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Our Bureau

Kolkata, Aug. 11 HEG finished up 11 per cent on Monday when the company informed the stock exchanges that its board would meet on August 19 to consider share a buyback proposal.

According to market sources, the recent reduction in promoter holding and increase in public holding has perhaps prompted the company to consider a buyback of shares.

With effect from July 19, the public shareholding has gone up from 21,522,719 shares (48.56 per cent) to 22,27,37,22 shares (50.26 per cent) due to disassociation of Mr Satish Jayantilal Mehta with the affairs of the company.

The existing shareholding of his relatives, associates and his group companies were reclassified as part of non-promoter shareholding.

Interestingly, total equity base and the shareholding pattern are also poised to change in the next couple of years owing to conversion of warrants and FCCBS.

According to Mr Rajesh Agarwal of CD Equisearch, HEG and Graphite India, two main Indian graphite electrode producers, are expecting a handsome mark up in the yearly contracts of their products as spot prices of regular and extra size have recently gone up by over 50 and 55 per cent.

“Price realisation is likely to go up significantly this year, but rise in cost of raw material – needle coke and blinder pitch – which is a crude oil derivative remains an area of concern,” he added.

According Emkay, forex derivatives losses is an overhang on the profitability. It said in a report that the company expects a maximum loss of Rs 8-10 crore on account of derivatives exposure.

HEG imports its key raw material - needle coke, which accounts for nearly 40 per cent of its export revenues. Out of the balance 60 per cent, HEG has covered nearly 30 per cent of its export sale through various futures and options in fx”. It also said that HEG expected to start negotiations for graphite electrode pricing for current year 2009 by the third quarter of financial year 2009.

Emkay said needle coke and binder pitch prices for CY09 are likely to increase substantially in the range of 50-100 per cent.

However, according to the management, the hike in graphite electrode prices will not only cover the rising costs, but also result in margin expansion. HEG’s 20,000 tpa graphite electrode capacity expansion project is progressing as per schedule and the company expects the plant to be operational by the fourth quarter of current year 2009.

HEG is also under the process of setting up 33 MW captive power plant (CPP) and expects the same to be operational by February 2009. These expansion projects will increase HEG’s capacities to 80,000 tpa graphite electrodes and 75 MW CPP.

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