HEG plunges 9% after it announces demerger of graphite business, to consolidate Bhilwara Energy with itself

HEG on Wednesday announced that it will demerge its graphite business into a new company and will consolidate Bhilwara Energy (BEL) with itself. The Advanced Carbons Company (TACC) will continue to be the wholly-owned subsidiary of HEG, it stated. Following the announcement, shares of HEG plunged over 9% on Thursday.

The company said the demerger will create two strong entities which would offer better growth prospects while providing a focused approach and management.

The company’s graphite business will be incorporated into a new company which is expected to be listed in 2025. Meanwhile, the existing company will become a platform for green energy business through its merger with BEL. The merged entity will also be involved in energy storage solutions and advanced carbon business through RePlus and TACC, respectively.

According to the demerger scheme approved by the board of directors, shareholders will receive one share for every equity share of the demerged Company. For the merger, shareholders will receive eight fully paid-up equity shares of the transferee company for every 35 shares of the transferor company.

The firm pointed out that following the restructuring, shareholders will possess shares of two publicly listed companies, each with a sharper strategic focus and enhanced investment profile.

Ravi Jhunjhunwala, chairman, managing director, and chief executive officer of HEG said the underlying growth drivers, risk profile and capital allocation requirements are fundamentally different in the graphite business compared to the green energy business. “The scheme will enable both companies to pursue their strategies and have focused management,” he said. HEG, an LNJ Bhilwara group company, is a graphite electrode manufacturer. The company exports over 70% of its production to more than 30 countries.

Shares of the company have risen by nearly 27% since the beginning of the year. The stock has gained over 109% in the last one year.