HEG Limited (HEG.NS) Earnings Call Transcript

Good day, ladies and gentlemen, and thank you for attending this virtual meeting. I'm pleased to welcome you on behalf of HEG Limited and SKP Securities to HEG Limited, demerger update webinar. We have with us Mr. Riju Jhunjhunwala, Vice Chairman, HEG Limited; Mr. Basant Jain, Joint MD and CEO; Bhilwara Energy Limited; Mr. Manish Gulati, Executive Director, HEG Limited; Mr. Om Prakash Ajmera, Group CFO, HEG Limited; Mr. Puneet Anand, Group CSO, HEG Limited; Mr. Ravi Kant Tripathi, CFO, HEG Limited; Mr. Ankur Khaitan, MD and CEO, TACC Limited; Mr. Hiren Pravin Shah, MD and CEO, RePlus; and Mr. Salil Bawa, Group Head Investor Relations. Today's virtual meeting is being recorded for compliance reasons. During discussion, there maybe certain forward-looking statements, which must be viewed in conjunction with the risks that the company faces. We'll have the opening remarks from the management followed by Q&A session. Thank you, and over to you, Mr. Jhunjhunwala.

Thank you, Navin Ji. Good afternoon to all our shareholders and participants on the call. Thank you for joining us today and for your continued trust in HEG and the LNJ Bhilwara Group. Today's call is focused on our proposed composite scheme of arrangement, the demerger of our existing graphite electrode business into a separate listed company and the formation of a listed HEG Greentech company that will house our integrated clean tech business. A brief note before I begin. Certain comments may be forward-looking and are subject to market conditions and to the receipt of necessary regulatory and statutory approvals. Why are we doing this? Sharper focus and value unlock. We are at an inflection point where 2 strong franchises sit within 1 listed company, a mature cash-generating graphite electrode business and a fast scaling Greentech growth platform. These businesses have different growth drivers, risk profiles, capital needs and valuation frameworks. The scheme is designed to unlock value for public shareholders by creating 2 focused listed companies, each with its clear strategy, governance and capital allocation discipline. In practical terms, the scheme is intended to deliver a clear value discovery as each business can be valued on its own merits or demerits, better transparency and capital allocation assigned to each business model, improved strategic flexibility, wherein maintaining strong governance and promoter alignment. What the schemes mean for you as a shareholder. Subject to approvals, the scheme proposal following mechanics. Demerger the existing graphite electrode business into HEG Graphite Limited and issuance of shares to HEG shareholders in a 1:1 ratio on the record date. Merger of Bhilwara Energy Limited, which houses 2 of our hydroelectric assets, with the existing listed company with the shares issued to BEL shareholders other than HEG based on completely independently determine swap ratios reviewed by merchant bankers. Post implementations, HEG Graphite Limited will be renamed HEG Limited and the current HEG Limited will be renamed HEG Greentech Limited. The structure is designed to preserve continuity. You will hold shares in the legacy business of the graphite electrodes through the new HEG Limited company, and you will also hold shares in HEG Greentech representing the clean tech businesses. Understanding HEG Greentech and integrated clean tech platform in India's energy transition growth story. India's decarbonization and electrification agenda is accelerating at the adoption of -- by the renewable and energy storage and in turn, driving demand for battery materials and enabling infrastructure. HEG Greentech is being built as an integrated clean tech platform to operate across the renewable energy and battery storage chains, both growing at a fast pace. HEG Greentech, as you see below, will be operating across 4 synergistic pillars. First, being the advanced battery materials. Over the last couple of years, India's renewable capacity additions have shifted away from stand-alone solar and wind projects to FDRE, RTC and storage led tenders, including stand-alone BESS driven by intermittent generation, peak versus off-peak differentials, phasing out of banking tighter DSM provisions for renewables, supportive policy measures and falling battery prices. Battery storage is increasingly becoming a critical component of upcoming projects, both for utilities and for C&I consumers. India has also seen a very strong growth in EV penetration across segments with the government's agenda of making India more self-reliant in battery storage. A range of fiscal and nonfiscal measures are encouraging local manufacturers of batteries and associated value chain materials. More than 150 gigawatt hour of local lithium-ion battery cell manufacturing capacity has already been announced in India. At HEG Greentech, we have identified advanced battery materials as a key growth pillar, starting with the establishment of a 20,000 tonnes per annum Active Anode Material manufacturing facility. We intend to be high-quality technology-led anode manufacturer catering to multiple battery chemistries and to end users. To this end, we are working on silicon and graphene-based doping solutions to enhance their existing anode performance, RE power generation, solar and BESS. Our investee company, RePlus is a leading battery energy solution provider with a broad portfolio across the BESS, EV and hybrid applications. RePlus has a highly automated 1 gigawatt cell-to-pack line, which is currently being expanded to 6 gigawatt hour as we speak, and it serves marquee customers across these segments. RePlus is creating a niche by indigenously developing smart battery and grid malleable solutions in partnership with leading academic institutions, along with the cloud-based analytics platform. These capabilities can help improve performance, enable AI/ML-enabled insights from across the battery life cycle and reduce the levelized cost of storage. RePlus is well positioned to benefit from the rapid growth in storage adoption across segments and is building tailor-made solutions aligned to global standards. It has also established an office in Dubai recently to serve a growing Middle East and Africa region, where grid-scale storage deployments are scaling up as much as India. The third pillar being the renewable energy IPP. As mentioned earlier, India is moving from a stand-alone solar and wind to FDRE, RTC projects with a large BESS component. Accumulative BESS capacity of over 250 gigawatt hours is projected across utility and C&I segments with annual installations expected to rise meaningfully over the decade. With RePlus' in-house technical expertise in energy storage solution and a team with a track record of building and developing multi-gigawatt solar assets. We are building a storage led IPP platform to capture the growing demand for firm and dispatchable renewable power. During the current financial year, we have secured an order for a 200-megawatt hour BESS project in Gujarat. We have emerged as the L1 bidder for a 1,000 megawatt hour stand-alone BESS project in Maharashtra. We are focusing on stand-alone solar and solar plus BESS projects in both B2G and C&I with a clear aim to deliver an Equity IRR of anywhere between 16% to 20%. The fourth business, which is the pillar of our company to begin with is the RE power generation, the hydroelectric plants. We have 2 highly efficient run-of-the river hydroelectric projects in Himachal Pradesh, Malana around 100 megawatts, operational for 25 years and AD Hydro 200 megawatts operational for 15 years, both delivering consistently an 80% high EBITDA margin. Both these projects are debt-free, eligible for renewable energy certificates and operate as run-of-the river plants with approximately 3.5 to 4 hours of reservoir capacity enabling peaking generation. These assets generate steady cash flows of approximately INR 300 crores plus annually, strengthening the platform's resilience as we scale. We have also signed a conditional agreement to acquire a 76-megawatt hydroelectric project in Uttarakhand and are in the process of securing the necessary approvals. Subject to approvals, this could be a very attractive addition into our hydro portfolio. Road map, discipline and shareholder value creation. We remain committed to disciplined execution and transparent communications as the scheme progresses through the stock exchange and NCLT approvals. If approved, shareholders that have direct ownership in 2 focus listed companies, one anchored in a global graphite electrode franchise and the other positioned for long-term growth in India's energy transition, enabling clear value discovery and unlock value over time. Thank you for your time. With that, I would just like to introduce to you the management team that is here today with us. And apart from them are others who are present with us who will be answering the questions. I'm pleased to introduce Mr. Basant Jain, who is the CEO and Joint Managing Director for the company. His resume speaks for itself. And ex-MD and CEO from Mahindra Susten, he's led clean tech portfolios, including 6-plus gigawatt solar projects and 25-plus years experience with leading large industrial companies. So it's a pleasure to introduce you to Mr. Basant Jain. Mr. OP Ajmera, who is the Group CFO and CEO for the hydro and wind segment. Mr. Ajmera has been with the group from inception, I would say. And he has led the entire hydroelectric power business of the company, which has enabled us today to get to the Greentech platform. Mr. Ankur Khaitan, who is the CEO of the Advanced Battery Materials, the anode project in the company called TACC. He has 17-plus years of experience with 12-plus years at HEG Limited in its graphite business. And later in the presentation, you will come to understand why that is very, very important in this particular framework that we are trying to work on. Mr. Hiren Pravin Shah, who is the CEO of RePlus, the battery energy solution. He's a very, very passionate battery man. That's all I can say, 23 years plus in the battery segment and new energy solutions with -- having worked with pedigree companies like Panasonic and Delta and lead ESS projects for Jio, Tata, AWS and Indian oil. He breathes and eats, I think, BESS. You have Puneet Anand, who is the Group Strategy Officer, who is helping us create a very robust platform in terms of efficiencies on taxation, in terms of new business ideas. And Puneet's experience has been 16-plus years of experience, I think 14 out of the 16 being in Ernst & Young at very, very senior positions. Mr. Salil Bawa, who is the Head of Investor Relations. Thank you, Salil, again, for helping Puneet and everyone at SKP organize this call. Salil would be based out of Mumbai. So he will be your point of contact for any information that you need from the company. He has had 25-plus years experience in this business with companies like DHFL, Edelweiss and Welspun. Mr. Karunesh Chaturvedi, who is the Head of the Corporate Affairs. He has over 30-plus years in Corporate Affairs and Strategy, Advocacy and Government Affairs. He's been the ex-Head of Corporate Affairs, Welspun India, Waaree Group, et cetera. Ms. Indu Mehta, who is the Chief Sustainability Officer for the company. Her resume includes 30-plus years in sales and marketing across industries, and has been a director with us in our other companies like Bhilwara Infotech, et cetera. And one of the newer members of the team, Mr. Ranjan Sarkar, who has a lot riding on his shoulders as the Chief Human Resource Officer for the company with 25 years in HR leadership in large Indian companies and MNCs, including being the ex-President of HR in Exide Industries. So with that, I think I will end my part of the presentation, and I'm around for any questions or answers that we'll have after the presentation. With the promise to everyone that we are trying to build over in HEG Greentech is absolutely aboveboard and will carry the legacy of the LNJ Bhilwara Group forward as its fourth pillar, textiles, graphite, power and now the new generation. So Basant Ji, Basant, over to you. I think Basant will do the talking from now, and the rest of us are available on the call.

Thank you very much, Riju, and a very good evening to all. Thanks for taking out time. Riju has already given a good introduction. Let me just try to explain these businesses in a little bit of detail. As Riju mentioned that we are building India's first technology-led integrated Greentech in our platform which primarily focuses on storage as a technology and all other businesses around it. To begin with, one of the most promising business which we see in our portfolio is our advanced battery material vertical wherein we are setting up a 20,000 tonne annual plant, which will produce one of the highest quality synthetic graphite material for lithium-ion batteries. As we speak, the plant is already at an advanced stage of construction near Indore. Apart from this, we are also, as Riju mentioned, that in the RE power present through hydro assets and storage-led IPP and battery energy solutions through RePlus. In all 3 businesses, India is going to see a massive capacity addition over the next few years and the reasons which Riju articulated how the India is decarbonizing it's energy sector trying to make India as a self-reliant and hence, lithium-ion batteries, battery materials, battery storage solution, and then the RE, IPP, they will all play a significant role, and we want to be a sizable player in all these segments. Next one, please. So why anode material? As we all know that the today lithium-ion battery technology has overtaken -- or any form of the technology, whether it's -- and it has emerged as one of the most promising technology for storing the energy for a variety of reasons. One of the biggest reason, of course, is the falling prices. The price is stumbling from $450 to now almost like $60, and that has led to the increased penetration. Because of the increased penetration of batteries across all segments, be it electric vehicle, battery energy storage and hybrid applications, there is a significant decrease in the anode material demand. Which from on the current level stands at 1.5 million tonnes as per the projections given by the leading research firms. This demand is likely to reach to about 4.5 million tonnes. Now typically, 1 gigawatt hour of battery requires about 1,000 tonne of anode material. That's the kind of thumb rule. Now as Riju mentioned that India is going to see a capacity addition of almost 150 gigawatt hour over the next 4 to 5 years' time that will entail a demand of almost 1.5 lakh tonnes in India. Apart from this, lot of global cell OEMs are also looking at manufacturer outside of China. As we all know that the China today controls almost 97% of this synthetic graphite supply globally. And from a derisking point of view, all these European and American and even Asian vendors are looking at suppliers who can deliver high-quality anode material at a competitive price. And we are here to set out and meeting this requirement. Apart from this, the PLI scheme, which mandates the domestic value add starting from 25% to going up to 60%. These local Indian cell manufacturer will be required to outsource battery materials locally to meet this [ DBA]. And we believe anode material will be the first one to be adopted in this anode direction. Next one. What is our right to win. This, I think, I already explained. So we all know that how Indian cell landscape and global cell landscape is going to be a factor for us to be confident about this vertical. Next one, please? What is our right to win? As we all know that we are one of the leading player in the graphite electrode in our space. Having a plant which delivers these anodes at the world beating cost structure, while -- one of the most complex process in the graphite electrode [indiscernible] this is a process which entails a lot of technologically sophisticated process control. And we are the one who have perfected this art with the experience of 50-year plus in this space. The process for manufacturing the synthetic graphite for battery anode material, it's similar, if not same, to the process being followed in the graphite electrode. And even the raw material, which is required is same. Taking the expertise of our HEG Limited, we have decided to get into the synthetic graphite manufacturing. And what we did, we ensured like in HEG that we have access to the best technology, which can help us compete with the Chinese. As we all know, the Chinese are already ahead in many aspects. But given our experience and expertise we are very confident of ensuring that we also deliver the material, which meets the requirement of the global OEMs. In this direction, we already set up 200 tonne of pilot plant almost 2 years back. Next slide, Puneet. The idea behind setting up this demo plant was that how do we really make all these global cell OEMs comfortable. Because we don't want a situation where we set up a plant and then we are sending the material for certification. It would have delayed the, I would say, commercialization of the plant or material. So this 200 TPA plant is absolutely identical in terms of process flow and then the technology, which is being used for this 20 KTPA plant, which is being built. So the material produced by 200 TPA plant has been sent to almost over 20 leading global cell OEMs. And these cell OEMs have tested our material. And I'm quite pleased to say that majority of the cell OEMs have been extremely pleased, happy with our material, both in terms of the material specifications and quality. And now we are at a stage where we are now discussing with them the -- potentially the terms for the long-term offtake. Next slide. There is lot of innovation which is happening in the battery anode material. As everybody is chasing for the higher energy density and faster charging time. There's a lot of elements which are being added to the synthetic graphite. One of them is the silicon. We are working on manufacturing our own high-quality silicon material, which if it is doped with the anode material will increase the energy density by almost 20% and also improve the charging time. Likewise, we are also at a very advanced stage of producing quality graphene. Which again, if added to the battery anode will further improve the charging speed and also prolong the battery life. In terms of our product mix, we will be catering to the price-conscious ESS segment and then the mid-range and high-range EVs with where the -- which are premium segments where the energy density and charging speed is the -- really the primary criteria. And hence, the silicon doped and graphene doped anode material will come into play here. Next one, please. As you could see here some of the pictures, this plant is spread across 100 acres already at an advanced stage of construction. Overall progress of the project is 30%. Bulk of the procurement process is complete a 90% -- over 90% engineering is also over. We have built this plant with the aim of expanding it to 30 KTPA within the same premises at a very optimal investment. This will further reduce our CapEx per tonne cost and also reduce our OpEx, thus enhancing our competitiveness further. We aim to expand this overall capacity to 60 KTPA by FY '32. This decision to invest this additional CapEx and will be taken once we stabilize our initial 20 KTPA plant. Next slide. What is our go-to-market strategy, as you mentioned. A team is already in touch with almost every single cell OEM. Some of those names are supplying to the [ marquee ] electric vehicle EV OEMs and even the companies which are making the batteries for the -- all segment, the ESS or hybrid. We are -- the team has already advanced to your discussion with customers, which could potentially offtake 30,000 metric tonnes, which is more than the capacity which we are setting up in Phase I. As I mentioned about graphene. We all know the graphene is considered -- known as magic wonder material apart from utilizing part of the graphene in our anode material to enhance its longevity and also improve the charging [ rate ] graphene also has some of the unique applications, as you all know graphene has a strength almost 200 times than steel. It is one of the lightest yet strongest material available on earth. There are very interesting use cases of graphene right from cement to the textile to paint and as I mentioned, anode, and we already piloted and experimented in cement and road infra, where we got a very encouraging result. There is a very good economic case for doping a very tiny quantity of graphene, which will -- which improves the anticorrosion properties of concrete and also reduces cement consumption significantly. In textile and paint also, there have been very encouraging results. So over the next few months, we will complete these testing. And then we will -- we intend to set up a 4,000 metric tonne of graphene derivative plant within the same premises where this anode plant is coming out. Next one. Battery Energy Solution. RePlus is a portfolio company, which provides the Battery Energy Solution. We all know how battery energy storage demand is going up, both in India and globally. As energy becomes -- as more and more solar is deployed and people are finding it very difficult to really -- or there is a massive surplus of daytime power due to excess solar capacity. Solar is now becoming an integral part of all projects, whether it's in India or Middle East or even Western world. Next one. Even in the EMEA region and Middle East, again, I know we have seen a multi-gigawatt hour of single location project with the power backup ranging from 2 hours to 6 hours. There have been some cases in Middle East, where 100% solar is being stored and then being discharged in the evening hour. At RePlus, we are fully focused in developing solutions, a plug-and-play solutions which will ensure the on-site and installation time is reduced. A solution can withstand all extreme weather conditions, whether it's India or even Middle East where the ambient temperature goes up to 50-degree celsius. And also ensure that the life of the battery installed is adequate enough for people to get the economic returns and out of their projects. Next one, please. As you could see here, we are already -- we have commissioned 100-megawatt hour plus capacity, both within India, and we have done some [ marquee ] projects in Saudi Arabia and DRC, which reflects the confidence our customers have about our offering. We have over 2,000 megawatt hour of capacity under execution in different part of the world. As I mentioned that the India and MENA region remains a key focus area. And we already have an office in place in Dubai. And as we speak, we are already in discussion with all Dubai-based IPP who are working in both MENA as well as the other African countries. And we will soon -- we should be able to secure a good chunk of orders from these markets as well. Next one. In case of EV, as we all know how EV penetration has really gone up significantly in India. As we speak, the growth rate in the 2-wheeler, 3-wheeler and buses and trucks, especially the segment, it's 20% plus CAGR. And I'm pleased to share that today we have the AIS-certified battery pack for all these applications and in many cases, even certified by ICAT and some of the battery packs homologated with the buses and 3-wheeler and trucks. We see this as a massive growth area. And RePlus is well positioned to be a leading partner for these EV OEM player. Next one. In case of hybrid applications, where most -- in most of the applications, the lead-acid batteries are paving the way for lithium-ion both from the price standpoint and the overall life point of view and also from the safety and I would say, the overall energy density standpoint. There are a lot of very interesting use cases emerging now, especially for cases like your data center where you need to have a very fast response in battery solutions. And we at RePlus are well positioned to cater to the needs of emerging segments like drone, data center, and even telecom tower, where most of the earlier installed lead-acid batteries are now being replaced and now lithium-ion batteries are becoming a norm there. Here again, we are the industry's first and in fact, India's first battery solution provider, where our packs are certified by TSEC, that means we can sell our packs to some of those very, very demanding markets even in European market. And we are also working on solutions for the IC rate batteries, as I mentioned to you, for -- especially for the data center and drone applications. Next one, please. RE power generation and solar BESS. We all know that how the whole Indian RE landscape has changed. The chart towards your top right, illustrates the current situation of RE in India. As you could see from almost 10, 11 a.m. till 4 p.m., the RTM, which is the real-time market for the renewable, the price point falls to practically 0. That means there are very few takers because of the mismatch in demand and supply. What is also concerning is that even though the prices are have reached to a near 0 level. The overall volume clear in RTM market during these hours is only 20%, 25%. That has set the panic button among the utilities. So if you see none of the utilities are now going for a stand-alone solar projects anymore. And they are being very reluctant to sign even the earlier awarded capacity because of this reason only because they are obligated to buy these units at whatever INR 2.5 plus where they are not able to find customers. So now almost every single project in last 18 months, if you see, is now integrated with the BESS in some minimum of 2 hours, in some cases even 4 hour and 5 hours as well. And even a lot of hybrid and RTC capacity has been auctioned, which requires a significant chunk of BESS to be part of the overall project in our mix. In addition to this, we have also seen the DSM, which is deviation settlement mechanism, charges going up significantly. Government is now making the DSM provision for RE almost at par with the thermal, that means you have to -- if you do not deliver the scheduled energy, then you will be penalized in a heavy manner. Now in many cases, the decent penalty is very, very steep in excess of INR 1. What it means that all RE developer will have to forcibly integrate storage because you can't avoid the, I would say, intermittency of power or the variability in the weather. Hence, now the storage is only way to go. And we all know the banking provision in almost every state is now going away because all DISCOMs are now facing losses. So they don't want to give banking as an artificial storage capacity. So now there is a more of a TOD-based settlement. So all these factors are driving the demand for BESS storage in a massive manner. Apart from this, as you know, there are a lot of policy tailwinds while ISTS waiver for the conventional RE is now being withdrawn by 2028 fully, but Ministry of Power has kept the waiver extended for the stand-alone BESS up till 2028, and we believe it might be extended further to improve the penetration. There is a BGA provision also, which has also led to the reduced cost of BESS for the DISCOMs. There are market dynamics, as I mentioned earlier, that the battery pack price is falling. And then as the TOD based -- the banking provision moves away and then the DISCOMs are ensuring that your RE capacity is limited to your connected load. So without storage, you can't really have a meaningful, I would say, RE penetration. So if I were to look at the stand-alone pure solar, it's only 12-percent whereas with solar and BESS, you can go up to 63%. So all the factors which are leading to the higher adoption of BESS projects in India and globally. Next one, please. Now these are I just now mentioned. So if I were to look at even the economic case for it, if you look at the peak grid power rate, which is after 6:00 p.m. and up to 10 p.m., it is invariably INR 9 in majority of the state. So even if I were to look at the current solar rate and then the LCs of BESS, you are in the money. So your the cost of solar-plus BESS is lower than your grid power. And this grid power, by the way, is a brown power and then you get green power at a price lower than the grid power. So this is where the most of the DISCOMs and even C&I consumer, primarily are now more and more inclined to have solar-plus BESS to meet their nano requirement. Next one, please. As I mentioned that India will see an annual addition of close to 50, 60 gigawatt hour per annum both in utility as well as C&I space. What is our right to win? We have a very strong IPP team. The team, some of the very senior people from Statkraft have joined us, and we also build a very experienced team over the last couple of months. We have a very strong technical know-how through RePlus and TACC to ensure that we choose the right kind of batteries and now the supply chain is, I would say, ensured through RePlus. So all these factors give us that extra edge over our competition. Over the next 5 years, we intend to build a total portfolio of about 5.9 gigawatt hour in BESS and about 3.7 gigawatt hour in the solar. And then the philosophy which you're going to follow here as Riju said that we'll target 16% plus IRR, which we are very confident using our -- given our expertise. And we will follow the capital recycling model because we don't really -- we don't see ourselves becoming a long-term asset owner in Re space. Once the project is stabilized, it is delivering the generations as per the design, then we will sell it to some of the InvITs. So as to improve our overall returns going forward. Next one. In hydro, as I mentioned, that we are one of the pioneer in this space. And then the performance of both Malana and AD Hydro speaks volume about the -- how the quality assets should be built. And these are today considered as a role model in Indian hydro energy sector. As Riju mentioned, we operate 2 plants, very high quality, delivering consistent EBITDA. We have proven a lot of [ naysayer ] wrong where a lot of people said that we should really contract this capacity on a long-term basis. But the management that time took a decision to keep this entire capacity on a merchant basis, and now we are reaping the dividend of the strategy. As we speak today, these projects deliver almost INR 370 plus crore EBITDA and a free cash flow of INR 300 crores plus. I mean these are all like -- both the projects have reservoir. So hence, we take advantage of generating during peak hour and getting extra that revenue. Next one, please. This is a synopsis of the CapEx which we have planned over next 3 to 4 years. By end of [ Feb ] '27, we will -- we intend to deploy almost INR 4,300 crores of capital, bulk of it is going in anode material and RE power generation and then taking it to overall CapEx of INR 7,700 crores. As I mentioned that while you see a big chunk of RE capacity coming here, but using a build and flip model of capital recycling model, we would like to minimize our capital outlay here. Assuming 30-70 capital structure, the total equity requirement comes to INR 2,300 crores. Hence, we are well capitalized for this kind of a growth plan, which we have set out ourselves for next 3 to 4 years' time. And thank you very much. With this, I will end my presentation. Now over to now Riju and Salil and team and then maybe open for questions. Riju, maybe you may like to open this floor for Q&A?

No, I think you've summed it up well, if I could just add a couple of things from the management side. I mean, from my side, the absolute vision, everything is absolutely clear in my head that we have to be following the highest corporate ethics possible. We will maintain in this particular company, the best-in-class team. So every business that you are seeing that [ Sanji ] just spoke about all the 4 different SBUs right now. Although they are -- sound like we have 4 different businesses within the company, but all 4 of them are being headed by very, very strong individuals who are the best-in-class in that particular segment. So we will continue to focus on team building. R&D is one area that we would wish to spend a lot of money on as a company. because contrary to our existing businesses of textiles, graphite, et cetera, R&D has to be a major portion if we have to stay ahead of the curve. So I mean, these are the 2 or 3 guiding principles and of course, the principle of scale on how to scale up this particular business is something that we relooking at as 4 different SBUs operating within the confines of HEG Greentech as a company. So glad to take any questions. I think we have all the CEOs of the existing businesses over here. I'm so glad to answer any question that anyone may have.

Thank you, Mr. Jhunjhunwala and Mr. Jain. [Operator Instructions] A request if participants could introduce themselves before asking the question. We'll take the first question from Amit Lahoti.

Amit Lahoti from Emkay. I have a few questions. The first one is that on Slide 4, how do we arrive to promoter group interest of 61.92%. Does it take into account the swap ratio given by the valuers.

I think, Puneet, you could answer that question.

So Amit, the shareholding of promoter has increased because the BEL, which is getting merged it is 50% -- 49% are owned by HEG and 51% was owned by promoters. So they are letting their shares of BEL and in view, they are getting shares of HEG Greentech pre se. It is as per the swap ratio given by PwC and wedded ISEC.

Right. So what is the swap ratio here?

It's 8:7. For every 7 shares, they are getting 8 shares.

Okay. The second question is the acquisition price for Phata Byung Power Plant that you are about to acquire. So when is it expected to get completed? And what is the acquisition price? .

The acquisition price, if I can say that, I mean, that's kind of confidential between us and Statkraft right now. But I can tell you it's not anything very significant. In fact, we're getting a good value out of that because the project has a lot of built-in stuff in it when it comes to the tunneling and the material that has been ordered. So we are -- I think we have to wait for the next 4 to 6 months for all the environment clearances, et cetera, to happen. And after that, I think we can quickly build the plant up in the next 2.5 years. And it will be up to us at that time to decide whether to keep it open as a merchant plant or to tie it up at the 16% return on equity kind of fixed plant.

Okay. Got it. And then a few questions on TACC. How much CapEx have we spent on this anode project so far, given that our progress is currently at 30%. So can we say 30% of CapEx has been spent or it is little more or a little less?

I'll ask Ankur to take that question. Ankur is leading TACC and the entire anode project.

So we have committed more than 50% of the CapEx, which will be spent over the next 15 months now. And all the major commitments regarding the procurement is done. And of course, the engineering, which is also a very critical part of it is completed.

Okay. So we have spent 50% already on this.

In terms of commitment, yes.

Okay. But in terms of actual cash outflow from the balance sheet, how much is that.

In terms of cash outflow, it will be close to 30% depending upon different [indiscernible] various terms and conditions, yes.

Right. The second thing, which I wanted to check on the same TACC project, the CapEx per tonne, which I calculated for 20,000 tonnes of -- works out to $12,500 per tonne in terms of CapEx intensity. And whereas the selling price for this anode is about $7,000. So this implies asset turnover of about 0.6x. So with that economics investor make 20% ROCE? Or is it going to be little possibly aspirational at this stage?

No, it is not aspirational because when you see the overall market, then if you see the market outside China because as we covered in the presentation as well that today, the -- most of the market is concentrated within China. And when we are speaking with various companies outside China, which does not only include the Indian geography but other geographies, including Europe, U.S. and the Asian markets, then they are very much willing to work with non-Chinese players. And with us having a very rich background in terms of graphite and carbon knowledge as well as operational factors of that. Today, we are in very advanced discussions with the key players in the market and which gives us a very positive edge. So all the demo plant material, which is going to the customers, and the kind of responses in terms of -- both in terms of product quality as well as a willingness to offtake the material for -- over the next 5 to 7 years we are getting is very positive, and it doesn't give us any reason to think that we would have any ROI less than what you have mentioned right now.

Right. So eventually, we will be looking at a price hike from the current level of, say, $7,000 to $8,000. Is that what you intend?

Yes, definitely.

Right. And the last question here is from the perspective of demerger that we have current consolidated net debt of about INR 500 crores for the entire HEG Limited business. So how are we going to split this between the graphite business and the Greentech business at the time of demerger?

I think Puneet would answer.

Amit, I'll take this question. So Amit, at the HEG level today, we are not on the debt side. Net we are positive. The entire debt, which you see in the HEG balance sheet is primarily for the graphite business, and it will go with graphite.

So HEG Greentech exits at a 0 net debt initially.

Technically, you can say yes, but all the debt which has being taken for TACC will go with TACC. Other than larger debt is towards HEG graphite business.

But could you quantify the amount, what will remain in the graphite business in terms of either gross debt or net debt?

So I think it will be a net debt -- it will be still a debt-free company. if we do the division. So basically, HEG Greentech, it's a INR 750 crores amount committed by the Board for TACC plus they have certain surplus assets which have been left in the company wherein the merger is going on with BEL. Other than that, graphite will take the additional cash plus the investment, which is in GrafTech and the working capital limits. So since the -- since the scheme appointed date was 1st April 2024, so by the time it gets implemented, I don't see a larger portion of debt, which is -- would be in if HEG graphite also.

We take the next question from Dhananjai Bagrodia.

This is Dhananjai Bagrodia from [indiscernible] just wanted to ask you, sir, the company which you're acquiring in BEL one which demerging, what were the revenues of that company. .

I didn't understand your question, Dhananjai can you repeat.

BEL, which is over 49% of the company, what were the revenues of that? And what multiple would that be valued at?

So the valuation is done by independent valuer with PwC. And the BEL today has around EBITDA of INR 400 crores, which is getting merged into this company.

And what values is it getting merged at?

At what value. The value is around INR 2,100 crores.

So around 8x EBITDA.

Around 8x EBITDA, you can say. But it also has some cash. So net cash, if you see the numbers will be different. So the entire calculation and the valuation has been already been uploaded with the stock exchange, you can go through that.

Sure. And regarding the advanced battery material business, so if the anodes are going to be then the graphite -- sorry, [ ATG ] stand-alone business and in this business, is that right? Or how will that be done by the management for anodes going ahead.

So what the demerger process is we are only demerging the existing graphite business. The old business will be in HEG Greentech which is warehoused in a separate entity, which is TACC Limited. That will go -- that will remain in this company and BEL will get merged in this company.

Okay. But as a pure play, anodes, that will stay in the earlier business, right?

You can put up that sheet of HEG Greentech structure, that I can quickly explain in one. Dhananjai, just to reiterate, there will be 2 companies post the demerger. One will be the graphite company, which will have the 100,000 tonnes of graphite electrode business. And the second company will be HEG Greentech, which you see here. Under HEG Greentech, you will have 4 different entities, TACC, which is 100% owned by it, which will have the active anode materials to start with. Then the solar and BESS IPP that Basant spoke about in which we have seen for the IPP and C&I kind of projects, and we hope to more than 1 gigawatt a year for the next 3 or 4 years. That is 100%, again, owned by HEG Greentech. RePlus is the battery storage company where we will manufacture high-quality BESS systems and implement them along with the EV solutions. That company is owned 74% by HEG Greentech and the balance 26% is with the founders of RePlus who are continuing to manage that particular business, along with HEG Greentech. And then you have the 2 power plants, which are Malana and AD Hydro, which are 100% owned by HEG Greentech. So HEG Greentech as a company owns 100% of the anode material, your IPP business, your hydro business and 74% of the battery manufacturing business. And HEG graphite, as you are seeing on the right-hand side of the slide, has 100,000 tonnes of graphite electrode, which also we are increasing by 15,000 tonnes and a 10% strategic investment in GrafTech USA, which is the world's largest graphite electrode company.

So just anode and electrode, those will be considered even though they're the same operationally also, they'll be separate?

So they are absolutely separate. HEG Graphite is -- our plant is situated in a place called Mandideep near Bhopal. And this new TACC plant is situated in a place called Dewas, which is near Indore. So just to understand what Basant was also trying to say that the core of the business, which is graphitizing when you convert the carbon from graphite, that technology is something that inherently at TACC as a company has inherited from HEG Limited. And we've actually taken physical people on board of TACC, who have had years and years of experience of managing graphitization. So the companies will be totally separate, the locations will be completely separate, yes, the same raw material will be bought for TACC and the graphite electrode where we will definitely see some synergies. And the technology, although this is different there you are producing long graphite electrodes, here, you are producing carbon in the purest talcum form for a lack of a better example. But nothing to do with each other, except for common promoter shareholding.

Also Dhananjai, as I mentioned to you that it is similar but not same, the graphitization process. So that is where we have an edge, and that is what I said is right to win. The process of graphitization here and here is pretty similar. But then as Riju said, here, we are making those long, those electrode, which are used in electric arc furnace, and here, this anode material is being in a powder form, which goes in making the lithium-ion battery anode.

Sure. This is very helpful. And lastly, what is the total CapEx we require for the HEG Greentech entities?

If you see my slide, that the slide Puneet can you just show that slide. So this is where I explained that up till '27, we have set out a CapEx outlay of INR 4,300 crores. And by F '30 accumulated INR 7,700 crores.

We'll take the next question from Abhishek Gita.

Sir, on Slide 3, we see that we own 100% of TACC. But I believe we have done a INR 500 crore capital raise with singularity. From Singularity in May of 2025. So what is the status on the capital raise and at what violations did we raise that capital.

Puneet, can you answer that -- there any violations over there, structure is difficult so you can explain that.

Abhishek, I'll explain you. We haven't raised money at the TACC level. So if I just show you this slide, give me 1 second. So if you see on the left, there is an entity called Bhilwara Energy Limited, BEL. So the investor has put the money in this. They have given the premium on the valuation. At they have put the money at around INR 3,600 crores in the company, whereas the company was valued INR 3,100 crores for a swap and they have invested INR 500 crores in this company. Since they are also sitting as a shareholder in this company, BEL, which is getting merged into HEG Limited. Pursuant to that, they are getting shares of the HEG Greentech Limited, if you see on this next slide. So out of this public shareholder of 38%, 12% is the investor holding and the remaining 26% is held by HEG public shareholder. So there is no dilution we have done at the subco level. The idea is to have the structure concretely in place so that tomorrow, if we want to do an independent listing of hundreds of any other entities, we can do that.

Understood. Another question was, sir, on the demand of 1.5 lakh tonne of anode. If you could briefly segment that demand across categories, if possible?

Ankur, you want to take this part?

So yes. Thank you, Puneet. So when we are talking about the Indian market, then today, the Indian market is mostly coming on the ESS side. But there are players who are working across the chemistries on ESS as well as on the EV side. So on the -- if we talk about absolutely on the short term, then, of course, the ESS is the fastest growing. But when we talk about the complete -- yes Puneet, that's where it would be good. When you're talking about 120,000 tonnes of demand in India alone, then it would come both from ESS as well as EV side.

But in short term, what is like the demand number on ESS and EV.

So in short term, when we are talking about next couple of years, then the majority part would be on the ESS side because with the current companies which are coming ahead, they are focusing more on the ESS side. And of course, the demand is going to start with less than about 35 to 40 gigawatt in India. But it is going to grow very rapidly because just in the next 3 to 4 years, all the plants which have done their all the research as well as their development work over the years are going to come up with their respective capacities.

And also having said that, if I can add, Ankur, there's a large -- there's a huge traction that we are seeing from the global markets because till now like we mentioned that more than 90% to 95% of the battery material anode is coming from China. So we are seeing a lot of positive development with all the European, U.S. and other countries that manufacture cells or are having plans of manufacturing cells. They all want to buy their anode, which is around 15% of their overall battery cost. They want to split it between China and other countries. And if we talk about other countries, I think apart from Indonesia, we would be the only plant that would come up first as far as the anode product is concerned. So I mean -- and that is where our kind of focus is to sell more and more on the EV side because that is where the higher paying customer is. ESS customer is on the lower end of the side. So our target is that 70% of our sales should be towards the EV side and only 30% towards the ESS sides and ultimately try and sell as much of this product in India once the cell companies come on board in India, which is taking longer than this expected time.

Also for EV and R&D, high-end applications.

Abhishek, may I request you to keep this as a last question because there's a long list of participants waiting.

In this room, can I ask one more question?

Yes, please go ahead.

Yes. Another question was, so what are the cost advantages in India versus -- global versus China for graphite anode? And what are like the cost economics of India versus China? And with Epsilon and Himadri also adding capacities, how do you see the demand panning out also, demand supply structure...

Ankur area maybe...

Yes. So first, I'll talk about the cost economics. So when we are talking today, the very good part about Indian ecosystem is that right from the center to the state, there is a massive support by the government. So overall, when we see the economics, then on an EBITDA level, we are either better or at par with China. The main component of the cost is the power cost. And again, because we are getting some very good support both because of our own facilities plus having a good power tariff here, we are competing very well with China at definitely at an EBITDA level. And when you talk about the overall supply situation in India, then that the kind of demand we are seeing, we are talking about 120,000 to 140,000 tonnes. So when you are talking about these kind of numbers, then we don't see an issue with other competitors also coming up in India. In fact, it is good for the overall Indian ecosystem to have a larger capacity in India because when you go a little further with the cell companies, then the PLI Scheme makes cell manufacturers mandatory to go up to 60% of the localized material. So the more you have a local production, the more cell people will be encouraged to ramp up their capacities and be dependent on the local suppliers. So it's a complementary situation, in fact, at this moment of time.

We take the next question from Jatin Damania.

Sir, just wanted to understand more on the BEL. If I'm not wrong, you indicated there's a INR 400 crore of the EBITDA, but earlier, AD Hydro was a JV of BEL through a Malana. And lately, we purchased the remaining stake from a joint venture company. And what valuation did we did that acquisition?

Ajmeraji, can you take that question, please, since you've been the architect of that side. I can answer, but I'd rather have you.

Yes. See, this 49% stake we have acquired from the Statkraft, the valuation of precisely INR 1205 crores.

1200 crores?

Yes.

So that means you are [indiscernible].

No. Actually, let me explain you. We had a first right of refusal with the joint venture agreement, and we exercised over that right to acquire this stake at 49% at INR 1,205 crores.

Right. So [indiscernible] agreeing the value of near about INR 2,400 crore for the AD Hydro and when you...

Not for AD Hydro. It's a combined Malana and AD both put together or both the hydro assets.

Both the hydro's. But sir, BEL used to hold 100% in Malana and Malana used to hold 51% in AD Hydro, right?

No, sir. No, no, no. BEL always BEL had 51% only in Malana and Malana had 100% of AD Hydro. So basically, we had a joint venture with Statkraft, 51%, 49% in both the companies together.

So now when you are valuing the entire company when you divested or you raised at INR 500 crore valuing at near about INR 3,600 crores, which is a premium of INR 500 crores. Does that indicate that the other 4 business, which is currently not generating any revenue, we are valuing that at around INR 500 crore of revenue at this point of time? Is it fair to ask?

No, Actually, hydro assets itself is willing higher than what we have acquired.

I'm agreeing that because BEL, when you divested or you raised INR 500 crore from Singularity, you indicated INR 3,600 crores of the valuation for that BEL, where you have only 2 operating asset, which is Malana and AD Hydro, which is giving you INR 400 crores of revenue. And you are giving an 8x, which gives near about INR 3,200 crores, INR 3,300 crores of valuation. So between INR 700 crore, INR 800 crores is for your Solar, BESS and TACC business, fair to assume that?

Yes, you can assume that because TACC was also valued at a particular valuation and the...

Ajmeraji, where you can speak about the cash and cash and BEL so that we have to reduce from that.

So what is the cash in the book at BEL level?

At that point of time, when the valuation was done, it was about INR 250 crore was lying in the company.

And sir, once our entire CapEx is done of INR 7,700 crore across all the business verticals, what sort of IRR one should look in the consolidated entity?

I think it's INR 4,300 crore is the CapEx.

Stage 1 and then after that, after the C&I projects, like Basant mentioned, I think we are not chasing the regular IPP or the regular tenders that are coming every day. We are only targeting a 16% to 20% plus kind of this thing, which will be led primarily by the C&I segment. So as if you see all the 4 different businesses combined together, we are aiming for a healthy at least 20% IRR across the 4 different businesses. They could delay from time to time or year-to-year, but on a steady flow basis, all the 4 business should be generating a healthy 20% IRR.

And post the completion of the Phase 1, what should be a steady-state EBITDA for us other than this INR 400 crores that we generate from the hydropower?

I think Puneet, would you like to answer that or?

Well, I mean, we haven't worked out the number we are -- because there are multiple things and I believe that we actually are following the asset recycling model. The EBITDA number and all will not be that relevant because bulk of the IPP assets are being, I would say, flipped, but if you were to look at the -- our -- out of these 4 businesses, RePlus will require a very limited capital. So there, the best mode of gauging the performance is not IRR, but more like ROCE, and we believe RePlus will really generate a very healthy ROCE and IPP business is more like an IRR game. And I agree, where Riju already clarified. And then you can imagine that the hydro, we are generating INR 300 crore plus cash and INR 370 crore plus kind of an EBITDA, you can then calculate there. And then the tech business, we already mentioned the 20,000 capacity, ASP of $7,500 plus and the CapEx of INR 2,200 crore. So one can calculate now the overall financials.

I mean, I agree with what you are saying. But since our capacity is going to start from FY '27, which is the second quarter, definitely, there should be -- I mean, we're estimating that there could be some amount of the better benefits will come from the BSS because when we generally talk to our BSS players, they indicate about INR 4 lakh of EBITDA per megawatt. So we are also working on the same number or probably we are later on the higher side...