, or it would be at a different location as well.

See, 150 tons, actually it was about 150 to 200 tons what we had been contemplating earlier. But again, the graphene has got a major impact not only at the final usage level, but also at the environment level. And that is how we have also contemplated on the volumes and the kind of fraction we are getting with graphene in Indian as well as overseas geography. It made more sense to go up to 500 tons. And we are going into a new location for graphene, and we have split that into two parts. One is a 200 tons, the other is an additional 300 tons. And the reason of delaying of this additional 300 tons is because there are certain permissions, etc., which will be required for the additional quantity in terms of the land, environment, etc., due to which it can come a little later. But 200 tons, since the work we had already started, it can start much earlier. But yes, the reason of going up 500 tons is absolutely a customer pull, and we are very confident that this 500 tons is just a beginning.

Sure. Just one clarification. For the H1, we've done a capex of almost 490 crores. Large part would be for the Android business.

Large part of that is coming from the no business, yes.

Okay, thank you, and all the best.

Thank you. Ladies and gentlemen, for fairness to all, please limit your questions to two per participant. Should you have a follow-up question, we will request you to rejoin the queue. The next question is from Mr. Kevin Gandhi from CapCro Capital. Please go ahead.

Hello, sir. Thanks for taking my question. I hope I was audible. Good afternoon. Yeah, so my question was actually on the unified network business, the sales have actually gone down by 20 to 23% on QoQ basis. Has the utilization decreased or the realization part time has actually reduced? What's the reason for the downfall?

So actually, you know, I mean, on the graphite electrode, we will be having a full conference call about the results, I think, around one week after Diwali. And all these specific questions related to graphite electrodes can be answered then. But yes, what you're saying is more or less true. Everything is pointing towards a higher trajectory, including the margins, et cetera, there. But more about it later, I think, in the specific mapping protocol.

Thank you. The next question is from Anukul Arura from Sagun Capital. Please, go ahead.

Yeah, hi, sir. Thanks for the opportunity. I have a few questions on the RE plus division. Firstly, on the front, what kind of sustainable EBITDA margins are we seeing in the RE plus division?

Hi, this is Viren Shah. Yeah, I am here, sir. So, firstly, when we started this RE-plus with 1 gigawatt hour capacity, since we had limited production capacity available, we targeted only electric vehicle, high voltage range, and some specific products in the UPS segment. And now we have the 5 gigawatt hour capacity, which is coming in and will be operational from next year. COD is March 27. We will be manufacturing the BSS containers locally. And we have done the entire localization cycle. And we have also made products for the data center category. So, with this focus, I want to highlight that we are the company who have in-house capability of BMS, EMS, thermal management, design, and engineering. So, with this kind of capability and this kind of production capacity, I think definitely we are shifting from what we were doing traditionally in the last two, three years as EPC to product manufacturing and supply. So definitely with the localization and all these factors coming in, definitely there is much more scope to improve the EBITDA margins and make this business more and more sustainable. Currently, I'm not factoring the facts that a lot of thrust and you must have seen in the new tenders which are coming with VGF and also NTPC that there is a local content requirement. So all those factors will only add on. I'm just saying purely by the capability point of view, we're definitely working on the improvements of margins and sustainability.

So, any ballpark number that you could provide us, and if you could also provide us, what was the rational behind going into this business?

So, basically, rational is very simple that more and more localization, like we have seen the trend in solar, initially, most of the projects, and because there is a huge demand. So, let me start from the demand side that RE business, renewable energy business. Definitely needs, you know, battery energy storage solutions. And in the next 10 years, the demand is 480 gigawatt hour for just for the renewable, you know, renewable energy storage. So you have seen that the multiple CEA guidelines that have come starting from 1% going up to 10% will go up to 30% of storage, which will be mandatory with every renewable park. To top it up, there is a strong EV demand coming from OEMs and not every OEM has a capability of doing battery packs. Third, huge demand coming from data center. Fourth, there is a huge demand for DC replacement and the traditional technology of lead-acid battery replacement by future technologies like lithium-ion batteries. So all of this put together almost is close to more than 1000 gigawatt hour of, you know, lithium-ion battery demand in the next 10 to 12 years. So definitely, you know, there's a huge potential in this industry and a huge business opportunity for all of us. To add to that, globally, what is happening, we know the geopolitical situation, and everybody is looking for China plus one option. So, we have an office in, you know, we have representatives, and we have office in Dubai, and we are getting solid traction from the AMIA market as well, which is just a buildup at this moment. Not much of business has been converted, but there is a lot of traction which is happening. Globally, everybody is looking at China plus one option. So, this is all helping us and it's definitely a huge potential business. So, I mean, I cannot name a perfect number for the EBITDA, but definitely double digit. And also for different category of business, there will be different EBITDA margins like center. has the best EBITDA margin, followed by EV, followed by BSS, and the UPS inverters. So, I can just say that.

Okay, sir. So, are we doing EPC or boot? And if we are doing boot, so how much CAPEX are we thinking? And I think, and on the working capital side, I think on the IE plus, the working capital is generally stretched. So, if you could just throw some light on that side.

So, actually, when we started, while we were building up the factory and while we were developing the products and getting the products certified, so, At this point of time, let me pause and also share that all the products that we have designed and manufactured are all certified for all the global standards, even the BSS container. We have received, you know, all the international standard certifications for our BSS container. Data center products are all UL certified. Our telecom products are TSEC approved. All our, you know, home residential UPS products are IEC approved. So EV is basically all ARAI and, you know, ICAT approved. So, while we were doing all of this, we were building up all these things. Basically, we took a position of doing EPC business so that we can keep a connect in the market, and we can also have a relationship, you know, establish working relationships with the IPPs and the developers. Not to forget the, you know, the utilities and also study the market. So we build up the EPC business as a first step. And then going forward, we are going more towards the product sales. We are more focusing on manufacturing and supply of our products. The ratio of EPC business over a period of time will come down. At this point of time, around 70-80% of the business is EPC, and 20-30% of the business is manufacturing and supply. From next year, See, from the next one, we will keep only for starting projects, and then focusing more on the supply side. This is how we can roll this out.

Anything on the working capital side? I think working capital requirements are pretty high in this domain.

So, anything you can throw some light on this.

EPC projects and we know that and we know how these projects are dependent on multiple factors like land connectivity and so many things. So I think the ratio will focus more on the production and supplies, it will improve. Currently, because we're doing EPC, yes, the cycles are longer, but yes, over a period of time, this will also change.

Okay, sir.

Got it. So my last question would be on the side of graphene business. So what kind of realizations are we seeing in the graphene domain?

It's difficult to talk about realizations on graphene part because, as we said, it's a very customized product, changes a lot from industry to industry, and both from the technical perspective as well as the usage perspective. So, while we cannot comment on the realization perspective, but we can definitely say with quite confidence that nothing is spoken less than 35-40% of EBITDA margins right now, 35-40%.

And also, like, we're putting up a 500-ton plant or this thing. Or at around 500 crores with around 1 is to 1 capital output ratio. So, you can do the math yourself. I mean, the average would come out to be something around that. And with a healthy 40-45% EBITDA margin.

Okay, sir. Got it. Thank you so much, sir. Those were my questions. Thank you.

Thank you, sir. Pat Spence. We request you all to please limit your questions to two per participant. The next question is from Mr. Rajesh Setia from iThoughtPMS. Please go ahead.

Yeah, hi. Sir, just wanted to check about the capacities that we are putting up. Do we have confirmed orders from our clients in the future, or how is it that we are getting the confidence about putting up so much of money?

So, I'll take that question as its most appropriate question in terms of, you know, We have set up a pilot plant around two and a half years back, through which we've had around more than 1500 to 2000 rounds of sampling of our products going to customers. Now the customers that you're talking about are all the non-Chinese cell makers, which could be in Korea, which could be in Japan, there could be large automotive players based out of the U.S. Based out of Germany, Middle East, etc. Even Indian companies who are coming up with the cell companies. So, I mean, while almost all these contracts that we are signed and are in the process of signing, they are very, very clear with us that, you know, they're on an absolute kind of no-name basis. But I can tell you on a cumulative volume front, I think our decision to go up from 20,000 to 44,000 was led more by customer demand and less by intent. So, you know, while we are in the process of signing all these documents, I think if we stuck to a plant of 20,000, we would not be able to provide even more than 25% of what the customer needs are. So, 44,000 tons, I mean, once the plant is absolutely stable, which I think in six months it would be after our commissioning, it would absolutely not be an issue to sell 44,000. And we would be looking at our next portion of growth over there. 44,000 we have limited ourselves right now because the current site that we are working on, at the 105-acre site at Devas, after all kind of engineering and trying to fit in as many tons over there as possible, this is the number that maximum we could come up with, 44. We would have been happy if we could set up 60,000 in the same capacity. So getting customer traction is not a problem today, in fact. And this I'm talking about only the global customers today. But don't forget, I mean, once the Indian customers start coming, let's say even 100 gigawatts start by 2030, that translates into 100,000 tons of anode material only which would be needed by the Indian players. And we believe that we are far ahead of the curve of any other company that plans to set up the anode material because everyone has to go through that cycle of 12 to 18 months of pilot plant, testing, accreditation, etc. by the global players. So we are in a very comfortable situation over there. I mean, in terms of the overall plan, the kind of government support that we are getting, I mean, in a few days, we'll be able to talk about it more in terms of the different programs that the government is running in terms of subsidy, etc. there. And so, to answer your question, I mean, the customer demand is not at all an issue, and we already have around three or four confirmed signed letter of intent, and in the next three months, we will be signing at least three or four more, which will probably take the capacity for more than 44,000 if you actually add them all up. So that's what gave us the confidence to do the initial 20,000 and then 244.

Sure. Thanks for the detailed answer, sir. One more thing. In India, I think we are the only suppliers, going to be the only suppliers for beef, anode, and caffeine, right?

I think I'll let Ankur answer that question.

Well, on Anode, you know there are players who are working on it, but we have the first mover advantage, that is for sure. That when we are talking about 2027, then we will be the first to move ahead and again. There are players who are working, you know them very well. And in Graphene, at the scale we are talking about, yes. First, to be supplying and working at that scale, and to such a large base customers, because we are not limited to one or two customers and one or two industries alone. We have a very big basket of industries which we are catering to for our graphene.

Thank you. These margins that we are making obviously is bound to attract a lot of competition in the market and maybe from outside as well. So how do you see overall markets spanning in the next 3-4 years and the consequent effects of the economic opportunities? Because right now, it looks very attractive.

So, see, I mean, in terms of, you know, initially also what we said, I mean, today the global demand is around 3 terawatts, which will go up to around 8 terawatts, which takes up the total anode demand that is there, which would be around 3 million tons today, to around 8 million tons. So, demand-wise, the way the lithium-ion ecosystem is moving. Anode will always be in a short supply. Any graphite-related product in the next 5 years or 10 years, I should say, is going to be in extreme short supply. Having said that, of course, we are one of the first plants that would be coming up outside of China. And when we are starting this particular plant, it's with this very clear intention that we are able to compete with the Chinese at every stage. So the power rates, the power rates that we've been able to get from the government, the raw material that we have been working on from our parents company, HEG, from a long time, our technology readiness in terms of this thing, and especially now adding this 24,000 tons to the 20,000 tons, therefore, you know, kind of, we were putting up this 20,000 tons at 11 lakh rupees per ton. Now, the balance 24,000 will be coming up at 6 lakh rupees per ton. So, the average goes down to 9 lakh rupees per ton, making us very, very competitive and making us a factory of scale. So, in terms of margin, I mean, they are very confident that with the backward integration combined of the crucible project, we'll be able to do north of 35% in terms of the EBITDA margin. In the anode, and in graphene, today we do not really see any major competition over there per se, and tomorrow even if there is competition, the market is very large, and it's a custom-made product, so we will not be doing that at anything less than around 40-45% EBITDA margin there.

And, sir, are we the only company going to be, which is doing capital integration, or the competitors are also planning for that?

I mean, I have absolutely no state to... So, say that whether competition would be planning or not. What sets us apart from competition is one thing, is that since we have been producing graphite electrodes for a long time, the technology to make something like crucibles, etc. also does not come cheap, and it's available to us. How it is available to our competition is, you know, kind of up to them. But we are very, very confident that we will be able to use all these fusibles and export half of them at a very, very healthy rate.

Sir, one last one. The other income, what are the major constituents of this high other income that we have?

I'll let Neha, I'll let, sorry, Mr. Ajmera talk about the other income, but I can tell you that if you see the breakup of the other income, half of it would be something that would be reckoning every year, and half of it would have been one time, but Ajmera can explain better.

Yeah, next to you, there's... Most of the other income right now is coming from the transmission line. We have one dedicated transmission line of 175 kilometers, and that has been converted recently into the DM-ISCS transmission line. This transmission line was built up in, way back in 2011, and since then, this transmission line is being used by a couple of other developers also. So we had been talking to the government to get the revenue out of it because other people are using our transmission line. And finally, we were able to get the order recently about a year back that, yes, this transmission line is deemed to be a HTS with retrospective effect from August 2011. And therefore, there is a one-time income, which is the area for last 10 years we received last year, and some of the portion is coming this year also. And that is why this portion is giving the other income at a higher level. Besides this, we have a regular transmission income also from the same transmission line. And recently, some of the income is coming from the insurance claim, which is not going to be there in the future. So, these two components are there. Otherwise, there is a income, other income coming from the REC sale also, because these hydro projects are eligible for issuance of renewable energy certificates. So, this is also a regular income. So, there are partly, there is a regular income, partly is a one-time income.

I think overall, this is another income, as I said, is the regular income. So, half of the income is related to the interest what we have earned on the bank deposit and on our mutual fund.

Yeah, one thing I mentioned. Yeah, I forgot to mention that the company is sitting on a large amount of cash into the fixed deposit. So, this is the recurring income coming from the interest on FD.

Okay, sir. Thank you so much. Thank you.

Thank you, sir. The next question is from Janish Shedha from Kemfin Family Office. Please go ahead.

Good afternoon, sir. I'm audible.

Yes, sir.

Sir, I have one single question. It's related to your segment financials. If I look at the segment financials, the power, the revenue from power grew by 15% on a pot-on-potter basis, about 212 crores, but the segment EBIT went up by 64% to 190 crores. So what was the reason for this higher increase in the EBIT margin?

It's basically because of the higher receipt of the one-time income in the second quarter. As Ajmeela sir was explaining, which is in the form of interest, what we have received on our transmission line, and the insurance claim amount, which leads to the higher EBIT in the second quarter.

So, if you can help me break this 190 crores of power segment EBIT, how much would be a steady-state basis, and how much would be one-time?

So, approximately 40% of that is one time, and remaining 60% is a regular exit.

Okay, got it. Thank you so much. So, that 40% will not be recurring in Q3 and Q4, right? Yes, we are right. Thank you so much.

Thank you. The next question is from Shani from Central Insights. Please go ahead.

Good afternoon. So, as a new investor to your company, I wanted to obtain understanding on your anode business. So, could you help me understand the raw material's composition of your finished anode material, both in terms of volume and value? And could you provide the details of the sourcing mix, including which countries or suppliers this material are stored from, and what proportion is sourced domestically versus imported?

Thank you, ma'am.

I'll help you give an overall detail, but there might be some things I cannot say outrightly. So, first of all, when you're talking about the raw materials, there are two most important raw materials. One is the oak, which is basically a green petroleum oak. The other is power. And together, they take more than 60% of the overall cost. And when you talk about the suppliers, then there are, we are focusing on non-Chinese suppliers because that's the demand from our customers. And since you know, HEG is operating at more than 100,000 tons today. So basically, the suppliers are the same and they have very independent free stock for the anode raw material. So, we are in advanced discussions with them where they have given us some confidence that the supplies will not be a problem over the kind of quantities we are targeting. And the main geographies from where they come is, again, US, UK, and Japan. And about the pricing, I'm sorry, I mean, pricing is not something which can be very well discussed because there are larger ranges and at the same time, there are a couple of grades, between anode material itself where the different grade of raw material goes so I think so and anything else you want to know on the on the raw material side?

No, that's helpful. Other than that, one of my questions is could you provide like comparative breakdown of the current landed cost of implicit crucible versus expected in-house manufacturing cost and also what percentage of our total crucible requirements can be met through in-house manufacturing at the initial stages?

In a range, you can say about what we are, it will be 40% cheaper compared with the import. But here, it's not only about the cost, but it is also about the dependency. And again, you can, when we make a business plan, then for imported crucibles, there are certain amount of working capital which goes up drastically high, which we'll be able to reduce it in a big way. So it's not only the cost of the crucible, but overall the economics of the project, which makes it very healthy.

And how much of our in-house requirements will be met via this backup integration.

100% of our in-house requirement would be met by the plant. We would require at the peak around 40-45,000 crucibles in-house, and the balanced crucibles we will be selling outside, which are in extreme short demand today, because the only producer of crucible again today is China, and we will be one of the only companies producing from outside of China. The possible project actually is a very, very profitable project on its own.

Thank you.

Thank you. The next question is from Harshi Cheda from Sentra Insights. Mr. Ashit, please go ahead.

Thank you.

Sir, again, sir, your voice is a little bit heavy. Hello, can I share now?

Yes, yes, you can you can ask. Yes, please.

Yeah, my first question is, I wanted to obtain a brief understanding about our end to end manufacturing process for graphene. What are the key processing stages involved? And how does the manufacturing process work?

So, the graphene process is not a textbook graphene we make. It's a very customized process, and it involves various chemicals as well as reactions in that. Unfortunately, we cannot disclose that process outrightly because it's a patented process of our own where we've been working for more than last seven years. So, but basically, it's a kind of graphite material, which has where we layer out the graphite completely using different methodologies. And you can imagine the graphite material has got millions of layers and those layers have been trying to be removed where the graphene is finally produced. And again, there are several grades in graphene where the methodology changes. So it's a highly technical process, very, very high values to entry in this kind of process. That's the reason we cannot explain the whole process in a very simple way.

All right. And a question on the anode side.

Our process is completely patented.

Have you filed a process patent for it?

Yes.

Okay. My other question is on the anode side. Other than raw coke, what is another raw material that we can use to make graphite anodes?

There can be experiments, but in reality, since we are talking about a large capacity and we are talking about all the class A customers whom we are supplying to, so we are not doing any kind of experimentation in our plant. That is why the focus is very clear that where today 98% of the material made in China is made with this kind of raw material and we will be doing the same. There will be no new experimentation from the main plant.

All right. And to make anodes, what do we require other than rock? Is there any additional materials you need to add to it?

There are other materials which are smaller in quantities. For example, when there are some certain kind of fish required, there are certain, as you know, there are crucibles required and power. So overall, the number of raw materials required to manufacture anode is very limited.

And also, just if I can add to what Ankur is saying, this is the other thing that Ankur is talking about are the basic anodes, but as we go forward, when we are working with our customers, and if we want to make the… Absolutely high-end anodes that go into drones. EV, other application, then you have silicon-doped anode, graphene-doped anode. So we are actually working with our customers on things like this, which will completely change the entire scenario in terms of sales. So the idea is to, you know, while we sell the regular grade of anode, which will always be sold in large volumes, but if we can increase the sales of our specialized anodes, that will add to the top line significantly. So there you'll be adding stuff like silicone and graphene, etc., which constant R&D is going on to and so with all the customers for that.

Thank you. The next question is from Mr. Kaushal Sharma from Equinox Capital. Participants, please limit your questions to one. Mr. Kaushal, please go ahead.

Hi, sir. Very good afternoon. I'm a audible. Yeah, so just want to understand your R plus size. Thank you, everyone, and thank you for your contribution. So what amount of capital that we have involved in this and when are we expecting to commercialize this city and what kind of revenue production are they expecting? From this side, the unit economics in terms of IRR and EBITDA, do you right on that?

Kaushal, we are not able to understand the question. Can you be a bit clear?

Yeah, so my question is on your R plus BAS capacity that you are building a 5 gigawatt additional facility. So could you explain the unit economics in terms of EBITDA or the IRR in this that we are going to make in this and what amount of capex as we put up in this 5 gigawatt R setup now?

Yes, so the total capex, it is put to expand the capacity from 1 to 60 gigawatt is 250 crores. The EBITDA numbers, as it is a very highly competitive market, so it remains in the range of, say, 10% plus minus 1, 2% kind of. The third question, you talked about IRR. So, the IRR business in RE+, we could say, it's a low Kpex, high turnover ratio. So, in that case, RE+, is having a good IRR number on an overall basis.

Thank you. The next question is from Mr. Mr. Meeth Buha from Integrative Ventures. Please go ahead. Please limit your question to one.

Yeah, hi. Am I already?

Yes, sir, please.

So, I have the question on crucible side. I just want to understand what portion of the raw material requirement is the crucible is, and the crucible that we are planning to sell outside, what is the realization and margins on that?

See, the crucible raw material is basically when we graphitize in our anode business. So in the anode, we have the graphitization furnaces. So the packing media which is used in graphitization that ultimately becomes a raw material for crucible. So, the raw material is available with us in a natural process of making anode. Secondly, realization, I mean, you can connect with the numbers itself because realization is a, outside realization is very healthy because while we are talking about 30-40% saving when we are using it internally, the realization outside again is about 30-40% at a bit-time margin. So, the realization overall is very healthy in the crucible part.

Thank you. The next question is from Mr. Prakash, as an retail investor. Please go ahead.

Hi. Good afternoon, everyone. So I have a question regarding when we put all these things together, how are we looking into the FY28 numbers in terms of the top line and margin? If you could give us some kind of indication across business line and the group together.

So, I think the steady state numbers, which will be FI 2930 numbers, that will give me a more steady state, both in terms of my anode graphene and my Aliglas numbers, which will be somewhere in the range of 7500 to 8000, 8200 kind of revenue numbers. By beta numbers, we talked about the percentages earlier. So, the average beta at the group level will remain to be in the range of 25 to the 228 version.

Thank you. The next question is from Mr. Ahmad Madha from Unifi Capital. Please go ahead.

Yeah, thanks for the opportunity. Firstly, just to understand the power business, how much units one can assume annually from our two hydro power plant plus one wind plant? About 1000 million units, is that fair to assume?

Yeah, you see, the normative level, normally we produce about. 1 billion units every year from both the plant. But again, it depends upon the availability of water and other factors. So it depends on availability of water, whether we can produce more and less also. But on a non-material level, you can very well assume about 100 cloud units every year. And also the red cloud is going to the government of Imachibudas free power. So, balance is 80% is available for sale.

That's true. Okay, just quarterly, assuming the business is seasonal, considering the water availability and skewed towards the first half and Q2, can you give some sense, generally, not just the specific this year, but generally, how is it distributed among four quarters? So, 75-25%.

Between the first half and second half.

First half, we produced 75%, and the second half, we produced 25%.

Understood. And I think, obviously, the spot pricing have been a little favorable, at least this financial year, the first six months. So, is that fair to assume, depending on how the spot prices trend, our profitability will be also in accordance with that?

You see, the sport prices are dependent on so many factors in the country. As you know, we are selling in the exchange, Indian exchange market, and which deals with only 10% of the power of the total power consumed in this country. So, it really depends on the monsoon, it depends on the availability of the coal to the thermal power plants. So, these are the factors which are going to determine, plus the demand of the power in the country overall. And what we have seen recently, the demand is going up and the supply is going down because of the non-available thermal power in the market. And therefore, the prices have found up. And our belief is that this trend is going to continue for next couple of years, that's for sure. And I cannot say about more than five years or so, but next five years, we are projecting in the same range what we are selling today, the power is. Another thing is we have a reservoir for peaking power. So, on normative level, we produce about 70% non-peak power and 30% peak power. So, we are taking the advantage of peaking rates, which is right now going to the top of about 10 rupees or 9 rupees or something like that.

Understood. So, sir, when we generally we have been guiding the investors around 350 crore in the power business, that assumes far lower, maybe 5.5 rupees pricing compared to probably higher which you are getting today. Is that fair to look at it?

Yes, you can see that because since we are operating in a merchant market, so we don't want to be very, very aggressive for next five years. So when we are projecting one number, we go with the reasonable number, of course, on a conservative basis.

Understood, sir. We had 1,000 crore cash on works. I believe because we are now different entities, have we been able to figure out the way to upstream the cash from one subsidiary to other subsidiary because our power businesses will have the cash accumulated and will continue to generate incremental cash, but the other entities, other subsidiaries will need that cash flows. So, I have been able to figure out a way to upstream the cash and then be distributed to our other businesses.

See, we are working on this aspect, and as you know, that recently we have acquired the 49% stake from statecraft, and that has been funded by the 50% by the banking community and the 50% by our own company and family office. So there is a debt also in one of our subsidiary companies who has acquired the stake. So, therefore, we are working on it, and I would request Poni to explain more on this.

So, see, we may evaluate all options, how we can consolidate our entire power business altogether, and how we have to utilize the money in the best possible way for the growth of the business. But give us a few quarters, we'll update you. We have some class on the table.

We are working on that.

Thank you, sir. We have next question from Mr. Arjan Ranjan. Please go ahead.

Hi, sir. Is there been a real statement in the power segment?

And I just wanted to know the current PLF factor and revenue realization.

So, the PLF factor that we've had is around the

PLF factor,

we are working on 43 to 44 percent,

both

the projects together, and the pricing, as you know, that we are operating in merchant market, every day we are selling at a different price, but certainly this year our price is ranging between 6 to 6.5, 6 to 6.5.

Thank you.

Thank you. Ladies and gentlemen, we will take this as a last question. I now hand the conference over to management for closing comments.

Thank you, everyone, for joining us today and for your continued interest in HEG Advanced Materials Limited. We are building a differentiated platform across advanced materials, energy storage solutions, and green power assets, while maintaining a very, very strong focus on disciplined execution and long-term value creation. We remain encouraged by the progress across our pre-growth initiatives and look forward to updating you on our journey in the quarters ahead. Overall summary, I mean, we are looking at a very healthy, steady-state EBITDA, as Neha had mentioned. The theme remains research to revenue, so we are spending a lot of time, money, effort on research, and ultimately it is all now coming back to us in the form of revenue in the next two or three years. And there is a lot of this thing, a good thing that we are seeing from the customer of states. Government incentive is something that we will be in a position to talk very soon, and that will form a very substantial portion that will add to our ROCs, which we are talking about in all the different businesses. In any case, more than 20%, 25%, etc. And when the government subsidies come, I think those should go ahead. Overall, thanks a lot for the first call. We'd be happy to have any one-on-one meetings for anyone for further queries. You can get in touch with Neha or the company secretary. And I would personally want to invite anyone on the call to visit our state-of-the-art R&D facilities where all this magic is happening because I do believe seeing is believing. Thank you once again and have a good day.

Thank you, sir. Thank you, participants. On behalf of 361 Capital Markets, that concludes this conference call. Thank you for joining us, and you may now disconnect your lines. Thank you.

Thank you.