The board of HEG has approved a proposal to buy back up to 13,63,636 equity shares comprising 3.41% of the total paid-up equity share capital for an aggregate amount not exceeding Rs 750 crore.
The board of HEG has approved a proposal to buy back up to 13,63,636 equity shares comprising 3.41% of the total paid-up equity share capital for an aggregate amount not exceeding Rs 750 crore. The buyback price has been fixed at Rs 5,500/share.
The buyback would be done through the tender offer route and is subject to approval of the shareholders by means of a special resolution through a postal ballot. The public announcement setting out the process, timelines and other requisite details will be released in due course by the company and will be in accordance with buyback regulations.
In the meeting, the board also approved an expansion plan proposing capacity addition of 20,000 tonne requiring investment of Rs 1,200 crore. The time frame for expansion is around 30 months. The mode of financing for the same would be through internal accruals and debt, if required. Post expansion, the company’s installed capacity would increase to 1,00,000 tonne from 80,000 tonne, currently. The decision on capacity expansion is based on the structural change in the industry, which would be boosting demand for graphite electrodes.
Over a medium- to longer-term horizon, we continue to remain positive on HEG on the back of increasing share in the electric arc furnace (EAF) route of steelmaking. The fortunes of the graphite electrode sector are closely linked with growth in the EAF route of steelmaking.
Going forward, we expect the share of the EAF route in overall steelmaking to increase further thereby supporting global graphite electrode demand. We continue to value the company at 10x FY20E EPS of Rs 575 thereby arriving at a target price of Rs 5,750. We maintain ‘Buy’ rating on the stock.