HEG Limited (HEG.NS): BCG Matrix [Dec-2025 Updated]

HEG's portfolio reads like a strategic pivot: cash-generating graphite electrodes and captive power fund high-potential Stars-UHP electrodes and a ramping synthetic-anode business-while targeted investments and a stake in GrafTech give leveraged exposure to global steel and EV supply chains; question marks in advanced carbon materials, recycling and energy storage need focused capital to become the next growth engines, and legacy textiles, IT and low-margin RP electrodes are prime candidates for divestment-capital allocation over the next 24 months will determine whether HEG's demerger and green-tech bets convert steady cash into lasting market leadership.

HEG Limited (HEG.NS) - BCG Matrix Analysis: Stars

Stars

Ultra High Power (UHP) graphite electrodes constitute a Star for HEG Limited, driven by structural global demand from the Electric Arc Furnace (EAF) steel transition. As of December 2025 HEG's expanded UHP capacity of 100,000 metric tonnes is running at ~85-90% utilization to satisfy rising export and domestic orders. Global EAF steel production (ex-China) is projected to require an incremental ~200,000 tonnes of electrodes by 2030, a tailwind that positions HEG to capture significant share given its current scale and utilization profile.

Key strengths of the UHP electrodes Star:

• High utilization (85%-90%) on a 100,000 tpa base provides near-term production leverage.
• Clear addressable incremental market (~200,000 tpa ex-China to 2030) supports sustainable volume growth.
• Proactive capex: 650 crore INR to add 15,000 tpa by 2027 maintains supply-side leadership.
• Robust segment economics: Q1 FY26 revenue of ~609 crore INR with segment profit ~67.65 crore INR and EBITDA margin ~17% under pricing pressure.

Advanced Carbon Company (TACC), HEG's wholly-owned subsidiary, is a second Star: it targets the synthetic graphite anode market for lithium-ion batteries, a high-growth node of the EV supply chain. The first phase of the anode plant is nearing operational readiness (late 2025) with planned capacity of 20,000 metric tonnes per year. India's anode demand is forecast to reach ~140,000 tonnes (1.4 lakh t) by 2030, representing a large domestic market opportunity for TACC.

Strategic implications for TACC as a Star:

• First‑mover advantage in domestic synthetic graphite anode manufacturing aligns HEG with India's EV battery localization objectives.
• High projected margins (>25%) and ROCE (>20%) point to meaningful contribution to consolidated profitability once commercialized.
• Material addressable market (140,000 t by 2030) supports multi‑phase capacity expansion beyond Phase‑1 economics.

HEG's strategic equity investment in GrafTech International functions as a leveraged Star exposure to the resurgent US steel/EAF market. HEG increased its stake to 9.98% (May 2025), enabling participation in US demand dynamics where EAFs represent >75% of steel production and electrode consumption is large and growing. The investment delivered a mark‑to‑market gain of ~37 crore INR to Q1 FY26 net profit, and is underpinned by a strong treasury (~1,167 crore INR as of Sep 2025) that supports both organic and inorganic growth initiatives.

Operational and financial measures reinforcing the Stars portfolio:

• Maintained high utilization on core UHP capacity while executing incremental 15,000 t capex (650 crore INR) to preserve market share.
• Large strategic investment into TACC (1,850 crore INR total) with OCD funding (633 crore INR) to de‑risk funding and accelerate commercialization.
• Equity stake in GrafTech gives geography diversification and financial upside linked to cyclical US electrode demand.
• Segment-level profitability: graphite segment delivering ~17% EBITDA margins and visible topline contribution (609 crore INR in Q1 FY26).

HEG Limited (HEG.NS) - BCG Matrix Analysis: Cash Cows

Cash Cows

HEG's mature graphite electrode operations function as the primary Cash Cow, producing stable, high-margin cash flows that underwrite diversification and capex in green technologies. The core graphite electrode business-established in 1977-accounted for over 94% of total turnover in the 2024-2025 fiscal period and continues to operate from the world's largest single-site integrated plant at Mandideep, benefiting from significant economies of scale and a structurally low-cost operating base. Standalone total income for the September 2025 quarter reached INR 804 crore, reflecting steady revenue generation from this low-growth, high-share segment.

The following table summarizes key operating and financial metrics for HEG's graphite electrode cash cow:

Captive power generation is integral to HEG's cost leadership and operational stability. The company operates three power generation facilities-thermal and hydroelectric-with combined capacity of approximately 76.5 MW, primarily supplying its energy-intensive graphite manufacturing process and hedging against volatile industrial power tariffs. In the quarter ended June 2025, the power segment reported INR 3.78 crore in revenue and INR 1.56 crore in segment profit, with the division requiring relatively low maintenance capex while delivering essential operational support.

• Total captive power capacity: ~76.5 MW (thermal + hydro).
• Power segment revenue (Q1 Jun 2025): INR 3.78 crore.
• Power segment profit (Q1 Jun 2025): INR 1.56 crore.
• Role: Cost hedge for energy-intensive manufacturing; supports ~17% EBITDA margins.

The power infrastructure is also a strategic asset in HEG's corporate restructuring: these assets constitute a core component of the "HEG Graphite" entity in the ongoing demerger, preserving the low-growth, high-share cash-generating business as a funding engine for growth initiatives.

HEG's investments in Bhilwara Energy Limited (BEL) further strengthen the Cash Cow profile via steady returns from renewable assets. BEL manages a mix of hydro and wind projects across India, including the 76 MW Phata Byung hydro project. BEL recently attracted INR 250 crore of investment from Singularity AMC, bolstering BEL's capital base and valuation ahead of consolidation into the proposed "HEG Greentech" entity. These renewables provide stable long-term dividends and capital appreciation, complementing the graphite business cash flows and supporting sustainability-focused CAPEX.

Collectively, the graphite electrode business, captive power assets, and BEL investments create a diversified Cash Cow portfolio: high market share in a mature market, predictable free cash flow, low incremental investment needs for base operations, and the ability to fund strategic capex and green transition initiatives from internally generated funds.

HEG Limited (HEG.NS) - BCG Matrix Analysis: Question Marks

Question Marks - Graphene and carbon nanotube research represents a high-potential speculative venture. Through its specialized innovation center at TACC (Technology & Advanced Carbon Center), HEG is investing in development of advanced carbon derivatives such as graphene and carbon nanotubes targeted for next-generation green energy and electronics. Global market forecasts for graphene and advanced carbon materials project CAGR in the high single- to double-digits; conservative estimates place addressable market growth at ~20% CAGR through 2030, reaching USD 6-8 billion by 2030 for functional graphene derivatives. HEG's stated commercial-scale production target exceeds 4,000 metric tonnes per annum; current pilot output is in the low-tons range with commercial revenue contribution effectively negligible (<1% of consolidated sales). High R&D intensity, capex needs (pilot-to-commercial scale capex estimated at INR 200-350 crore depending on process route), and uncertain adoption timelines place this unit in the Question Mark quadrant.

Question Marks - Entry into the PET bottle recycling market targets the circular economy. HEG Greentech's strategic plan includes a ~INR 250 crore capex allocation to establish PET bottle-to-resin recycling lines producing high-quality PET resin for packaging and fiber markets. Global PET recycling market growth is forecast at ~7-9% CAGR; India-specific demand for recycled PET (rPET) is estimated to grow 10-12% annually driven by EPR regulations and brand-side commitments. The business is in early implementation: planned annual capacity is ~15-30 kilotonnes (initial phase), with projected EBITDA margins variable (estimates 6-12% in steady state depending on feedstock costs). Competition includes integrated recyclers and regional aggregators; consistent feedstock procurement, contamination rates, and pricing volatility are principal execution risks.

Question Marks - Energy storage solutions through RePlus Engitech target the grid integration market. HEG's investment via RePlus focuses on battery energy storage systems (BESS), power electronics and system integration for renewable projects and grid stability. Indian government and market studies indicate a need for ~260 GWh of battery capacity by 2030 to support renewable integration. RePlus is an early-stage entrant; target initial commercial order book guidance is INR 100-300 crore over 24 months, depending on contract wins. The energy storage segment requires sustained R&D and manufacturing scale; unit economics hinge on battery cell prices (declining but volatile - average Li-ion cell pack price fell from ~USD 350/kWh in 2020 to ~USD 120-160/kWh by 2024) and localization of supply chain. Classification as a Question Mark reflects high market growth potential but low current relative market share vs. global incumbents.

Common strategic levers HEG is deploying to move Question Marks toward Stars:

• Leverage decades of carbon chemistry expertise and existing graphite manufacturing footprint to reduce time-to-market and lower unit costs.
• Targeted R&D spending and pilot lines at TACC to accelerate technical validation and product qualification with OEMs (projected R&D run-rate increase of 15-25% YoY for the next 2-3 years in advanced materials).
• Use HEG Greentech as a dedicated management and capital allocation vehicle to incubate PET recycling and energy storage businesses, isolating project risk from core graphite operations.
• Pursue strategic partnerships with feedstock aggregators, battery cell suppliers, and technology licensors to de-risk supply chains and accelerate commercialization.

Measured performance indicators to monitor transition from Question Marks include:

• Time-to-commercial-scale: months to first 1,000 MT/yr (graphene/CNT) or first commercial BESS contract (RePlus).
• Unit economics: target EBITDA margin thresholds - >15% (graphene specialty products), >8-10% (rPET), >10% (integrated BESS solutions) for sustainable scaling.
• Order book and offtake agreements: signed MOUs or contracts representing >50% of planned initial capacity within 12-18 months.
• Capex-to-sales ratio and payback: target payback <5-7 years for brownfield-adjacent projects; internal IRR hurdle rates above corporate WACC.

HEG Limited (HEG.NS) - BCG Matrix Analysis: Dogs

Dogs

Non-core textile and IT service legacy interests face divestment or stagnation. The LNJ Bhilwara Group, HEG's parent conglomerate, maintains legacy interests in textiles and IT services that are increasingly disconnected from HEG's core graphite focus. These segments contributed approximately 1-3% of HEG's consolidated revenue between FY2021-FY2025 and have shown near-zero compound annual growth rate (CAGR ≈ 0% to 1%) over the past five years. Management has signalled deprioritization ahead of the planned 2025 demerger into 'Graphite' and 'Greentech.' A formal valuation concluded in H1 2025 precipitated a proposal to sell a 26% stake in Texnere India Private Limited; expected proceeds were estimated at INR 120-160 crore based on the valuation range. Legacy units report operating margins below 5% versus consolidated EBITDA margins for HEG's graphite operations of 18-24% in FY2023-FY2025.

Regular Power (RP) grade electrodes lose relevance in a UHP-dominated market. Global steelmakers are upgrading to Ultra High Power (UHP) furnaces; UHP adoption increased from ~62% of global EAF capacity in 2018 to ~81% in 2025. RP electrodes command prices 25-40% lower than UHP equivalents and generate margins that are typically 8-12 percentage points lower than HEG's UHP business. HEG's installed capacity of ~100,000 tonnes is now weighted >90% toward UHP/HP grades. Chinese exporters have contributed to oversupply in RP markets, pushing RP utilization rates down to sub-60% levels regionally and depressing average realized prices by ~15% year-on-year in 2024-2025. HEG's RP line showed negative volume CAGR (≈ -6% p.a.) and low market share in global RP volumes-estimated at <2% in 2025.

• RP price differential vs UHP: -25% to -40% (2025 market averages)
• HEG RP segment utilization: ~55-65% in FY2025
• Global shift to UHP: 81% of EAF capacity (2025 estimate)
• HEG RP revenue CAGR (FY2021-FY2025): -6.5%

Specialty graphite products for non-steel applications remain a niche segment. As of Q3/Q4 2025, specialty graphite for applications such as crucibles, electrodes for niche furnaces, and other industrial carbon products represented under 5% of HEG's consolidated revenue-approximately INR 40 crore in FY2025. These lines face competition from global specialty carbon firms (e.g., SGL, GrafTech) that offer highly customized solutions and have established customer relationships. The specialty sub-segment requires bespoke manufacturing with small batch sizes, producing lower throughput and limited economies of scale. R&D investment allocation shows a clear tilt: ~65-75% of HEG's carbon R&D budget in 2024-2025 was directed toward battery anode precursor development and process optimisation for UHP electrodes, leaving specialty legacy items underfunded.

Operational and portfolio implications include concentrated capital redeployment toward UHP and battery anode projects, potential impairment charges on low-performing legacy assets, and targeted divestitures to improve ROCE. Maintaining RP and miscellaneous specialty lines risks suboptimal asset utilization and margin dilution; divestiture or repurposing is the prevailing strategic course.