Graphite electrode manufacturer HEG has approved the demerger of its graphite business into a separate company and the merger of Bhilwara Energy with itself. This strategy aims to unlock shareholder value.

In FY24, the graphite business accounted for 94.41% of the company’s total turnover.

HEG stated that the graphite business is expected to be listed by 2025.

According to a company notification on May 22, the existing company will transform into a platform for green energy ventures, including hydro and wind energy, advanced carbon businesses, and other emerging opportunities.

The demerger will involve a share swap ratio of 1:1, while for the merger, HEG specified that shareholders will receive “8 fully paid-up equity shares of ₹10 each of the transferee company for every 35 equity shares of ₹10 each of the transferor company.”

The resulting company’s equity shares issued will be listed on both the Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE).

In an update, HEG stated that segregating businesses with differing risk and return profiles provides shareholders with increased flexibility to align their investments with their strategies and risk preferences, effectively reducing the risk associated with the graphite business.

Ravi Jhunjhunwala, Chairman and Managing Director, CEO of HEG Ltd., mentioned that the existing company and the new company will embark on separate paths as independent, publicly listed entities. He highlighted that the growth drivers, risk profiles, and capital allocation requirements significantly vary between the graphite business and the green energy business.

Jhunjhunwala expressed that the Scheme would allow both companies to pursue their respective strategies with focused management. He emphasized that this approach would unlock the full value of each business for the benefit of the shareholders.